BIR Ruling [DA-469-98]

October 30, 1998 BIR RULING [DA-469-98] Pinera, Marcella, Romero & Associates Penthouse, Columbian Building 160 West Ave., Quezon City Attention: Ms . Maribel Alindogan Sr . Executive Assistant Gentlemen : This refers to your letter dated June 8, 1998 requesting on behalf of your client, Center Realty & Development Corporation (CRDC), for a ruling to the effect that the conveyance of the lot and common areas of a condominium project from the Developer Corporation to the Condominium Corporation is exempt from the payment of the creditable withholding tax. It appears that your client, CRDC, is a domestic corporation duly registered with the Securities and Exchange Commission (SEC); that it is the owner-developer of a condominium apartment building known as the "Jaboneros Garden Residential Condominium" (JGRC); that the condominium project was built and constructed on two (2) parcels of land covered by Transfer Certificate of Title Nos. 177546 and 177547 with a total area of 743.90 square meters situated at 455 Jaboneros St., San Nicolas, Manila; that Jaboneros Garden Condominium, Inc. (JGCI), is likewise a domestic corporation duly registered with the SEC as a non-stock, non-profit corporation on May 22, 1990; that it was organized for the purpose of holding title to the common areas in the condominium project, JGRC; that a Deed of Conveyance was made and executed by and between CRDC and JGCI whereby the former transferred and conveyed in favor of the latter the aforesaid two (2) parcels of land covered by TCT Nos. 177546 and 177547 including the common areas and capital equipment and shafts, generators, water reservoirs and tanks, pumps, main lobby, the stairways, the common entrances and exits, the common hallways and other areas of common use, the foundation, columns, bearing walls, beams, floor borders, roof and other structural elements of the building, the elevator and all other central services, mechanical, and electrical or otherwise which are for common use in the JGRC including the use of the telephone cable lines now or hereafter installed and all other apparatus, equipment, installations and facilities not mentioned herein but existing on the property for common use or necessary and convenient to the existence, maintenance or safety of the property without any monetary consideration; and that the said transfer and conveyance was done simply to comply with the requirement of R.A. No. 4726, otherwise known as the Condominium Act. In reply, please be informed that since the above-mentioned Deed of Conveyance is without consideration and is not in connection with a sale made to the condominium corporation since the purpose of the conveyance to the condominium corporation is for the management of the project for the common benefit of the unit owners, no income was generated and a fortiori, no creditable withholding tax is payable and collectible. (Section 10, R.A. No. 4726) (BIR Ruling No. 176-91 dated September 10, 1991) Moreover, under Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26), conveyances of real property not in connection with sale to trustees or other persons without consideration are not taxable, the aforementioned Deed of Conveyance executed by the developer in favor of the condominium corporation is not subject to the documentary stamp tax as 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 pursuant to Section 188 of the same Code. (BIR Ruling No. 176-91 dated September 10, 1991) 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)