BIR Ruling [UN-332-95]

September 12, 1995 BIR RULING [UN-332-95] Leynes & Guillergon T-11 Sunvar Plaza Pasay Road Makati City Attention: Atty . Ma . Lourdes L . Guillergon Gentlemen : This refers to your letter dated May 25, 1995 requesting for a ruling confirming your opinion that the transfer of the common areas, including the land, by your client, Sunvar Realty Development Corporation (SRDC), owner-developer, in favor of Corinthian Court Condominium Association, the condominium corporation, is not subject to income tax and consequently to the creditable withholding tax and to the documentary stamp tax, since the same was made in compliance with the provisions of R.A. No. 4726, otherwise known as the "Condominium Act." It is represented that your abovenamed client with offices situated at S-8 Sunvar Plaza, Pasay Road, Makati city is the owner of certain parcels of land situated at Cubao, Quezon City and covered by TCT No. RT-58226; that it undertook a condominium project on said property known and identified as "Corinthian Court Condominium Project;" that for this purpose, it executed a Master Deed with Declaration of Restrictions in accordance with the provision of the Condominium Act, and had the same registered with the Registry of Deeds for Quezon City; that likewise, the condominium corporation known as "Corinthian Court Condominium Association", was organized to hold title to and manage the common areas of the condominium project for the benefit of the unit owners; that at present, the units of the condominium project have been transferred individually to the unit owners; that each transfer was annotated and/or registered with the Register of Deeds after payment of all taxes and fees; that on May 23, 1995, your client executed a Deed of Assignment conveying the aforesaid parcels of land, including the common areas of the condominium building, in favor of the condominium corporation to enable the latter to manage the same; and that the transfer was without any consideration and was made merely in compliance with the provisions of the Condominium Act." In reply, please be informed that since the Deed of Assignment 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 owner-developer of the condominium units was made in favor of individual unit owners of the condominium project; and that the purpose of the assignment (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). 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 is not taxable." In view thereof, your opinion that the aforesaid Deed of Assignment is not subject to any income tax, and consequently to the creditable withholding tax under Section 50(b) in relation to Section 24 of the Tax Code, as amended and to the documentary stamp tax imposed under Section 196 of the Tax Code as amended, is hereby confirmed. However, the acknowledgment to said deed of assignment 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) cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)