Conveyance of Property of Land Developer to Homeowners Association Without Consideration Not Taxable

December 28, 1993 BIR RULING NO. 546-93 CONVEYANCE OF PROPERTY OF LAND DEVELOPER TO HOMEOWNERS ASSOCIATION WITHOUT CONSIDERATION NOT TAXABLE 21 (a) 1966 349-93 546-93 Swire Realty Development Corporation 5th Floor, EBC Building U.N. Avenue, Ermita, Manila Attention: Ms . Ma . Luisa C . Bravo Legal Officer This refers to your letter dated May 13, 1993 requesting for a ruling that the transfer or conveyance of the common areas and facilities of the City Garden Townhouse I by your company, as owner-developer, in favor of the City Garden Townhouse I Homeowners Association, Inc. is exempt from capital gains tax and documentary stamp tax. cdpr It appears that Swire Realty Development Corporation, a domestic corporation engaged in the realty business, is the owner-developer of a townhouse project located at No. 200 Pasadena Drive, San Juan, Metro Manila, consisting of thirty-two (32) residential townhouse units designated as City Garden Townhouse I; that the said townhouse project has common areas and facilities consisting of the following: (a) Road Lot 3 (Road Lot 3 of the consolidation and subdivision plan Pcs-10-001301) containing an area of 621 square meters, and covered by TCT No. 1984-B; (b) Road Lot 2 (Road Lot 2 of the consolidation and subdivision plan Pcs-13-1301) containing an area of 468 square meters, and covered by TCT 1983-R; (c) Road Lot 1 (Road Lot 1 of the consolidation and subdivision plan Pcs-13-001301) containing an area of 457 square meters, and covered by TCT No. 1982-R; and (d) Parks and playground (Lot & Block 2 of the consolidation and subdivision plan Pcs-13-0001301) containing an area of 80 square meters, and covered by TCT No. 1963-R; that the buyers-homeowners of the said townhouse project organized and formed a community association called City Garden Townhouse Homeowners Association, Inc., and duly registered with the Home Insurance and Guaranty Corporation (HIGC) dated November 14, 1989; that for the purpose of maintaining and promoting the common safety and enjoyment of the townhouse unit-owners, Swire Realty Development Corporation intends to transfer and assign the aforesaid common areas and facilities in favor of the City Garden Townhouse Homeowners Association, Inc. without any monetary consideration. In reply, please be informed that conveyances of realty not in connection with a sale, to trustees and other persons without consideration are not taxable (Sec. 188, Regulations No. 26, or the Revised Documentary Stamp Tax Regulations). In this case, the Deed of Conveyance in question is without consideration, and the conveyance is not in connection with a sale made to the Homeowners Association. In fact, the sales by the Swire Realty Development Corporation of the townhouse units were made in favor of the individual unit owners of the townhouse project, and the purpose of the assignment to the Homeowners Association of its common areas and facilities is for its management, and for the common benefit and enjoyment of the members-unit owners. In view thereof, this Office is of the opinion as it hereby holds that the transfer and conveyance by the Swire Realty Development Corporation of the common areas and facilities on its townhouse project, City Garden Townhouse I, in favor of the City Garden Townhouse Homeowners Association, Inc. without consideration is exempt from capital gains tax and that the said Deed of Conveyance 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 the certificate in the amount of P3.00 pursuant to Section 188 of the Tax Code, as amended. (BIR Ruling No. 45-07). prcd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue