Conveyance of the Common Area by a Developer to a Condominium Corporation is Exempt from Payment of Creditable Withholding Tax and Documentary Stamp Tax

September 10, 1991 BIR RULING NO. 176-91 24;196 125-89 176-91 Gentlemen : This refers to your letter dated July 17, 1991 requesting for a ruling that the conveyance of the common area, including the land, by the developer, New Vistas Realty Corporation, to the Pearl Plaza Inc., the condominium corporation, is exempt from payment of the creditable withholding tax and documentary stamp. cdti It is represented that the New Vistas Realty Corporation, a domestic corporation with address at Room 302 Ortigas Building, Ortigas Avenue, Pasig, Metro Manila, is the owner-developer of a piece of land covered by TCT No. 60198 upon which the Pearl Plaza Condominium, with address at Pearl Drive corner Lourdes Street, Pasig, Metro Manila, was constructed; that the Pearl Plaza, Inc. a domestic corporation, is the condominium corporation that was organized for the purpose of holding title to, managing and maintaining the common areas of the project, as defined to the Master Deed with Declaration of Restrictions; that on Jan. 25, 1991, a Deed of Conveyance was executed between the owner-developer and the condominium corporation whereby the former we conveyed title to the said land, the common areas of the building and facilities of the project, in favor of the latter, free from all liens and encumbrances; the said Deed of Conveyance was executed without any monetary consideration, in pursuance of the requirements of the Condominium Act which mandates that the Condominium Corporation shall hold title to the common area (including the land); that all the units of the projects have already been sold and transferred in the name of the buyers, that likewise, said unit buyers/owners hold a percentage share of the common land on which the building stands and the common areas and appurtenances of the condominium building; that the selling price of each condominium unit already included a proportionate share of the cost of the common land and the building's common areas and appurtenances; that as each condominium unit was sold, it was individually titled and documentary stamp tax and transfer and registration fees and capital gains tax were paid; that each title to a unit sold is annotated in the Certificate of Title to the land; that herein transfer by conveyance is, therefore sought to be exempted from the creditable withholding tax and documentary stamp tax in as much as said conveyance is being done simply to comply with the requirements of the Condominium Act, and for the protection of the unit owners and in as much as said taxes have already been paid when each individual unit was titled; and that the above circumstances pertain to the conveyance by New Vistas Realty Corporation of the Title to the land covered by TCT No. 60198 to the Pearl Plaza, Inc., the condominium corporation. 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 units owners of the condominium project; and 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). Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realty not in connection with the sale of 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 any creditable withholding tax under Section 50 (b) in relation to Section 24 of the Tax Code, as amended. Neither is it subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. However, the acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P3.00 on certification, pursuant to Section 188 of the Tax Code, as amended. aisadc Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge