BIR Ruling [UN-062-94]

February 15, 1994 BIR RULING [UN-062-94] Cirilo L. Manlangit & Associates Megaworld Suite, 16th Floor Solidbank Building 77 Paseo de Roxas Makati, Metro Manila Attention: Atty . Cirilo L . Manlangit Gentlemen : This refers to your letter dated October 27, 1993 stating that your client, Megaworld Properties & Holdings, Inc. is a domestic corporation engaged in the development of townhouses and condominium projects and the registered owner of a certain parcel of land covered by TCT No. 5044-R located at #35 Annapolis Street, Greenhills, San Juan, Metro Manila containing an area of 1,130 square meters where a building was constructed with 130 condominium units sold to different buyers who were issued the corresponding Condominium Certificates of Title (CCT's) pursuant to the Condominium Law (R.A. 4726); that the corresponding documentary stamp tax, withholding tax and registration fees based on the prevailing market price of the unit have been paid; that as required by the Condominium Act, each title to a unit sold is annotated on the certificate of title to the land; that as required by said law, the developer consequently loses ownership over the land when it transfers the title to the land to the condominium association as common property; and that the transfer is usually effected by a Deed of Conveyance without any monetary consideration because the value of the land which is a condominium common property is already included in the purchase price of each individually-titled condominium unit. Based on the foregoing, you now request for confirmation that the Deed of Conveyance executed by your client transferring the lot on which the condominium building was constructed is not subject to documentary stamp tax under Section 196 (formerly 245) of the Tax Code, as amended. In reply, please be informed that "conveyance of realty not in connection with a sale, the trustees or other person without consideration are not taxable." (Sec. 185, Regulation No. 26 of the Revised Documentary Stamp Tax Regulations) In the instant case, the Deed of Conveyance, being without consideration, is a conveyance not in connection with a sale made to the condominium corporation. In fact, the sale by your client of the condominium units were made in favor of the individual unit owners of the condominium project, while 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. No. 4726, Condominium Act) Accordingly, the aforesaid Deed of Conveyance is not 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 Certification in the amount of P3.00 pursuant to Section 188 of the Tax Code, as amended. (BIR Ruling No. 052-91 dated April 2, 1991) cdtech Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)