BSC Realty Incorporated

December 22, 2009 BIR RULING [DA-(C-340) 822-09] 57 (B), 196; DA-178-2003; DA 178-2003 BSC Realty Incorporated 77 Malakas Street Diliman, Quezon City Attention: Betty S. Chua President Gentlemen : This refers to your letter dated December 9, 2009 requesting for a ruling relative to the tax consequences of the transfer of a parcel of land together with the common areas of the building and facilities of the condominium project from the Developer to the Condominium Corporation or Association. Documents submitted disclosed that BSC Realty, Inc. (BSC Realty, for brevity) is the developer of a condominium building known as East Side Condominium located along Malakas Street, Quezon City; that the said condominium building was constructed on the parcels of land covered by Transfer Certificates of Title Nos. N-167872 and N-167873 of the Registry of Deeds for Quezon City; that East Side Condominium Association, Inc. (Condominium Corporation) is a non-stock, non-profit organization which was organized to manage and maintain the common areas in the said condominium building; that in compliance with the law, BSC Realty provided said condominium with common areas under CCT Nos. N-44282 and N-50958; and that BSC Realty executed a Deed of Assignment covering the common areas in favor of the condominium corporation without monetary consideration because the said common areas, including the parcels of land, form part of the condominium project and was effected to ensure proper maintenance of the condominium facilities/amenities for the common benefit of the members of the condominium corporation. In reply, please be informed that since the Deed of Assignment was made without consideration and is not in connection with a sale made to the Condominium Corporation, no taxable income will be generated and a fortiori, no creditable withholding tax is payable and collectible. The purpose of the conveyance to the Condominium Corporation is for the management of the project for the common benefit of the unit-owners. (Section 10, R.A. 4726) HEASaC 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". 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 (8) * of Revenue Regulations No. 2-98: implementing Section 57 (B), in relation to Section 27 of the Tax Code of 1997. 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 Assignment is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-178-2003 dated June 5, 2003) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service