Amending Section 1 of Tax Ordinance No. 2011-048 as Amended by Tax Ordinance No. 2007-016

November 12, 2009 BIR RULING [DA-(C-262) 667-09] Mr. Vic Lim Room 404, 473 Sto. Cristo Street Binondo, Manila Sir : This refers to your letter dated October 12, 2009 requesting for confirmation of your opinion that the proposed transfer of the property together with the improvements thereon as well as the common areas by New Divisoria Center Condominium Corporation to the Homeowners Association is exempt from capital gains tax/creditable withholding tax and the corresponding documentary stamp tax. It is represented that New Divisoria Center Condominium Corporation is the absolute and registered owner of a parcel of land together with the improvements thereon covered by TCT No. 215064 issued by the Registry of Deeds for the City of Manila; that the property was brought under the operation of the Condominium Act (Republic Act No. 4726), or covered into a condominium project, by virtue of a Master Deed with Declaration of Restrictions; that the building was divided into condominium units and certain portions thereof were designated as common areas; that pursuant to the provisions of Section 7 (a) of the Master Deed and Section 10 of the Condominium Act, New Divisoria Center Condominium Corporation was established primarily to manage the condominium project and to hold title to the common areas; that in compliance with the aforesaid provisions of the Condominium Act, New Divisoria Center Condominium Corporation will transfer the land, improvements and the common areas above-mentioned; that a Deed of Assignment will be executed for the transfer of the said property to New Divisoria Center Condominium Corporation Homeowners Association, Inc.; and that the transfer is necessary to comply with the requirement of the Condominium Act and the transferor did not receive any consideration thereof. In reply thereto, please be informed that since the proposed transfer of the property and the common area is without consideration and is not in connection with a sale made to the Homeowners Association, no income is generated and a fortiori , no creditable withholding tax is payable and collectible. In fact, the transfer by New Divisoria Center Condominium Corporation of the property and the common area is made in favor of the individual unit owners of the project, and the purpose of the assignment to the Homeowners Association of the common areas and facilities is for its management, and for the common benefit and enjoyment of the members-unit owners. (Section 10, R.A. No. 4726) Moreover, Section 196 of the Tax Code of 1997, as amended, provides that on all conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of adjudication issued by the Government, whereby any land, tenement or other realty sold shall be granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any other person or persons designated by such purchaser or purchasers, there shall be collected a documentary stamp tax, at the rates . . . prescribed, based on the consideration contracted to be paid for such realty or on its fair market value determined in accordance with Section 6 (E) of the said Code, whichever is higher: . . . Inasmuch as the transfer of the property and the common area and facilities to the Homeowners Association is not in connection with a sale, the same is not subject to documentary stamp tax prescribed in Section 196, supra . SAaTHc IN VIEW THEREOF, this Office holds that the aforesaid transfer of the property and the common area 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 of the Tax Code of 1997. Neither is it subject to the documentary stamp tax imposed under Section 196 of the said Code. However, the notarial acknowledgment to said deed of assignment is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code, as amended. 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