Lee Tower Condominium Corporation

September 14, 2007 BIR RULING [DA-485-07] Section 105 VAT Ruling Nos. 026-97 & 334-88 Lee Tower Condominium Corporation 921 Sabino Padilla Street Binondo, Manila Attention: Ms. Rena Obo Alvarez President Gentlemen : This refers to your letter dated July 27, 2007 requesting on behalf of Lee Tower Condominium Corporation for tax exemption. EcASIC Documents show that Lee Tower Condominium Corporation (the "Association" for brevity) is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200616135 issued on October 23, 2006. It is a non-stock, non-profit corporation organized and operated for the following purpose: "To own and hold title to the common and limited common areas in the condominium project known and identified as the "Lee Tower" which has been constituted, pursuant to Republic Act No. 4726, otherwise known as "The Condominium Act" and other applicable laws, on the properties described in and brought under the operation of said Acts by that "Master Deed with the Declaration of Restrictions'' executed by the Anchor Properties Corporation, to manage, administer and operate the said Condominium Project, pursuant to and in accordance with aforesaid laws and the Master Deed with Declaration of Restrictions and to adopt and carry out such measures as may be necessary, incidental or convenient to promote the best interest of and to protect and safeguard the Unit Owners and their properties in the condominium project." Moreover, the Association shall have, among others, the following incidental powers: aACEID 1) To provide any contract services for public utilities and other services and for the maintenance, repair, sanitation and cleanliness of the common and limited common areas in the Project, as well as for the beautification and improvement thereof and for its construction, installation, reconstruction, restoration or repair when necessitated by damage, destruction, obsolescence, depreciation, expropriation or condemnation of the whole or any part thereof; 2) To contract for the services of persons or firms to assist in the management and operation of the condominium project, including administrative, legal accounting, engineering and other professional and technical services; 3) To enforce and/or discharge any lien or encumbrance levied against the units for unpaid assessments, fees and other charges; and 4) To levy and collect such assessment and penalties against the owners of units in the Project as are provided for in the Master Deed of the Restrictions of the Project and/or approved and authorized by the Board of Directors. HCITDc In reply, please be informed that the Association's receipts of the association dues and other assessments/charges collected from the members, which are merely held in trust and used solely for administrative expenses in order to protect and safeguard the welfare of the owners, lessees and occupants of the property, provide utilities and amenities, the maintenance of services and management, and from which the Association could not realize any gain or profit as a result of its receipt thereof, are not includible in said association's gross income. Accordingly, the Association's collections used solely for administrative expenses in implementing its corporate purposes i.e., association dues, membership fee, insurance premium, real property taxes, power and water and other receipts/miscellaneous fees are not subject to income tax or any withholding tax. Pursuant to Section 105 of the Tax Code of 1997, as amended, VAT is collected upon any person, who in the course of business, sells, barters, exchanges, leases goods or properties, and renders services. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, non-profit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. Considering that the Association does not sell, barter, exchange, lease goods or property and neither does it render service for a fee but only acts as the collecting agency to pool the respective shares of the unit owners and merely implements the administration of the required services to collect the association dues from the unit owners pursuant to its corporate purposes as "trustee" for the fund thereof for payment of common expenses, it is not subject to the VAT on such activity (BIR Ruling No. DA-426-2004 dated August 10, 2004 and BIR Ruling No. DA-362-2000 dated October 23, 2000, citing VAT Ruling Nos. 026-97 and 334-88). TASCDI 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service