BIR Ruling [DA-437-98]

September 25, 1998 BIR RULING [DA-437-98] Prince John Condominium 3rd Floor HGL Building 554 Edsa corner Biglang-Awa Street Caloocan City Attention: Ms . Elizabeth A . Sunga Client Service Manager Gentlemen : This refers to your letter dated August 6, 1998 requesting for a ruling that the conveyance by Prince John Development Corporation, developer/assignor, of the common areas, including the land of a condominium project known as the Prince John Condominium to the Prince John Condominium Association, Inc., is exempt from the creditable withholding tax and documentary stamp tax. LLpr It is represented that Prince John Development Corporation, a domestic corporation, is engaged in the real estate industry particularly in high rise buildings; that it is the registered owner of two (2) parcels of land located at No. 291 P. Tuason Street, corner 18th Avenue, Cubao, Quezon City, covered by TCT Nos. 108511 and 10812 issued by the Registry of Deeds for Quezon City, with a total land area of 525.70 square meters; that it is the developer of the Prince John Condominium; that on the other hand, Prince John Condominium Association, Inc. is a non-stock association organized by the homeowners in the said subdivision project, created among others, for the purpose of holding title to, managing and maintaining the common areas of the project; that a Deed of Conveyance was executed by and between Prince John Development Corporation and Prince John Condominium Association, Inc. whereby the former conveyed title to the said land, the common areas of the building, facilities and equipment of the project, in favor of the latter, free from all liens and encumbrances; that said deed was executed without any monetary consideration, in pursuance of the requirements of R.A. No. 4726, otherwise known as the Condominium Act, as amended; 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 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. 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 (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 Conveyance 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 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 said Code. (BIR Ruling No. 550-93 dated December 29, 1993; DA419-96 dated November 12, 1996) cdtech 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)