July 24, 2014

BIR RULING NO. 296-14

RR No. 2-98; RR 7-2003; RMO No. 18-

2009

Imperial Sky Garden Condominium Corporation

707 Ongpin St., Binondo, Manila

Attention: Ramon Y. Lim

President/Chairman of the Board

Gentlemen :

This refers to your letter dated 17 April 2012, requesting that the
conveyance of a parcel of land by China Banking Corporation ("CHINABANK")
to Imperial Sky Garden Condominium Corporation ("IMPERIAL") is exempt
from capital gains tax.
It is represented that CHINABANK is a universal banking corporation
duly organized and existing under the laws of the Republic of the Philippines;
that CHINABANK is the registered owner of a parcel of land located in
Binondo, Manila, covered by TCT No. 253014 of the Registry of Deeds of
Manila where Imperial Sky Garden Condominium Project was constructed
and developed by Ray Burton Development Corporation, in joint venture
with previous land owner, Mercantile Investment Company, Inc.; that
IMPERIAL is a condominium corporation organized for the primary purpose of
owning or holding title of the common areas in the said condominium project
as well as to maintain, administer and manage the said project; that in
compliance with the provisions of the Condominium Act, CHINABANK
transferred title and ownership over the parcel of land in favor of IMPERIAL.
In reply, please be informed that your request is denied for lack of
legal basis. Revenue Memorandum Order (RMO) No. 18-2009 which permits
transfer of the land and common areas pertaining to the condominium
project from the real estate developer to the condominium corporation
without issuing Certificate Authorizing Registration (CAR) or Tax Clearance
(TCL) does not apply to the instant case as CHINABANK was not the
condominium developer. The pertinent provisions of RMO No. 18-2009, is
reproduced below:
xxx xxx xxx
3. The concerned Revenue District Officer (RDO), upon receipt of
all the documents as enumerated in item (IV) hereunder, can proceed
with the issuance of the CAR/TCL relative to the conveyance of the land
and the common areas made by the real estate developer to the
Condominium Corporation, provided, that the RDO is assured that the
facts and the circumstances surrounding such transfer are analogous
to the facts and circumstances contained in the previously
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 promulgated rulings of the Bureau resolving the tax issues on the
matter. aSEDHC

4. The facts analogous to all of these promulgated rulings are as

follows:

(a) The real estate developer is the registered owner of a parcel

of land which undertook a real estate development project thereat by
constructing a condominium building on said parcel of land in
accordance with the provisions of Republic Act No. (R.A.) 4726,
otherwise known as the Condominium Act; (Underlining supplied)

Clearly, what is contemplated in the above mentioned RMO is the

transfer of land and common areas by a real estate developer to the
condominium corporation. In the instant case, CHINABANK was not the real
estate developer which built the condominium project since it foreclosed the
property subject of this ruling. Thus, it cannot invoke the said provision and
avail of the privileges under the said RMO.
Moreover, the transfer of the subject property from CHINABANK to
IMPERIAL is subject to 6% creditable withholding tax pursuant to Section
2.57.2 (J) of Revenue Regulations No. 2-98, as amended, in relation to
Section 2 (b) of Revenue Regulations No. 7-2003. The pertinent provisions of
Section 2 (b) of Revenue Regulations No. 7-2003 provides that:
Real properties acquired by banks through foreclosure sales are
considered as their ordinary assets. However, banks shall not be
considered as habitually engaged in the real estate business for
purposes of determining the applicable rate of withholding tax imposed
under Sec. 2.57.2 (J) of Revenue Regulations No. 2-98, as amended.

Clearly, the transfer of the subject property from CHINABANK to

IMPERIAL is also subject to 6% creditable withholding tax under Section
2.57.2 (J) of Revenue Regulations No. 2-98, as amended, in relation to
Section 2 (b) of Revenue Regulations No. 7-2003.
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.) KIM S. JACINTO-HENARES

Commissioner
Bureau of Internal Revenue

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