Vinmer Realty Development, Inc.

December 8, 2009 BIR RULING [DA-(C-303) 748-09] Section 27 (A) and (D) (5), 57 (B), 98, 106 & 188; RR 2-98; DA-660-06; 595-06; 219-06 Vinmer Realty Development, Inc. No. 291 P. Guevarra Avenue, San Juan City Attention: Vicente Padilla, Jr. President Gentlemen : This refers to your letter dated May 28, 2009 requesting for a ruling that the conveyance by Vinmer Realty Development, Inc. of the open spaces for adequate facilities in favor of the Wilson Manor Homeowners' Association, Inc., is exempt from the payment of capital gains, documentary stamp, income, creditable withholding, value-added and donor's taxes. As represented, Vinmer Realty Development, Inc. is a corporation duly organized and existing under the laws of the Republic of the Philippines, with Securities and Exchange Commission (SEC) Registration No. CS200500450 dated January 18, 2005 and Tax Identification Number (TIN) 235-547-350, with principal address at No. 29 P. Guevarra St., San Juan City, Metro Manila. It was formed with the purpose "to own, use, improve, develop, subdivide, sell, exchange, lease, and hold for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures." It is the developer of the Wilson Manor, a townhouse development located at No. 2 Wilson St. corner J. Asinas St., San Juan, Metro Manila. As such, it is the registered owner of two (2) parcels of land covered by Transfer Certificate of Title Nos. 12493-R and 12497-R of the Registry of Deeds for City of San Juan. On the other hand, Wilson Manor Homeowners' Association, Inc. is an association duly organized and existing under the laws of the Republic of the Philippines, with Housing and Land Use Regulatory Board Certificate of Registration No. 13277 dated January 15, 2007 and Tax Identification Number (TIN) 262-747-165, and one of the purposes for which the Association was formed was "to construct, manage, maintain and operate adequate facilities and services for its members." SaETCI For the common enjoyment of the homeowners of Wilson Manor, Vinmer Realty Development, Inc. executed a Deed of Donation dated May 21, 2009 conveying, by way of donation, the abovementioned parcels of land in favor of Wilson Manor Homeowners' Association, Inc., free from all liens and encumbrances and without monetary consideration, for the purpose of giving full management over the construction, development, maintenance and operation of adequate facilities for all the members of the Association. In support of your request, you attached photocopies of the following documents: 1) Deed of Donation dated May 21, 2009; 2) TCT Nos. 12493-R and 12497-R; 3) Tax Declaration of Real Property Nos. 96-016-39659 and 96-016-39663; 4) BIR Certificates of Registration of Wilson Manor Homeowners' Association, Inc. and Vinmer Realty Development, Inc.; 5) HLURB Certificate of Registration and Articles of Incorporation of Wilson Manor Homeowners' Association, Inc.; and 6) SEC Certificate of Incorporation, Articles of Incorporation and By-laws of Vinmer Realty Development, Inc. In reply, please be informed that since the Deed of Donation was made without consideration and is not in connection with a sale made to Wilson Manor Homeowners' Association, Inc., no taxable income will be generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to Wilson Manor Homeowners' Association, Inc. is for its management, and for the common benefit and enjoyment of the members thereof. Thus, the conveyance is not subject to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) in relation to Section 27 (A) and (D) (5), all of the Tax Code of 1997. Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable." Inasmuch as the transfer of the subject parcels of land to Wilson Manor Homeowners' Association, Inc. is not in connection with a sale, the same is not subject to documentary stamp tax prescribed in Section 196 of the Tax Code, as amended. IcDCaT Further, since the conveyance of common areas to Wilson Manor Homeowners' Association, Inc., being without monetary consideration and is not in connection with a sale, it is likewise not subject to VAT imposed under Section 106 of the Tax Code of 1997, as amended, nor to capital gains tax imposed under Section 27 (D) (5) of the Tax Code of 1997, as amended. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid transaction is not subject to the creditable withholding tax prescribed by Section 2.57 (B) of Revenue Regulations No. 2-98, implementing Section 57 (B), in relation to Section 27 of the Tax Code of 1997, as amended. Neither is it subject to the documentary stamp tax imposed under Section 196 of the same Code. However, the notarial acknowledgement to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. Finally, the said conveyance is not a donation and therefore, the same is likewise not subject to donor's tax under Section 98 of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service