BIR Ruling [DA-298-97]

September 1, 1997 BIR RULING [DA-298-97] Verde de Pasadena Condominium Corporation 209 Pasadena Drive San Juan, Metro Manila Attention: Mr. Jose De. Valenzuela, Jr. Administrator Gentlemen : This refers to your letter dated August 9, 1996 requesting in effect for a ruling that the conveyance of the common areas by Swire Realty Development Corporation, owner-developer of a condominium project known as Verde de Pasadena Condominium-Casa Madrid Tower I, to the Verde Pasadena Condominium Corporation, the condominium corporation, is exempt from the payment of the creditable withholding tax and documentary stamp tax. It is represented that Swire Realty Development Corporation, a corporation duly organized and existing under and by virtue of the law of the Philippines, with office address at Garden Island Condoville, #34 N. Domingo St., Quezon City, is the owner-developer of a parcel of land located at No. 209 Pasadena Drive, San Juan, Metro Manila covered by Transfer Certificate of Title No. 3044-R of the Registry of Deeds of San Juan, Metro Manila, upon which the Verde de Pasadena Condominium-Casa Madrid Tower I was constructed; that the Verde de Pasadena Condominium Corporation, 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 Transfer was executed between the owner-developer and the condominium corporation whereby the former conveyed title to 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 was 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 Transfer 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). SCIcTD 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 Deed of Transfer is not subject to any creditable withholding tax under Section 50 (b) in relation to Section 24 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 conveyance is subject to the documentary stamp tax of P15.00 only pursuant to Section 188 of the Tax Code, as amended by Republic Act No. 7660. (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. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV OIC-Assistant Commissioner (Legal Service)