BIR Ruling [DA-593-99]

October 7, 1999 BIR RULING [DA-593-99] Filinvest-I Homeowners Association, Inc . Batasan Hills, Capitol District Quezon City Attention: Engr . Benedict O . Manalo President Gentlemen : This refers to your letter dated July 5, 1999 stating at Filinvest Homes I Homeowner's Association. Inc. (Association) is non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) with SEC Registration No. 70161 dated October 18, 1976; 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 in order to accomplish the above-mentioned objectives, the Association collects monthly dues from its members which becomes 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 swimming pool and clubhouse, as means of replenishing its general fund; and that such assessment is made pursuant to Article IV(2-b) of the amended By-Laws of the Association. In connection therewith, you now request for a ruling to the effect that the receipts of the Regular Assessment billed the unit owners of the condominium building which are used solely for administrative expenses, utilities and maintenance of the common areas do not form part of the Filinvest Homes II Homeowner's Association's taxable income subject to income tax and consequently exempt from withholding tax. In reply, please be informed that the Filinvest Homes I Homeowner's Association receipts of the Regular Assessment from the unit owners which are merely held in trust and which are to be used solely for administrative expenses, utilities and maintenance of the common areas for the benefit of the said unit owners and which the Filinvest Homes I Homeowner's Association could not realize any gain or profit as a result of its receipt thereof are not includible in said Corporation'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) 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)