Jade Dragon Realty Holdings, Inc.

December 16, 2009 BIR RULING [DA-(DT-074) 784-09] Section 27 (A) & (D) (5); 57 (B), 98, 106 & 188; DA-660-06; 595-06 Jade Dragon Realty Holdings, Inc. 11 Unit B, Gregorio Araneta Avenue, Quezon City Attention: Trinette C. King President Sir/Madam : This refers to your letter dated October 30, 2009, requesting exemption from the payment of taxes in connection with the transfer by JADE DRAGON REALTY HOLDINGS, INC. of the open space at the Villa Fortuna Townhomes which is being used by the latter as its open space for adequate facilities and at the same time used as the driveway for the ingress and egress of the unit owners of the Villa Fortuna Townhomes to the main road. It is represented that Jade Dragon Realty Holdings Inc., (Jade Dragon, for short) with TIN 207-679-680, is a domestic corporation registered with the Securities and Exchange Commission (SEC) on September 4, 2000, bearing SEC Regs No. A200013623, with principal office address at 11 Unit B Gregorio Araneta Ave., Quezon City; that its primary purpose is to own, use, improve, develop, subdivide, sell, exchange, lease and hold for investment purposes or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures; that it is the developer of the Villa Fortuna Townhomes and the registered owner of a parcel of land covered by Transfer Certificate of Title (TCT) No. 246895 of the Registry of Deeds of Quezon City, which land forms part of the housing project it developed for the Villa Fortuna Townhomes; that Villa Fortuna Townhomes Association Inc., (Association, for short) is a non-stock, non-profit organization duly organized and existing under Philippine laws bearing SEC Registration No. CN200911944; that one of its primary purposes for which it was incorporated, among other things, is to uplift the living conditions of the members by assisting them in the establishment of facility services and enterprises; that in order to attain this particular purpose, Jade Dragon executed a Deed of Donation over that parcel of land covered by TCT No. 246895, in favor of the Association which will be used as open space for adequate facilities and likewise will be used as the driveway of the unit owners, including their families. AacCIT In reply, please be informed that since the Deed of Donation was made without consideration and is not in connections with a sale made to Villa Fortuna Townhomes 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 the Association 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 parcel of land to the Association 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. Further, since the conveyance of common area which is used as open space for adequate facilities and as driveway for the members of the Association being without monetary consideration and is not in connection with a sale, it is likewise not subject to the Value-Added Tax (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, 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