BIR Ruling [DA-074-98]

March 11, 1998 BIR RULING [DA-074-98] Siena Realty Corporation 1409 Alvarado Ext. corner Mayhaligue Tondo, Manila Attention: Ms . Elsa H . Chua President Gentlemen : This refers to your letter dated February 5, 1998 requesting for a ruling that the conveyance of the common areas, including the land of Siena Realty Corporation, owner-developer, to the Harvard Mansion Residents Association, Inc., the Condominium Corporation, is exempt from the payment of creditable withholding tax and documentary stamp tax. casia It is represented that Sienna Realty Corporation is a domestic corporation duly registered with the Securities and Exchange Commission (SEC); that it is the absolute and registered owner of three (3) parcels of land located at 1409 Alvarado Ext. corner Mayhaligue St., Tondo, Manila with total area of 621.80 square meters, more or less and covered by TCT Nos. 209949, 209950 and 209951 of the Register of Deeds of Manila, upon which the Harvard Mansion Condominium was constructed; that the Harvard Mansion Residents Association, Inc. is the condominium corporation that was organized for the purpose of holding title to, managing and maintaining the land and the common areas of the project as defined in the Master Deed with Declaration of Restrictions; that on February 9, 1998, a Deed of Conveyance was executed between the owner-developer and the condominium corporation whereby the former conveyed title to the said land, the common areas of the building and facilities of the project, in favor of the latter, free from all liens and encumbrances; that the said deed was executed without any monetary consideration in pursuance of the requirements of the Condominium Act which mandates that the Condominium Corporation shall hold title to the common areas (including the land); that all of the units of the project have already been sold and titled in the names of various unit owners after having paid the withholding taxes/capital gains, documentary stamp taxes, transfer and registration fees; that the Register of Deeds of the City of Manila has annotated at the back of the above-mentioned mother titles that 38 Condominium Certificates of Title and 34 titled parking slots have been issued to cover the individual unit/parking ownership; and that the herein transfer by 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 and inasmuch as said taxes have already been paid when each individual unit was titled. In reply, please be informed that since the Deed of Conveyance 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. 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 condominium corporation 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. 25) provides that "conveyances of units 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 Conveyance is not subject to any creditable withholding under 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 106 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 133 of the same Code. (BIR Ruling No. 046-92 dated February 13, 1992) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation will be dissolved the facts are different, then this ruling shall be considered null and void. LLjur Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)