BIR Ruling [DA-094-05]

March 29, 2005 BIR RULING [DA-094-05] Sec. 30 (E) DA-125-2003 Rockwell Leisure Club, Inc. #23 Amorsolo Drive, Rockwell Center Makati City Attention: Anna Maria P. Baldemeca Accounting Manager This refers to your letter dated February 24, 2005 requesting on behalf of Rockwell Leisure Club, Inc. for confirmation of your opinion that no income tax and creditable withholding tax under the Tax Code of 1997 is due on the membership dues being collected from its members. DHIcET Documents submitted show that Rockwell Leisure Club, Inc. (Rockwell Club), is a domestic non-stock, non-profit corporation duly organized and existing under Philippine laws and is registered with the Securities and Exchange Commission (SEC), under SEC Registration No. A199904785 dated March 26, 1999, for the purpose of "primarily to own, maintain, operate, manage and carry on a sports, social and recreation club and its facilities on a non-profit basis at the Rockwell Center for the amusement, social, entertainment, recreational and athletic activities of the club members"; that Rockwell Club collects membership dues and fees from its members primarily to cover and defray the cost of maintenance of the club facilities and premises and special assessments which are being utilized for the improvements in the club facilities; that these dues and assessments do not arise from any sale of goods or services but are imposed to cover the necessary expenses related to the improvements and maintenance of the club families; and that no part Rockwell Club's income inures to the benefit of its members. In reply, please be informed that as an exempt organization under Section 30(E) of the Tax Code of 1997, as amended, and considering that the membership dues are not income derived from real or personal property, or from any activity conducted for profit, said membership dues are not subject to income tax. Moreover, under Revenue Regulations No. 2-98, as amended, payments only to persons enumerated therein are subject to the creditable withholding tax. Since membership dues payable by the Club members are not among those specified in the Regulations, then, your opinion that said membership dues are not subject to the creditable withholding tax, is hereby confirmed. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner (Legal & Inspection Group)