BIR Ruling [UN-081-95]

February 28, 1995 BIR RULING [UN-081-95] Ray Burton Development Corporation 20/F Producers Bank Centre 8737 Paseo de Roxas Makati, Metro Manila Attention: Ms . Eunice Chuaunsu VP-Business Development Gentlemen : This refers to your letter dated November 29, 1994 stating that the Ray Burton Development Corporation (RBDC); a domestic corporation, is the developer of a condominium project known as the Fountainebleau Villas, located at No. 105 Celery Drive, Valle Verde V, Pasig, Metro Manila; that Fountainebleau Villas Condominium Corporation (FVCC) is likewise a domestic corporation organized for the purpose of holding title to, managing and maintaining the common areas of the project; that you sold to different buyers the condominium units of the aforenamed project including the percentage interest of each unit buyer in the common areas and correspondingly paid the withholding tax, documentary stamp tax, transfer tax and registration fees for the purpose of transferring the individual condominium certificates of title over each of the units to the buyers; that on June 5, 1991, a Deed of Conveyance was executed between RBDC and FVCC pursuant to the provisions of Republic Act No. 4726, otherwise known as the Condominium Act whereby the former conveyed in favor of FVCC the title to the common areas which includes the land, the common areas of the building and the facilities in the project free from any liens and encumbrances, without any monetary consideration, and complying with the requirements of Section 10 of the Condominium Act; and that you submitted to this Office the following documents, viz.: a) Deed of Conveyance; b) Articles of Incorporation and By-Laws of FVCC; c) Master Deed with Declaration of Restrictions of Fountainebleau Villas; d) Transfer Certificate of Title No. PT-67998; and e) other documents. cdtech Based on the foregoing, you now request for a ruling confirming your opinion that said conveyance of the common areas inclusive of the land of Fountainebleau Villas is exempted from the payment of creditable withholding tax and documentary stamp tax. 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 unit 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. Moreover, Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26)provides that "conveyances of realty not in connection with a sale, to trustee 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 notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P10.00 pursuant to Section 188 of the Tax Code, as amended. (BIR Ruling No. 349-93 dated July 30, 1993) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)