BIR Ruling [DA-020-02]

February 13, 2002 BIR RULING [DA-020-02] 57 (B), 188 DA-019-2000 Cityland Development Corporation 2/F & 3/F Cityland Condominium 10 Tower 1 6815 H.V. dela Costa St., Ayala Avenue North Makati City Attention: Atty. Lilia T. de Guzman Senior Legal Counsel Gentlemen : This refers to your letter dated July 11, 2000 requesting for a confirmation of your opinion that the conveyance of the common areas of your condominium project in favor of Cityland Pioneer, Inc. (CPI) is not subject to documentary stamp tax and creditable withholding tax. It is represented that Cityland Development Corporation (CDC) is the registered owner of a parcel of land located along Pioneer St., Highway Hills, (formerly Bo. Barranca), Mandaluyong City, identified as Lot No. 2-A with an area of Two Thousand Five Hundred Seventy Two (2,572) sq.m.; that said property is covered by Transfer Certificate of Title No. 11180 of the Registry of Deeds for the City of Mandaluyong; that CDC developed and constructed on the above-stated lot a condominium project known as Cityland Pioneer; that in compliance with the law, CDC, provided sufficient amenities/facilities to the Project, such as: gymnasium, water facilities, administration room, information counter and other common areas; that said facilities are being used and enjoyed by the unit owners who are members of CPI, a non-stock, non-profit corporation duly organized for the purpose of managing and holding title to all the common areas in the condominium project, including, the land on which said condominium is located; that on July 6, 2000, Cityland executed a Deed of Assignment, whereby it transfers, conveys and cedes unto CPI, its rights, titles and interest over the parcels of land above-described and over other common areas of the project (excepting all units, storage areas, drying areas, parking areas, residual rights and interests separately held and/or reserved as indicated in the Master Deed with Declaration of Restrictions) without monetary consideration; and that said transfer was effected to ensure proper maintenance of the condominium facilities for the common benefit of the members of CPI. In reply, please be informed that since the Deed of Assignment above-mentioned was made without consideration and is not in connection with a sale made to CPI, no taxable income will be generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to CPI is for the management of the project for the common benefit of the unit-owners. (Section 10, R.A. 4726) Moreover, Section 185 of the Revised Documentary Stamp Tax 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 the aforesaid transaction 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 same 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 of 1997. (BIR Ruling No. DA-019-2000 dated January 11, 2000) 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, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner Legal Service