BIR Ruling [DA-275-04]

May 17, 2004 BIR RULING [DA-275-04] 30; S-30-023-99 The Alexandra Condominium Corporation No. 29 Meralco Avenue Pasig City 1605 Attention: Mr. Ram M. Sarda Chairman and President Gentlemen : This refers to your letter dated March 5, 2004 requesting for exemption from the payment of 20% final withholding tax on your interest income from your deposits/placements. Documentary evidence submitted disclosed that The Alexandra Condominium Corporation is a non-stock, non-profit organization registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 144215 dated September 11, 1987; that the purposes for which the corporation is organized are as follows, viz : "To own and hold title to the common areas in the condominium project known and identified as the "ALEXANDRA CONDOMINIUM CORPORATION" Project which has been constructed pursuant to Republic Act No. 4726, otherwise known as the "Condominium Act" and Presidential Decree No. 957, otherwise known as "The Subdivision and Condominium Buyers' Protective Decree," on the properties described in and brought under the operation of said Acts by the "Master Deed with Declaration of Restrictions" executed by PHILIPPINE REALTY & HOLDING CORPORATION, to manage, administer and operate the ALEXANDRA CONDOMINIUM Project, pursuant to and in accordance with the aforesaid laws and the Master Deed with Declaration of Restrictions; and to adopt and carry out such measures as may be necessary, incidental of, and to protect and safeguard the Unit Owners and their properties in the condominium project." that the corporation is composed of all the unit owners in Alexandra Condominium, Pasig City; that the corporation collects regular monthly dues from all the unit owners to cover the monthly operating expenses of the corporation; that it also makes periodic assessments to all the unit owners to cover the costs of major renovations, repairs and/or maintenance; that pending disbursement of the funds collected from the condominium owners, the corporation places the funds with commercial banks; and that the interest income from these deposits/placements is subjected to the 20% final withholding tax. DTAESI In reply, please be informed that your request cannot be granted for lack of legal basis. The tax exemption contemplated under the provisions of Section 30 of the 1997 Tax Code refers to income received by it as such organization. It is, however, subject to the corresponding internal revenue tax imposed under the National Internal Revenue Code on its income derived any of its properties, real or personal or any activity conducted for profit regardless of the disposition thereof, which income should be returned for taxation. Thus, interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties as derived from sources within the Philippines are subject to the 20% final withholding tax and that interest income derived by it from a depository bank under the expanded foreign currency deposit system shall be subject to 7 1/2% final withholding tax pursuant to Section 27(D)(1) in relation to Section 57(A), both of the Tax Code of 1997. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group