BIR Ruling [UN-177-94]

June 16, 1994 BIR RULING [UN-177-94] Guadalupe Grands Villas Inc. 2nd Flr., V & L. Building 8 Gorordo Avenue Cebu City Attention: Mr . Earl U . Kokseng Treasurer Gentlemen : This refers to your letter dated April 26, 1994 stating that your company, Guadalupe Grand Villas, Inc. is engaged in the development and selling of townhouse units; that you have sold a number of townhouse units during the past year, and a townhouse association has been formed by the homeowners; that this townhouse association was formed primarily to hold title to the common areas and to adopt and enforce the corresponding rules and regulations concerning the proper use, enjoyment and upkeep of said common areas; and that in order for the townhouse association to hold title to the common areas of the townhouse project, you are contemplating on transferring the ownership of these common areas to the townhouse association by way of a deed of assignment without consideration since the townhouse association does not have any assets yet. Based on the foregoing, you now request for a ruling on the following queries, to wit: cdtech "1. Is a deed of assignment the proper document to execute? 2. Is said transfer or conveyance subject to the documentary stamp tax? 3. What taxes, if any, are we subject to?" In reply, please be informed as follows: 1. The proper document to execute is a Deed of Conveyance between the owner-developer and the condominium corporation for the management of the project for the common benefit of the unit owners. (Section 10, R.A. 4726). 2. The transfer or conveyance is not subject to the documentary stamp tax. Section 185 of the Revised Documentary Stamp Tax Regulations (Regulations No. 26) provides that "conveyances of realty not in connection with a sale, to trustees or other persons without consideration are not taxable". 3. The acknowledgment to said deed of conveyance is subject to the documentary stamp tax of P10.00 on certification, pursuant to Section 188 of the Tax Code, as amended. (BIR Ruling No. 349-93 dated July 30, 1993). cd Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner Legal Service