Eurovilla 1 Apartment Condominium, Inc.

February 6, 2009 BIR RULING [DA-(C-019) 069-09] Section 32 & 105; BIR Ruling No. DA-362-2000 & DA-426-2004 Eurovilla 1 Apartment Condominium, Inc. 142 Legaspi cor. Herrera Sts., Legaspi Village, Makati City Attention: Ms. Imelda F. Caro Gentlemen : This refers to your letter dated October 9, 2008 requesting for exemption from the payment of income and value-added taxes. Documents show that Eurovilla 1 Apartment Condominium, Inc. ("Association"), is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 32453 dated (illegible). The primary purpose for which it was organized is as follows: "To own or hold title to the common areas in the condominium project known and identified as 'THE EUROVILLA APARTMENT CONDOMINIUM PROJECT' which has been constituted pursuant to the provisions of Republic Act 4726, on the properties described in and brought under the operation of said Act by the 'Master Deed and Declaration of Restrictions' . . . ; to manage the said condominium project pursuant to and in accordance with the provisions of Republic Act 4726 and the said 'Master Deed and Declaration of Restrictions'." Annual assessment shall be levied upon each members in proportion to their proprietary interest or participation in the corporation to meet the operating expenses which shall include, but shall not be limited to the cost of insurance policies insuring the entire project against loss and casualty risks, cost of maintenance and ordinary repairs and of utilities and other services benefiting the common areas, fees and/or salaries of professional or technical personnel or entities employed/retained to assist in the management of the corporation project, cost of repairs of furniture, furnishing, fixtures and equipment for the common areas, cost of any other materials, supplies, furnishing and fixtures, labor, services, maintenance, repairs, taxes or assessments (Article IV, By-laws). In reply, please be informed that since the Association's receipts of association dues and other assessments/charges collected from the members 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 which the Association could not realize any gain or profit as a result of its receipt thereof, the dues, assessments and charges are not includible in said Association's gross income. Accordingly, the aforesaid collections used solely for administrative expenses in implementing the Association's corporate purposes are not subject to income tax or any withholding tax. IaHCAD Pursuant to Section 105 of the National Internal Revenue Code, VAT is collected upon any person, who in the course of 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. Accordingly, the Association's receipts of the aforesaid "collections" are exempt from the VAT since the Association does not sell, barter, exchange, lease goods or property or render service for a fee in accordance with Section 105 of the NIRC but only acts as collecting agency to pool the respective shares of the members of the Association and merely implement the administration of the required services pursuant to its corporate purposes as trustee of the funds thereof for payment of common expenses (BIR Ruling No. DA-362-2000 dated October 23, 2000 and BIR Ruling No. DA-426-2004 dated August 10, 2004). However, should the Association engage in business for profit, any profit realized from such activities is subject to income tax and to the 12% VAT or 3% percentage tax, as the case may be. 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