BIR Ruling [DA-351-98]

July 28, 1998 BIR RULING [DA-351-98] Megaworld Properties & Holdings, Inc. 28/F The World Centre 330 Sen. Gil J. Puyat Avenue Makati City Attention: Atty . Garry V . De Guzman Corporate Lawyer Gentlemen : This refers to your letter dated April 20, 1998 in effect, requesting for confirmation of your opinion that the conveyance of the common areas of your condominium building is exempted from the payment of creditable withholding tax and documentary stamp tax. cd It appears that Megaworld Properties and Holdings, Inc. (Megaworld) is a corporation engaged in the development of condominium projects; that it is the registered owner of a parcel of land located along Lee St., Barangay Addition Hills, Mandaluyong City, covered by TCT No. 12768 of the Registry of Deeds of Mandaluyong City, Metro Manila; that it constructed a six (6) four storey clusters and one (1) seventeen-storey residential condominium project named as the "Wack Wack Heights"; that individual Condominium Certificates of Title (CCT) were issued to the unit owners pursuant to the Condominium Act (Republic Act No. 4726); that when the units were sold to the buyers, separate Deeds of Absolute Sale were executed and the corresponding documentary stamp taxes, withholding taxes and registration fees based on the prevailing market price of the unit were paid accordingly; that pursuant to the Condominium Act, Megaworld formed a condominium corporation named "Wack Wack Heights Condominium Association, Inc."; that among the purposes of the condominium corporation is to own or hold title to all the common areas in the condominium project, including the land on which the condominium project is located; and that a Deed of Conveyance without consideration was executed between Megaworld and the Wack Wack Heights Condominium Association, Inc., whereby the former conveys in favor of the latter the above-described property together with the common areas. In reply, please be informed that since the Deed of Conveyance above-mentioned was made without consideration and is not in connection with a sale made to the condominium corporation, no taxable 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. 4726). Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26) provides that "conveyance 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 is not subject to the 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 same Code. 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 24, 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 Deputy Commissioner (Legal & Enforcement Group)