Ms. Ma. Lourdes T. Fabie

December 23, 2009 BIR RULING [DA-(C-343) 827-09] DA 600-04 Ms. Ma. Lourdes T. Fabie c/o 321 Katipunan Avenue Loyola Heights Quezon City Madam : This refers to your letter dated November 12, 2009 requesting for a ruling that the transfer by HECARLO, INC. to TORRES BUILDING CONDOMINIUM OWNERS' ASSOCIATION, INC. of a parcel of land together with the common areas of the building and facilities of the condominium project constructed thereon pursuant to the provisions of Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, is exempt from creditable withholding tax and documentary stamp tax (DST). It is represented that HECARLO, INC. is the owner/developer of a condominium project known as the Torres Building Condominium located at 321 Katipunan Avenue, Loyola Heights, Quezon City; that on the other hand, TORRES BUILDING CONDOMINIUM OWNERS' ASSOCIATION, INC. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 01993 dated May 31, 1995; and that its primary purpose is "To hold title to, manage by itself or through a managing agent, maintain, preserve and administer the common areas or elements of the real estate property consisting of one parcel of land located at 321 Katipunan Avenue, Loyola Heights, Quezon City and the 4-storey building constructed thereon (now known as the Torres Building), the same building and lot complex having been constituted into a Condominium Ownership Property, as a consequence of which it gave rise to the formation, organization and incorporation of this association pursuant to and in compliance with the legal requisites called for under Republic Act No. 4726." In reply thereto, please be informed that in BIR Ruling No. DA-411-2005 dated October 4, 2005, this Office had occasion to rule as follows: ". . . since the transfer will be 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) DCAHcT 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(B) of Revenue Regulations No. 2-98, as amended, 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 acknowledgment to said deed of transfer is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997." SUCH BEING THE CASE, since the above-cited ruling is in all fours similar to the instant case, this Office holds that the transfer by HECARLO, INC. to TORRES BUILDING CONDOMINIUM OWNERS' ASSOCIATION, INC. of above-described parcel of land together with the common areas and facilities pursuant to the provisions of R.A. No. 4726 is EXEMPT from creditable withholding tax and DST. However, the notarial acknowledgment to said deed of transfer is subject to the DST of P15.00 pursuant to Section 188 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 null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service