BIR Ruling [DA-515-98]

November 19, 1998 BIR RULING [DA-515-98] Grace Tower Condominium Association, Inc. 528 Lavezares, San Nicolas Manila Attention: Mr . John U . Chua Assistant President Gentlemen : This refers to your letter dated September 21, 1998 requesting for a ruling that the conveyance by Grace Development, Inc., developer/assignor, of the common areas, including the land of a condominium project known as the Grace Tower Condominium to the Grace Tower Condominium Association, Inc., is exempt from the creditable withholding tax and documentary stamp tax. cdtech It is represented that Grace Development, Inc. is a domestic corporation duly organized and existing under Philippine laws with office address at 18 Jose P. Bautista Avenue, Potrero, Malabon, Metro Manila; that Grace Development, Inc. is the absolute owner of two (2) parcels of land situated at Lavezares, San Nicolas, Manila covered by TCT No. 122248 issued by the Registry of Deeds for Manila; that Grace Development, Inc. has developed and constructed on the said parcels of land a condominium project known as Grace Tower Condominium; that the said parcels of land form part of the common areas of the condominium project; that Grace Tower Condominium Association, Inc. as the condominium corporation was organized and formed purposely to manage the project and to hold title to the common and limited areas of the condominium project; that on September 21, 1998, a Deed of Assignment was executed by and between Grace Development, Inc. and Grace Tower Condominium Association, Inc. whereby the former transferred to the latter its rights including the ownership of the two (2) parcels of land and machineries thereat without any monetary consideration because under the Master Deed and Declaration of Restrictions dated November 16, 1976, the two (2) parcels of land and machineries thereat are considered part of the common areas of the condominium project to be managed and held by the condominium corporation; 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 Assignment 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; DA-419-96 dated November 12, 1996) cdta 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. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)