BIR Ruling No. 340-12

May 15, 2012 BIR RULING NO. 340-12 Section 31, PD 957, as amended by PD 1216 Cayaga Zuiga & Angel Attorneys-at-Law 2nd Flr. One Corporate Plaza 845 Arnaiz Ave., Legazpi Village Makati City Attention: Carlo T. Valeza Gentlemen : This refers to your letter dated 15 February 2010 requesting for a confirmatory ruling that the conveyance by Guadalupe Estate, Inc. of the common areas of Guadanoville Subdivision, consisting of two (2) parcels of land and the aqueduct constructed thereon, in favor of Guadanoville Homeowners Association, Inc. (the "Association"), is exempt from the capital gains tax (CGT), donor's tax, creditable withholding tax (CWT) and documentary stamp tax (DST). IEHScT It is represented that Guadalupe Estate, Inc. is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines with principal address at Rm. 24 Facilities Center Bldg., Shaw Blvd., Mandaluyong City; that it is the developer of a subdivision project known as the Guadanoville Subdivision; and that it also owns two (2) parcels of land with an area of two hundred (200) sq. m. and fifty two (52) sq. m., duly covered by Transfer Certificate of Title (TCT) Nos. C-395094 and C-395095 of the Register of Deeds of Calookan City, respectively, both located at the adjoining Amparo Subdivision. On the other hand, the Association is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office address at Bo. Makatipo, Tala, Kalookan City; and that it is the Homeowners Association of the Guadanoville Subdivision. It is further represented that Guadalupe Estate, Inc. constructed on the said two (2) parcels of land a culvert serving as drainage of the water outflow from Guadanoville Subdivision; and that Guadalupe Estate, Inc. executed a Deed of Conveyance covering the above parcels of land in favor of the Association pursuant to Presidential Decree No. 957, as amended by PD No. 1216. In reply, please be informed that the transfer by a developer of the common area of a subdivision project is governed by the provisions of Presidential Decree (PD) No. 957, as amended by PD No. 1216, otherwise known as "THE SUBDIVISION AND CONDOMINIUM BUYERS' PROTECTIVE DECREE." We noted, however, that the two (2) parcels of land to be donated by the Guadalupe Estate, Inc. in favor of the Association are not located in Guadanoville Subdivision but in the adjoining Amparo Subdivision. The said transfer is not within the purview of PD No. 957 since the aforesaid law only covers transfers of a common area located in the same subdivision. Besides, under PD 1216, only parks and playgrounds may be donated to the Homeowners Association with the consent of the city or municipality concerned. It must be emphasized that statutes granting tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. One who claims an exemption from tax payments rests the burden of justifying the exemption by words too plain to be mistaken and too categorical to be misinterpreted. Exemption from taxation is never presumed. For tax exemption to be recognized, the grant must be clear and express; it cannot be made to rest on doubtful implications. (Michel J. Lhuillier Pawnshop, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166786 dated May 3, 2006) Based on the foregoing, this Office is of the opinion, as it hereby holds that the donation executed by Guadalupe Estate, Inc. in favor of the Association is subject to the donor's tax and DST. Please be guided accordingly. AacSTE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue