BIR Ruling [DA-312-98]

July 7, 1998 BIR RULING [DA-312-98] 6776 Ayala Avenue Condominium Corporation 6776 Ayala Avenue Makati City Attention: Mr . Eduardo I . Plana President Gentlemen : This refers to your letter dated January 29, 1998 requesting in effect for a ruling that the conveyance of the common areas, including the land of the Pacific Banking Corporation, owner-developer of a condominium project known as 6776 Ayala Avenue Condominium (formerly Pacific Bank Makati Condominium), to the 6776 Ayala Avenue Condominium Corporation, the condominium corporation, is exempt from the payment of the creditable withholding tax and documentary stamp tax. LibLex Documents submitted show that the Pacific Banking Corporation is the owner-developer of two (2) parcels of land located at 6776 Ayala Avenue, Makati City and covered by Transfer Certificates of Title Nos. S-106359 (242476) and S-106360 (242475) upon which the 6776 Asia Avenue Condominium Project was constructed; that the 6776 Ayala Avenue 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; that a Deed of Conveyance 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 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". prcd 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 then Section 50(b) of the Tax Code, as amended (now Section 57(B) of the Tax Code of 1997) in relation to then Section 24 of the Tax Code, as amended (now Section 27 of the Tax Code of 1997). Neither is it subject to the documentary stamp tax imposed under then Section 196 of the Tax Code, as amended (also 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 then Section 188 of the Tax Code, as amended by Republic Act No. 7660 (also 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. cdlex Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)