BIR Ruling [DA-189-99]

March 25, 1999 BIR RULING [DA-189-99] KSY Land Development Corporation 18/F Pacific Star Building Sen. Gil Puyat corner Makati Avenues Makati City Attention: Atty . Carlos D . Cinco Corporate Secretary Gentlemen : This refers to your letter dated July 6, 1998 requesting for a ruling that the conveyance by KSY Land Development Corporation (KSY) developer/assignor, of the common areas, including the land of a condominium project known as the Alpha Salcedo Condominium Corporation (ASCC), is exempt from the creditable withholding tax and documentary stamp tax. It is represented that KSY, a domestic corporation duly organized and existing under Philippine laws with office address at the 18/F Pacific Star Building, Sen. Gil Puyat corner Makati Avenues, Makati City, is the owner of a parcel of land situated at H.V. dela Costa Street, Salcedo Village, Makati City, covered by TCT No. 177813 issued by the Registry of Deeds of Makati; that KSY has developed and constructed on the said parcel of land a condominium project known as the ASCC; that the said parcel of land forms part of the common areas of the condominium project; that ASCC, as the condominium corporation was organized and formed purposely to manage the project and to hold title to the common and limited areas of the condominium project; that on July 1, 1998, a Deed of Assignment was executed by and between KSY and ASCC whereby the former transferred to the latter its rights including the ownership of the parcel of land, and was duly amended on via an Amendment to the Deed of Assignment executed on October 14, 1998, by and between the same parties, to include machineries as part of the common areas, as the original Deed erroneously excluded the machineries from the description of the common areas; that under the Deed of Assignment and the Amended Deed of Assignment, KSY transferred to ASCC all its rights including ownership of the parcel of land and machineries thereat without any monetary consideration because under the Master Deed and Declaration of Restrictions dated August 31, 1993 and amended on June 14, 1996, the parcel of land and machineries thereat are considered part of the common areas of the condominium project to be managed and held by the condominium corporation; 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. In reply, please be informed that since the Deed of Assignment abovementioned 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 association is for the management 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 (Revenue 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 Assignment 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, as amended. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. However, the notarial acknowledgment to said Deed of Assignment is subject to the documentary stamp tax of P15.00 only pursuant to section 188 of the said Code. (BIR Ruling Nos. DA419-96 dated November 12, 1996 and 550-93 dated December 29, 1993) LLpr 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)