BIR Ruling [DA-187-00]

March 30, 2000 BIR RULING [DA-187-00] 57 (B), 437-98 DA-187-2000 City Tower Realty Corporation Escolta, Manila Attention: Mr . Adolfo M . Peralta First Vice-President Gentlemen : This refers to your letter dated January 26, 1999 requesting for a ruling that the conveyance by City Tower Realty Corporation, project owner/developer, of the common areas including the land of a condominium project known as Dasma Corporate Center, located in Manila to Dasma Corporate Center Condominium Corporation is exempt from the creditable withholding tax and documentary stamp tax. It is represented that City Tower Realty Corporation is the owner of two (2) parcels of land located at Dasmarias corner Ugalde Streets, Binondo, Manila, both covered by Transfer Certificate of Title No. 219329 of the Registry of Deeds for the City of Manila; that it built a condominium building known as the Dasma Corporate Center on the aforesaid parcels of land and thereafter sold to condominium units to various purchasers; that on the other hand, Dasma Corporate Center Condominium Corporation, a corporation duly organized and existing under and by virtue of the laws of the Philippines with principal office and place of business at Ugalde Streets, Binondo, Manila, was created as a management body, to own and manage the land and other common areas of the Dasma Corporate Center; that a Deed of Conveyance was executed by and between City Tower Realty Corporation and Dasma Corporate Center Condominium Corporation whereby the former conveyed title to the said land, the common areas of the building in favor of the latter, free from all liens and encumbrances, in pursuance to the requirements of R.A. No. 4726, otherwise known as the Condominium Act, as amended; that the said 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. prcd In reply, please be informed that since the above-mentioned Deed of Conveyance 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 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 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 transferring the common areas of the project to the Dasma Corporate Center Condominium Corporation 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. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code of 1997. However, the notarial acknowledgment to said deed of assignment is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. (BIR Ruling No. DA-437-98 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, this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)