BIR Ruling [DA-019-00]

January 11, 2000 BIR RULING [DA-019-00] Cityland Development Corporation 2/F & 3/F Cityland Condominium 10 Tower 1 6815 H.V. Dela Costa Street, Ayala Avenue North Makati 1226 Attention: Atty . Ma . Lilia T . de Guzman Senior Legal Counsel Gentlemen : This refers to your letter dated November 20, 1999 requesting for a ruling that the conveyance by Cityland Development Corporation, project owner/developer of the common areas including the land of a condominium project known as Cityland Wack Wack Royal Mansion located at Wack Wack Road, Wack Wack Greenhills East, Mandaluyong City to the Cityland Wack Wack Royal Mansion, Inc. is exempt from the creditable withholding tax and documentary stamp tax. It is represented that Cityland Development Corporation (Cityland) is the registered owner of real properties located at Wack Wack Road, Wack Wack Greenhills East Mandaluyong City covered by Transfer Certificate of Title No. 63870; that Cityland developed and constructed a condominium project known as Cityland Wack Wack Royal Mansion; that Condominium Unit No. UG-39 of the said condominium project covered by Condominium Certificate of Title No. 9336 is used as administration room of the Cityland Wack Wack Royal Mansion, Inc. (Condominium Corporation), a duly organized and registered entity; that in compliance with the law, Cityland provided said condominium with facilities/amenities such as gymnasium, water facilities, administration room, information counter and other common areas; that said amenities/facilities are used and enjoyed by the unit owners who are members of the aforesaid condominium corporation; that since the facilities/amenities are being used and maintained by the members/unit owners of the aforesaid condominium corporation, Cityland deemed it necessary and proper for the condominium corporation to own, operate and maintain said facilities/ amenities, and the condominium corporation agreed thereto; that on September 24, 1999, Cityland executed a Deed of Assignment covering the common areas and administration room in favor of the Condominium Corporation cdlex without monetary consideration because under the Master Deed with Declaration of restrictions dated March 28, 1995, the aforesaid parcel of land, administration room and other common areas are considered part of a condominium project; and that aforementioned transfer/assignment was effected to ensure proper maintenance/upkeep of the condominium facilities/amenities for the common benefit of the association/residents. In reply, please be informed that since the Deed of Conveyance above-mentioned is without consideration and it is not in connection with a sale made to a condominium corporation, no income was generated and a fortiori, no creditable withholding tax is payable and collectible. In fact, the sale by the developer of condominium units was made in favor of individual unit-owners of the condominium project; and the purpose of the conveyance to the corporation is for the management of the project for the common benefit of the unit-owners, (Section 10, R.A. No. 4726) Moreover, Section 185 of the Revised Documentary Stamp 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." In view thereof, this Office is of the opinion as it hereby holds that aforesaid Deed of Conveyance executed by and between Cityland Development Corporation and Cityland Wack Wack Royal Mansion, Inc. 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. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. (BIR Ruling No. DA-437-98 dated September 25, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group