Pacific Star Building Condominium Corp.

February 23, 2007 BIR RULING [DA-121-07] 105; R.R. 8-2005 DA-494-04; DA-687-06 Pacific Star Building Condominium Corp. 6/F Pacific Star Building Sen. Gil Puyat corner Makati Avenues Makati City Attention: Marilyn A. Kong Chief Accountant Fernan Espineda Finance Director Gentlemen : This refers to your letter dated February 13, 2007, requesting for a ruling that the assessments (dues and related charges) collected by Pacific Star Building Condominium Corporation (PSBCC) from its members/unit owners as well as the refund from the Manila Electric Company (MERALCO) are not subject, respectively, to the expanded withholding tax and to the 25% creditable withholding tax under Revenue Regulations No. 8-2005. THIECD It is represented that PSBCC is a non-stock, non-profit corporation registered with the Securities and Exchange Commission (SEC) with the purpose to hold ownership of the common areas of the building pursuant to the provisions of R.A. No. 4726 (Condominium Act), primarily with the objective of maintaining and preserving the building in good and efficient operating condition. Pursuant to the said purpose and to protect collective interest, all unit owners or members of the condominium corporation are obligated to share in the cost of preserving and maintaining the common areas/facilities of the building. Relative thereto, the condominium corporation fixes and collects all charges or assessments, as provided for in the Master Deed with Declaration of Restriction and accordingly pays all expenditures in connection with and incidental to the performance of the functions of the corporation. As a consequence, it has a refund of the excess utility payments with MERALCO covering the period from 1995 to 2003. AIECSD Accordingly, the condominium corporation's assessment of association dues is merely a re-distribution or sharing of common expenses and is not in pursuit of business or profit. In addition, receipts or collection of said assessments from the members are simply funds held in trust and which shall be used solely for administrative and operational expenses in implementing the condominium corporation's purpose/s i.e. protect and safeguard the welfare of the owners, lessees and occupants of the building, provide utilities and amenities for public use and the maintenance of services, waste management and environmental control to which PSBCC could not realize any gain or profit as a result thereof. In reply, please be informed that receipts by PSBCC of the condominium dues and other assessments/charges collected from the members, which are merely held in trust and to which are to be used solely for administrative expenses in implementing its purpose/s i.e., promote general welfare, property and service of PSBCC, specifically to protect the and safeguard the welfare of the owners, lessees and occupants of the property, provide utilities and amenities for public use and the maintenance of services, waste management and control, and which PSBCC could not realize any gain or profit as a result of its receipts thereof are not includible in said association's gross income. Hence, the same is not subject to income tax and consequently to the expanded withholding tax. ( BIR Ruling No. DA-494-2004 dated September 17, 2004 ) caIACE Furthermore, considering that PSBCC is an organization exempt from income tax and it has not been engaged in any profitable activities that would result in the imposition of taxes, and provided, however, that it has not claimed the utility payments to MERALCO as deductions for income tax purposes, the refund of the excess utility payments with MERALCO is not subject to withholding tax. ( BIR Ruling No. DA-687-2006 dated December 6, 2006 ) This will, therefore, serve as your authority to request Meralco the release of your refund without being subjected to withholding tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. HTaSEA Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service