Landco Business Park Merchants Association, Inc.

December 4, 2008 BIR RULING [DA-(C-160) 495-08] S 30; S 105; DA-331-2007 Landco Business Park Merchants Association, Inc. F. Imperial Street Legaspi City Attention: Ernesto V. Reynoso Vice-President Gentlemen : This refers to your letter dated September 3, 2008 requesting for an opinion from this Office concerning exemption of Landco Business Park Merchants Association, Inc. (LBPMAI) from income taxes and VAT. It is represented that LBPMAI is a non-stock, non-profit organization whose primary purpose is to promote and advance the general welfare, property, services, the best interest and the reputation of Landco Business Park and to safeguard the well-being of the owners, lessees, and occupants of the parcels of land and buildings located in Landco Business Park; and that the corporation shall be maintained by fees, dues, assessments or charges paid by its members. In reply, please be informed that your association is not among those enumerated as exempt from payment of income tax under Section 30 of the Tax Code of 1997. Under Section 30 (E), the said exemption only applies to "non-stock corporations or associations organized and operated exclusively for religious, charitable, scientific, athletic or cultural purposes or for the rehabilitation of veterans, no part of its net income or asset shall belong or inure to the benefit of any member, organizer, officer or any specific person". As your association is not organized for the purposes stated above, your association may be held liable for income tax under this Section. However, pursuant to BIR Ruling No. DA-196-2001, the collection of dues for the purpose of merely providing members with beneficial services is not one of the contemplated activities subject to income tax since no income was generated for the association by this activity. In addition, the act of collection by the association from the members of their respective shares in the payment of said services is not itself subject to VAT as contemplated under Section 105 of the Tax Code of 1997. 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. STcADa Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service