BIR Ruling [DA-125-03]

April 21, 2003 BIR RULING [DA-125-03] Capitol Hills Golf Subdivision Homeowner's Association Capitol Hills Golf Subdivision, Quezon City Attention: Engr. Teodoro B. San Juan President Gentlemen : This refers to your letter dated April 9, 2002 stating that Capitol Hills Golf Subdivision Homeowner's Association, Inc. is a non-stock, non-profit organization registered with the Securities and Exchange Commission (SEC) on July 2, 2002; that it was primarily organized to promote the interest and well-being of its members as well as to safeguard the welfare of its residents; that the Association collects monthly dues from its members which become a major source of the Association's general fund from which the administrative and other common expenses for utilities and services are regularly disbursed ( e.g. , salary of employees, security and janitorial services); that on account of the increasing cost of administration and maintenance, the Association also assesses its members such other dues and charges for the use of water facilities and utilities, like multi-purpose hall, gym, basketball court, park, administrative office, and guardhouse, as a means of replenishing its general fund; and that such assessment is made pursuant to Article IV (2) of the Amended By-Laws of the Association. Based on the foregoing, you are requesting for information on whether or not the membership dues and such other fees and charges which the Association assesses against its members and which are disbursed for their common benefits are to be considered as income subject to income tax and consequently, subject to withholding tax. In reply, please be informed that as an exempt organization under Section 30(E) of the 1997 Tax Code, 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 Association's members are not among those specified in the Regulations, then they are not subject to the creditable withholding tax. aTEHCc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group