BIR Ruling [DA-440-99]

July 30, 1999 BIR RULING [DA-440-99] Megaworld Properties and 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 February 8, 1999 requesting for a confirmation of your opinion that the conveyance of the common areas by Mango Orchard Resource and Development Corporation (Mango Orchard) and J-Alfra Development Corporation (J-Alfra) in favor of Narra Heights Condominium Association, Inc. is not subject to documentary stamp tax and creditable withholding tax. It is represented that Mango Orchard is the registered owner of a parcel of land located along No. 28 Mariposa St., Quezon City covered by Transfer Certificate of Title (TCT) No. N-138480 consisting of Three Thousand Four Hundred Fifty Six (3,456) sq.m.; that J-Alfra is the owner of a land, together with the improvements thereon consisting of Three Hundred Fifty One (351) sq.m. and covered by TCT No. N-149523; that both titles were issued by the Registry of Deeds for Quezon City; that Megaworld Properties and Holdings, Inc. (Megaworld) is a corporation engaged in the development of condominium projects; that Megaworld, Mango Orchard and J-Alfra constructed on the above said parcels of land a residential condominium named "Narra Heights"; 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; that Narra Heights Condominium Association, Inc. was organized to manage and hold title to all the common areas in the said condominium project including, the land on which the condominium is located; and that a Deed of Conveyance without consideration will be executed by Mango Orchard and J-Alfra in favor of Narra Heights Condominium Association, Inc. for the purpose of transferring title to the lands. In reply, please be informed that since the Deed of Conveyance above-mentioned will be made without consideration and is not in connection with a sale made to the condominium corporation, no taxable income will be 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). DSETcC 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 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. DA-437-98 dated September 25, 1998) 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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVAS IV Deputy Commissioner (Legal and Enforcement Group)