BIR Ruling [DA-169-03]

May 23, 2003 BIR RULING [DA-169-03] 57 (B), 196 DA-019-2000 Xavierville Square Condominium Corporation 38 Xavierville Avenue, Loyola Heights Quezon City Attention: Mr. Benjamin S. Talan President Gentlemen : This refers to your letter dated January 2, 2003 requesting for a confirmation of your opinion that the conveyance of the common areas, including the land on which a condominium building was constructed is exempt from the payment of the creditable withholding tax and documentary stamp tax. Documents submitted shows that Spouses Enrique and Cecilia Olonan are the registered owner of a parcel of land located at 38 Xavierville Avenue, Loyola Heights, Quezon City covered by Transfer Certificate of Title (TCT) No. 67549 of the Registry of Deeds of Quezon City, while Specified Contractors and Development, Inc., a domestic corporation organized and existing under and by virtue of the laws of the Philippines are likewise the owner of the adjacent lot covered by TCT Nos. N-138141; the latter is also the developer of the aforestated parcels of land with a combined area of One Thousand Seventeen square meters and Forty decimeters (1,017.4), upon which the Xavierville Square Condominium Project was constructed; that the common areas of the condominium building such as the generator room, driveway and ramp are registered under the names of the above-named owners and developer; that in accordance with and pursuant to the Condominium Act (RA 4726) and the "Master Deed with Declaration of Restrictions", Xavierville Square Condominium Corporation was created, formed and incorporated for the primary purpose of among others, owning or holding title to the common areas of the Xavierville Square Condominium Project; that a Deed of Conveyance, Transfer and Assignment was executed between the owners-developer and the condominium corporation whereby the former has conveyed title and ownership of all the common areas of Xavierville Square Condominium Building in favor of the latter. In reply, please be informed that since the Deed of Conveyance, Transfer and Assignment was made without consideration and is not in connection with a sale made to Xavierville Square Condominium Corporation, no taxable income will be generated and a fortiori, no creditable withholding tax is payable and collectible. The purpose of the conveyance to Xavierville Square 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. 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 transaction is not subject to the creditable withholding tax prescribed by Section 2.57(B) of Revenue Regulations No. 2-98, 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 acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. ( BIR Ruling No. DA-019-2000 dated January 11, 2000 ) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. aETADI Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service