The Eastwood Lafayette Three Condominium Association, Inc.

November 11, 2008 BIR RULING [DA-(C-129) 410-08] DA 328-06 The Eastwood Lafayette Three Condominium Association, Inc. No. 119 Eastwood Avenue Eastwood City Cyberpark Bagumbayan, Quezon City Attention: Ms. Grace C. de Vera Property Administrator Gentlemen : This refers to your letter dated July 15, 2008 stating that the Eastwood Lafayette Three Condominium Association, Inc. is a non-stock, non-profit organization duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CN200410266; that the Association is primarily organized for the following purpose(s), to wit: 1. To own or hold title to the common areas in the Condominium Project; and 2. To manage the said project pursuant to and in accordance with the provision the said Condominium Act and the amended Master Deed. In connection therewith, you now request for an opinion that association dues and other assessments/charges collected from the members are exempt from the payment of income tax and value-added tax (VAT). In reply thereto, please be informed that the Association's receipts of the association dues and other assessments/charges collected from the members which 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 from which the Association could not realize any gain or profit as a result of its receipt thereof are not includible in said association's gross income. Accordingly, the Association's collections used solely for administrative expenses in implementing its corporate purposes are not subject to income tax or any withholding tax. Pursuant to Section 105 of the Tax Code of 1997, 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 or 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. DHacTC Considering that the Association does not sell, barter, exchange, lease 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 the VAT on such activity. (BIR Ruling Nos. DA008-00 dated January 5, 2000 and DA196-01 dated October 17, 2001) IN VIEW OF THE FOREGOING, the Association is not subject to income tax and consequently to withholding tax on its collection of association dues, membership fee and other receipts/miscellaneous fees. The Association's receipts of the collections are exempt from VAT. Finally, the Association only acts as the collecting agency, to pool the respective shares of the unit owners 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, hence, is not subject to VAT. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service