Parc Royale Condominium Unitowners Association, Inc.

September 22, 2008 BIR RULING [DA-(C-078) 247-08] Sec. 105; DA-031-2006 Parc Royale Condominium Unitowners Association, Inc. Doa Julia Vargas Street, Ortigas Center, Pasig City Attention: Mr. Marcelo A. Lasco Property Manager Gentlemen : This refers to your letter dated June 25, 2008 requesting for a certificate of tax exemption from payment of income tax and consequently from the expanded withholding tax. It is represented that Parc Royale Condominium Unitowners Association, Inc. is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. AN095-04075 dated October 22, 1995; that some of the purposes for which the corporation was formed is to own or hold title to the common areas in the Parc Royale Condominium, to manage and operate the said project pursuant to and in accordance with the said Master Deed with Declaration of Restrictions, to obtain and maintain insurance policies against loss by fire, casualty, liability and other insurable risks, to adopt and enforce rules and regulations concerning the proper use, enjoyment and occupancy of all units and common areas in the project and to fix penalties, by way of liquidated damages, for violation thereof, to provide and contract services for public utilities and for the maintenance, repair, sanitation and cleanliness of the common areas in the project, as well as for the beautification and improvement thereof and for the reconstruction, restoration or repair when necessitated by damage, destruction, obsolescence, depreciation, expropriation or condemnation of the whole or any part thereof; and that in pursuing of its purposes and to protect their collective interest, all unit owners or members share in the cost of preserving and maintaining the common areas of the building by collecting charges or assessments to pay all expenses in connection with and incidental to the performance of the corporation. In reply, please be informed that the association dues, membership fees 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. , to protect and safeguard the welfare of the owners, lessees and occupants; provide utilities and amenities for its members, and which the Corporation 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. Furthermore, pursuant to Section 105 of the Tax Code of 1997, 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 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 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 purpose/s as "trustee" of the fund thereof, it is not subject to the value-added tax (VAT) on such activity. This ruling is being issued in 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