BIR Ruling [UN-162-95]

April 17, 1995 BIR RULING [UN-162-95] Yap, Capili, Castro, Del Carmen & Associates 38 De Vera St., Near Cor. Roosevelt (near Quezon Ave.) Quezon City Attention: Atty . Jose W . Yap Gentlemen : This refers to your letter dated April 7, 1995 requesting for a ruling that the conveyance of the common areas and facilities consisting of the following: 1. Right of Way TCT No. 24861 282 Square Meters 2. Right of Way TCT No. 24862 283 Square Meters 3. Open Space TCT No. 23854 134 Square Meters 4. Easements TCT No. 23839 191 Square Meters of Crown Holdings Phils. Inc., owner-developer to the Crown Place Townhomes Association, Inc., the condominium corporation, is exempt from payment of the creditable withholding tax and documentary stamp tax. It is represented that the Crown Holdings Phils. Inc., a domestic corporation, is the owner-developer of the aforementioned parcels of land located at No. 6 1st Street, New Manila, Quezon City upon which the Townhouse Project was constructed; that the Crown Place Townhomes Association, Inc., also a domestic corporation, is an association of homeowners of Crown Holdings Phils. Inc. that was organized for the purpose of holding title to, managing and maintaining the common areas and facilities of the project; that on March 11, 1995, a Deed of Conveyance was executed by and between the owner-developer and the association whereby the former 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; and that said deed 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 areas (including the land). 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 association, no income was generated and a fortiori, no creditable withholding tax is payable and collectible. In fact, the sale by the developer of the residential units was made in favor of individual unit owners of the project; and the purpose of the conveyance to the association 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 "conveyance of realty not in connection with a sale, to 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 notarial acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P10.00 only pursuant to Section 188 of the Tax Code, as amended by Republic Act No. 7660. (BIR Ruling No. UN-083-94 dated February 23, 1994). Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)