Kasiyahan Homes Condominium Corporation

June 18, 2010 BIR RULING [DA-(C-025) 102-10] Secs. 30 (C), 105; BIR Ruling No. 018-05; BIR Ruling No. S30-047-01; BIR Ruling No. DA-(C-078) 247-08; VAT Ruling No. 026-97 Kasiyahan Homes Condominium Corporation 58 McKinley Road, Forbes Park, Makati City Attention: Ms. Marlyn M. Lopez Village Manager Gentlemen : This refers to your letter dated December 1, 2009 requesting for issuance of certificate of tax exemption. LLphil Documentary evidence submitted disclosed that Kasiyahan Homes Condominium Corporation ("Kasiyahan Homes") , with Taxpayer Identification No. 000-468-553-000, is a non-stock, non-profit domestic corporation organized pursuant to the Condominium Act (Republic Act No. 4726) and duly registered with the Securities and Exchange Commission (SEC) under SEC Reg. No. 120015 dated March 30, 1984, that the primary purposes for which it was organized are as follows, viz. : 1) To own or hold title to the common areas in the condominium project; 2) To provide for the preservation in the Project of the values and amenities of a residential community and for the proper maintenance of the common areas and facilities of the Project; that as provided for in the corporation's by-laws, any and all monies and assets of the corporation shall be devoted exclusively to the furtherance of these purposes, and no dividends of any kind or distribution of income shall be declared or made; that the unit owners (members) are assessed association dues to defray administrative, maintenance and operation expenses of the Condominium Project. In reply, please be informed that Kasiyahan Homes' receipts of association 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 purposes i.e. , to operate, manage and maintain the said condominium project, to defray the costs of the condominium, and from which Kasiyahan Homes could not realize any gain or profit as a result of its receipt thereof, are not includible in said corporation's gross income. In BIR Ruling No. 018-05 dated September 16, 2005 citing BIR Ruling DA-008-01-05-00 dated January 5, 2000 , this Office ruled as follows: "We ruled that BGCEA's receipt of association 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 the purposes of the BGCEA, and which it could not realize any gain or profit as a result of its receipt thereof, are not includible in said corporation's gross income, thus not subject to income tax and consequently, to the expanded withholding tax." Pursuant to Section 105 of the 1997 Tax Code, as amended, 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 or 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. (BIR Ruling No. DA-(C-078) 247-08 dated September 22, 2008) It should be understood that Kasiyahan Homes shall be constituted as withholding agent of the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as implemented by Revenue Regulations (Rev. Regs.) No. 2-98, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the Tax Code of 1997, also as implemented by Rev. Regs. No. 2-98, as amended (BIR Ruling No. S30-047-01 dated June 5, 2001) . However, please be reminded that pursuant to Sec. 30 of the 1997 Tax Code, as amended, income of whatever kind and character from any of its properties, real or personal, or from any of its activities conducted for profit regardless of the disposition thereof made of such income, shall be subject to income tax. cAHIST Moreover, Kasiyahan Homes is still required to file on or before the 15th day of the fourth month following the close of its accounting period a Profit and Loss Statement and Balance Sheet with the Annual Information Return under oath, stating the gross income and expenses incurred during a given taxable year. Considering that the corporation does not sell, barter, exchange, nor lease any goods 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 purposes as "trustee" for the fund thereof, it is not subject to VAT on such activity. (VAT Ruling No. 026-97 dated April 1, 1997) Finally, Kasiyahan Homes' the books of accounts and other pertinent records shall be subject to periodic examination by the BIR for the purpose of ascertaining whether it has complied with the conditions under which it has been granted tax exemption or tax incentives, and/or has paid its tax liability, if any pursuant to Section 235 of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service