BIR Ruling [DA-037-97]

January 23, 1997 BIR RULING [DA-037-97] LPL Center Condominium 130 Alfaro St., Salcedo Village Makati City Attention: Mr . Lauro S . Leviste II President Gentlemen : This refers to your letter dated April 23, 1996 requesting in effect for a ruling confirming your following opinions relative to the transfer/conveyance of title of the land and common areas of LPL Center Condominium Project by Frontier Realty Corporation, the developers thereof, in your favor as the management body of the members-unit owners in accordance with the provisions of Section 10 of Republic Act No. 4762 otherwise known as the Condominium Act: "1. That the transaction is not subject to the capital gains tax imposed under Section 33 of the NIRC since conveyance being done in conformity with the provisions of Section 10 of Republic Act No. 4726 aforementioned, so as to enable the condominium corporation to properly perform its management function of the affairs of the members thereof. "2. That the Deed of Conveyance is not subject to the documentary stamp tax imposed by Section 196 of NIRC, such conveyance being exempted under the provisions of Section 185 of Regulation No. 26, known as the Revised Documentary Stamp Tax Regulations. Rhus: "Conveyance of Realty, not in connection with a sale, to trustees or other persons, without consideration are not taxable." cdt Documents submitted show that Frontier Realty, Inc. (FRI), a non-stock, non-profit domestic corporation, is the owner-developer of a parcel of land with an area of one thousand one-hundred fifty nine square meters (1,159 sq. m.) situated at 130 Alfaro St., Salcedo Village, Makati City covered by Transfer Certificate of Title No. 158563 issued by the Registry of Deeds of Makati City, upon which the LPL Center Condominium project was constructed; that the LPL Center Condominium Corporation (LPL), a domestic corporation, is the condominium corporation that was organized for the purpose of holding title to, managing and maintaining the common areas of the project, as defined in the Master Deed with Declaration of Restrictions; that on May 16, 1996, a Deed of Conveyance was executed by FRI whereby it unilaterally conveyed title to the parcel of land together with the common area and capital equipment and shafts, generator, water reservoirs and tanks, pumps and other control services, mechanical, electrical or otherwise which are commonly used in the LPL Center Condominium Building, in favor of LPL which acknowledges and confesses receipt thereof to its entire and absolute satisfaction; that the said deed was in pursuance of the requirements of the Condominium Act which mandated that the Condominium Corporation shall hold title to the common areas (including the land); and that a ruling on the abovequoted query is being sought in as much as the aforesaid transfer by conveyance was done in order to comply with requirements of the Condominium Act, and for the protection of the unit owners. In reply, please, be informed that your aforequoted queries are answered as follows: 1. Considering that the abovementioned Deed of Conveyance was executed without monetary consideration and was not in connection with a sale in favor of the condominium corporation, no income was derived therefrom and a fortiori , no creditable expanded withholding tax is due and collectible. The conveyance by the developer in favor of the condominium corporation was for the purpose of management of the project for the common benefit of the unit owners. (Section 10, R.A. 4726). Accordingly, your opinion to the effect that the aforesaid Deed of Conveyance executed by FRI in favor of CPL is not subject to the creditable expanded withholding tax imposed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 (not Section 33 of the Tax Code) implementing Section 50 (b) of the Tax Code, as amended in relation to Section 24 of the same Code is hereby confirmed. 2. Under Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26) conveyance of realty not in connection with a sale, to trustee or other persons without consideration are not taxable. Thus, your opinion that the Deed of Conveyance executed by FRI, conveying the title of the land and common areas of LPL Center Condominium Project in favor of LPL Center Condominium Corporation is not subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended, is hereby likewise confirmed. However, the notarial acknowledgment to said Deed of Conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code, as amended by Republic Act No. 7666. (BIR Ruling No. UN-083-94, dated February 23, 1994) This ruling is being issued based on facts 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, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)