BIR Ruling [DA-052-06]

February 16, 2006 BIR RULING [DA-052-06] 57 (B), 188; DA-371-2004 Belvic Realty & Development Corporation No. 18, J. P. Bautista Avenue, Malabon, Metro Manila Attention: Mr. Ernesto A. Genato Owner/Developer Gentlemen : This refers to your letter dated June 8, 2005 requesting for exemption from payment of documentary stamp tax and creditable withholding tax on the conveyance of the common areas of your condominium townhouse project in favor of Paramount Executive Townhomes Association, Inc . It is represented that BELVIC REALTY & DEVELOPMENT CORPORATION is a corporation engaged in the development of condominium townhouse projects and a registered owner of a parcel of land located at No. 7 C. Benitez St., Cubao, Quezon City with an area of One Thousand Two Hundred (1,200) square meters more or less covered by Transfer Certificate of Title No. N-156402 issued by the Register of Deeds of Quezon City; that the building and the other improvements constructed thereon have been constituted into a condominium townhouse project known as Paramount Executive Townhomes Association, Inc . in accordance with the provisions of Republic Act No. 4726, otherwise known as the Condominium Act, by registering with the Register of Deeds of Quezon City, the Master Deed with Declaration of Restrictions of the project; that the developer, Belvic Realty & Development Corporation turned-over the management of the common areas to the Paramount Executive Townhomes Association, Inc . which accepted the same; and that for the purpose of conveying title to the above parcel of land to the condominium townhouse project, Belvic Realty & Development Corporation executed a Deed of Assignment in favor of Paramount Executive Townhomes Association, Inc . In reply, please be informed that since the Deed of Assignment was made without consideration and is not in connection with a sale made to Paramount Executive Townhomes Association, Inc ., no taxable income will be generated and a fortiori, no creditable withholding tax is payable and collectible. The purpose of the conveyance to Paramount Executive Townhomes Association, Inc . is for the management of the project for the common benefit of the unit-owners. (Sec. 10, RA 4726) Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyance 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) Revenue Regulations No. 2-98, as amended, 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 acknowledgement to said Deed of Assignment is subject to documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-371-2004 dated July 5, 2004) aTDcAH 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service