BIR Ruling [DA-126-99]

March 3, 1999 BIR RULING [DA-126-99] Prince Gregory Development Corporation # 105 12th Avenue, Cubao, Quezon City Attention: Ms . Elizabeth A . Sunga Client Service Manager Gentlemen : This refers to your letter dated October 27, 1998 requesting for exemption from the payment of Expanded Withholding Tax and Documentary Stamp Tax relative to the conveyance of the right and ownership of the common areas by Prince Gregory Development Corporation to Prince Gregory Condominium Association, Inc. prcd It is represented that Prince Gregory Development Corporation (Prince) is a domestic corporation organized and existing under Philippines laws; that it is engaged in the Real Estate Industry particularly in the high rise buildings; and that in accordance with a Board Resolution, the board convey the right and ownership of the common area of the said condominium as well as the title of the land wherein the building was constructed to the Prince Gregory Condominium Association, Inc., (Association) an Association duly organized and incorporated to hold title of the lot, to manage and maintain the common area of the said corporation. 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 Association, 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 association is for the management and maintenance 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 Conveyance 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. 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 said Code. (BIR Ruling No. 437-98 September 25, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However if upon investigation the facts turned out to be different, then this ruling shall not apply and/or considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group