Taxability of the Transfer or Conveyance of the Common Areas of a Condominium Building

January 27, 1992 BIR RULING NO. 041-92 21 (e) 196 045-87 125-89 041-92 Travelers Inn Condominium, Inc. Makati Avenue, Makati Metro Manila Attention: Atty . Jose A . Subida Board Secretary & Legal Counsel Gentlemen : This refers to your letter dated October 8, 1991 requesting information as to whether the transfer or conveyance by the Lard Systems Development Corporation (Lard System) to the Travelers Inn Condominium, Inc. (Travelers Inn) of the common areas of the Travelers Inn Condominium building is exempt from capital gains tax and documentary stamp tax. Documents submitted show that Land Systems, a domestic corporation, is the absolute owner of two (2) parcels of land situated in Makati, Metro Manila; that it has developed and constructed on these parcels of land a condominium project called Travelers Inn Condominium Apartments pursuant to the Condominium Act (R.A. No. 4726); that these two parcels of land form part of the common areas of the condominium project; that Travelers Inn, as the condominium corporation was constituted and formed purposely to manage the project and to hold title to the common and limited areas of the condominium project; that pursuant to a Deed of Assignment executed on March 15, 1990, Land Systems shall assign to and in favor of Travelers Inn its rights, including the ownership of the two parcels of land; and that the assignment is without any monetary consideration because under the Master Deed and Declaration of Restrictions dated November 5, 1976, the two parcels of land are considered part of the common area of the condominium project to be managed and held by the latter. In reply, please be informed that "conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable". (Sec. 195, Regulations No. 26 of the Revised Documentary Stamp Tax Regulations). In this case, the Deed of Assignment in question is without consideration and the conveyance is not in connection with a sale made to the condominium corporation. In fact, the sales by the Land Systems of the condominium units were made in favor of the individual unit owners of the condominium project, and the purpose of the assignment to the condominium corporation (Travelers Inn) is for the management of the project for the common benefit of the unit owners. (Section 10, R.A. No. 4726, Condominium Act). In view thereof, this Office is of the opinion as it hereby holds that the transfer and conveyance of Travelers Inn of the common areas of said condominium building without consideration is exempt from capital gains tax; and that the said Deed of Assignment is not also subject to the documentary stamp tax imposed by Section 196 of the Tax Code, as amended. However, the acknowledgment is subject to the documentary stamp tax on certificate in the amount of P3.00 pursuant to Section 189 of the Tax Code, as amended. (BIR Ruling No. 45-87) adc Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue