BIR Ruling [DA-288-98]

July 1, 1998 BIR RULING [DA-288-98] Ngaw & Lauron Suite 1402 State Centre 333 Juan Luna St., Binondo Manila Attention: Atty . Jose Ngaw Gentlemen : This refers to your letter dated June 4, 1998 requesting in effect for a ruling that the proposed conveyance of the common areas, including the land of the Spouses Marcelo Cruz and Corazon Cruz, owners/developers of a condominium project known as Villa Corazon Condominium, to the Villa Corazon Condominium Association. Inc., the condominium corporation, is exempt from the payment of the creditable withholding tax and documentary stamp tax. Documents submitted show that the Spouses Marcelo Cruz and Corazon Cruz are the owners/developers of a parcel of land located at 506 2nd St., San Miguel, Manila and covered by Transfer Certificate of Title No. 169690 upon which the Villa Corazon Condominium Project was constructed; that the Villa Corazon Condominium Association, Inc., a domestic corporation, is the condominium corporation that was organized for the purpose of holding title to, managing and maintaining the common areas of the project, as defined in the Master Deed and Declaration of Restrictions; that a Deed of Conveyance will be executed between the owners/developers and the condominium corporation whereby the former convey the title of the said land, the common areas of the building and facilities of the project, in favor of the latter, free from all liens and encumbrances; and that said deed will be executed without any monetary consideration, in pursuance of the requirements of the Condominium Act which mandates that the Condominium Corporation shall hold title to the common areas (including the land). 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 condominium corporation, no income was generated and a fortiori , no creditable withholding tax is payable and collectible. The purpose of the conveyance to the condominium corporation 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 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". cdpr In view thereof, this Office is of the opinion as it hereby holds that the aforesaid Deed of Conveyance is not subject to any 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 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 Tax Code of 1997. (BIR Ruling No. UN-083-94 dated February 23, 1994) 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. prcd Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)