DBP Village Homeowner's Association, Inc.

June 11, 2008 BIR RULING [DA-350-08] RR 8-2005; DA-746-2006 DBP Village Homeowner's Association, Inc. Village Clubhouse, DBP Avenue, Almanza Dos Las Pias City Attention: Wilfredo C. Roldan President, DBPVHA Gentlemen : This refers to your letter dated December 19, 2007 requesting for exemption from the withholding taxes in connection with the refund of your excess utility payments from MERALCO. ETIcHa It is represented that DBP Village Homeowners Association, Inc. is a non-stock, non-profit corporation duly registered with the Ministry of Human Settlements Home Financing Corporation under Registration No. 04-235 dated April 19, 1983; and that the purposes for which the corporation was formed are the following: "1. To enhance better understanding, foster good-will, cooperation and mutual assistance among its members: 2. To enrich and develop the personality and worth of the individual members of their families by preserving the sanctity of the family as a basic social institution; 3. To promote the physical, social and moral consciousness of the members; 4. To mobilize and utilize the talents, energies and resources, the ideals and aspirations of the members in order to meet and resolve the problems and needs of the community; 5. To coordinate efforts for the peaceful co-existence with the other residents of the areas surrounding the village; 6. To develop and maintain by example the prestige and good reputation of the DBP Village as a model community worthy of emulation; and 7. To preserve, maintain and develop the properties of the Association." CDESIA In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98 as amended by Revenue Regulations Nos. 3-2004 and 8-2005, is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. DBP Village Homeowner's Association Inc., is an exempt corporation organized for mutual aid association as contemplated under Section 30 (C) of the Tax Code of 1997, as amended. As such, it is exempt from payment of income tax on income received by it as such organization and consequently from the expanded withholding tax. SDHETI Further, since the excess utility payments pertain to expense related to DBP Village Homeowner's Association Inc.'s registered activity as a mutual aid association, then the refund which it will receive is not subject to the 32% regular corporate income tax because as an exempt corporation under Section 30 (C) of the Tax Code of 1997, as amended, it did not benefit from tax reduction at the time it paid/incurred the aforementioned utility expense. In sum, the MERALCO refund to DBP Village Homeowner's Association Inc., arising from the Supreme Court case G.R. No. 141314 dated April 9, 2003 of the excess utility payments which were incurred and paid by it as an exempt organization under Section 30 (C) of the Tax Code of 1997, as amended, is exempt from the 32% regular corporate income tax, and consequently, from the 25% or 32% withholding tax imposed under Revenue Regulations No. 8-2005. IEHaSc 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service