BIR Ruling [DA-077-01]

May 4, 2001 BIR RULING [DA-077-01] 27; DA 437-98 Ms . Myrna J . Tan 612 Dao Road, Midtown Executive Homes U.N. Avenue, Paco, Manila M a d a m : This refers to your letter dated January 11, 1999 requesting for exemption from capital gains tax and documentary stamp tax on the conveyance of the common areas and facilities of the Villa Kenrich Townhomes in favor of the Villa Kenrich Townhomes Homeowners Association, Inc. It is represented that you are previously the registered owner of five residential townhouse units collectively called as the Villa Kenrich Townhomes located at 922 of land covered by TCT No. 8585 of the Registry of Deeds for Mandaluyong City adjacent to the five parcels of land on which the five (5) townhouses stand which serve as the common area, passageway or driveway of the homeowners therein; that the title/ownership of the five townhouse units were already transferred to the homeowners and the facilities for the common benefit are currently being enjoyed by these homeowners who voluntarily organized, associated and called themselves as Village Kenrich Townhomes Homeowners Association, Inc.; and that on August 17, 1998, you executed a Deed of Conveyance transferring the common area and other facilities in favor of the Villa Kenrich Townhomes Homeowners Association, Inc., a homeowners association duly registered with the Home Insurance & Guarantee Corporation (HIGC) for the management and maintenance of the common areas, passageway and driveway. In reply, please be informed that since the aforementioned Deed of Conveyance above-mentioned was made without consideration and is not in connection with a sale made to the homeowners association, no gain was derived and a fortiori , no capital gains tax is payable and collectible. The purpose of the conveyance to the homeowners association is for the management and maintenance of the common areas and facilities for the common benefit of the unit-owners. In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Conveyance is not subject to the creditable withholding tax 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 196 of the same Code. However, the notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA437-98 dated September 25, 1998) 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)