BIR Ruling [DA-033-00]

January 13, 2000 BIR RULING [DA-033-00] St . Francis Unit Owners Association, Inc . 83 Xavier St., Greenhills San Juan, Metro Manila Attention: Ms . Norma O . Cablao Internal Auditor Gentlemen : This refers to your letter dated November 10, 1999 requesting for a ruling that the conveyance of the common areas, including the land of a condominium project known as the St. Francis Condominium by Conducto Development, Inc. in favor of St. Francis Unit Owners Association, Inc., is exempt from the creditable withholding tax and documentary stamp tax. It is represented that Conducto Development, Inc. is a domestic corporation engaged in the real estate industry; that it is the registered owner of a parcel of land located at Xavier Street, Greenhills, San Juan, Metro Manila covered by Transfer Certificate of Title No. 1289-R of the Registry of Deeds for San Juan; that the subject property has a total area of One Thousand Nineteen (1,019) sq. m.; that likewise, Conducto Development, Inc. is the developer of the St. Francis Condominium constructed on the said parcel of land; that on the other hand, St. Francis Unit Owners Association, Inc. is a non-stock association organized by the homeowners in the said project, created among others, for the purpose of managing and holding title to all the common areas in the condominium project including, the land on which the condominium is located; that a Deed of Assignment was executed by and between Conducto Development, Inc. and St. Francis Unit Owners Association, Inc. whereby the former conveyed title to the said land, the common areas of the building, facilities and equipment of the project, in favor of the latter, free from all liens and encumbrances; that the said Deed of Assignment was executed without any monetary consideration, in pursuance of the requirements of R. A. No. 4726, otherwise known as the Condominium Act, as amended; and that the said conveyance is therefore sought to be exempted from the creditable withholding tax and documentary stamp tax inasmuch as said conveyance is being done simply to comply with the requirements of the Condominium Act, and for the protection of the unit-owners. In reply, please be informed that since the Deed of Assignment above-mentioned is without consideration and is not in connection with a sale made to the condominium corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the assignment to the condominium 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 the aforesaid Deed of Assignment is not subject to the creditable withholding tax prescribed by 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 assignment is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the said Code. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group