Bureau of Local Government Finance Opinion

June 26, 2012 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Atty. Melina O. Tecson Reyes Francisco Tecson & Associates Law Office Unit 1710 Cityland 10 Tower 1, H.V. dela Costa St. Salcedo Village, Makati City Madam : This has reference to your letter dated June 7, 2012 requesting opinion from this Office as to whether a Condominium Corporation is liable for the payment of transfer tax over a Deed of Conveyance from the Developer, there being no consideration for the transfer. Section 135 of R.A. 7160 otherwise known as the Local Government Code of 1991, states that: aSIETH "SEC. 135. Tax on Transfer of Real Property Ownership . (a) The province may impose a tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real property at the rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved in the acquisition of the property or of the fair market value in case the monetary consideration involved in the transfer is not substantial, whichever is higher. The sale, transfer or other disposition of real property pursuant to R.A. No. 6657 shall be exempt from this tax ." It is your contention that the aforequoted provision presupposes that there is monetary consideration involved in the transfer, and since the consideration for the Deed of Conveyance is not monetary, but for the management of the property as mandated for by law, then no transfer tax is due from the said transaction. The Bureau finds your contention partly unmeritorious. In its letter dated April 17, 2001 (copy enclosed), addressed to Mr. Rogelio T. Serafica, President Condominium Builders and Developers Association of the Philippines, this Bureau opines, as follows: "The transfer tax is imposed on the basis of the total consideration involved in the acquisition of the property or the fair market value, whichever is higher. But this does not mean that if there is no monetary consideration the transfer tax will not be imposed. Donation and Barter do not involve monetary consideration. Other modes of transferring ownership of real property such as by estate succession and by means of prescription also do not involve monetary consideration but the transfer tax is imposable on these transactions. Therefore, we agree with the view that the transfer tax is imposable, as what is being taxed is the exercise of privilege to transfer or convey a property. The determining factor is whether or not there is indeed a transfer of ownership or title over real property." "xxx xxx xxx" "The issue here is whether or not the subsequent registration of title to the land (mother lot) in the name of the condominium corporation constitutes a transfer subject to transfer tax. The answer is in the negative. As already discussed, the transfer of interest in the land (mother lot) and common areas was already effected upon the sale of the condominium corporation as required by law. Therefore, the subsequent registration of title to the land in the name of the condominium corporation is not a "transfer" but merely a confirmation of ownership or title over the condominium units previously acquired by unit buyers. Since it is merely a confirmation and not a transfer, the same is not subject to transfer tax." IcDCaS Clearly, the determining factor in the imposition of transfer tax is whether or not there is indeed a transfer of ownership or title over real property. However, any subsequent registration of title to land (mother lot) in the name of the condominium corporation, like in the instant case, no longer constitutes a transfer subject to transfer tax. The transfer of interest in the land (mother lot) and common areas was already effected upon the sale of the condominium corporation as required by law. Further, conveyances for management purposes likewise do not constitute a transfer subject to transfer tax. In view hereof, this Bureau is of the opinion that your client, Petron Megaplaza Condominium Association, Inc., is not liable to pay the transfer tax. We trust that this suffice your abovementioned request. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director