BIR Ruling [DA-494-04]

September 17, 2004 BIR RULING [DA-494-04] 105 DA-008-00 88 Corporate Center Condominium Corporation 141 Valero Street Salcedo Village, Makati City Attention: Mr. Garry G. Valenzuela Property Manager Gentlemen : This refers to your letter dated March 9, 2004 requesting for issuance of a certificate as non-vat/Vat exempt taxpayer. It is represented that 88 Corporate Center Condominium Corporation (88 Corporation) is a non-profit and non-stock corporation registered with the SEC; that the primary purpose for the creation of said corporation is to hold in ownership the common area of the 88 Corporate Center pursuant to the provisions of the Condominium Act (RA 4726), primarily to maintain and preserve the building in good and habitable condition; that in pursuing the purpose of the Corporation and to protect their collective interests, all unit owners or members share in the cost of preserving and maintaining the common areas of the building; that the corporation then has its other purpose, which is to fix and collect all charges or assessments as provided for in the Master Deed with Declaration of Restriction and to pay all expenses in connection with and incidental to the performance of the functions of the corporation; that the assessment of association dues is merely redistribution or sharing of common expenses and is not in pursuit of business or profit; and that there is no business involved as it does not engage in trade transaction with the consuming public. In reply, please be informed that the 88 Corporation receipts of the Corporate Center dues, and other assessments/charges collected from the members, which are merely held in trust and which are to be used solely for administrative expenses in implementing its purpose/s i.e., promote general welfare, property and service of the Corporate Center, specifically, protect 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 and solid management and environmental control, and which 88 Corporation could not realize any gain or profit as a result of its receipt 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. 103-94 dated May 16, 1994; DA-470-98 dated November 3, 1998) Pursuant to Section 105 of the 1997 Tax Code, value-added tax (VAT) is collected upon any person, who in the course of trade or business, sells, barters, exchanges, leases goods or properties, 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. HCATEa Considering that the 88 Corporation does not sell, barter, exchange, nor lease any good or property and neither does it render service for a fee but merely implements the administration of the required services to collect the association dues from the unit owners pursuant to its corporate purpose/s as "trustee" for the fund thereof, it is not subject to the value-added tax (VAT) on such activity. (VAT Ruling No. 026-97 dated April 1, 1997) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it shall 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.) MILAGROS V. REGALADO Assistant Commissioner Legal Service