First Tondo Complex Association, Inc.

December 18, 2008 BIR RULING [DA-(C-177) 553-08] 30, 105; DA-629-2007; DA-470-98; VAT Ruling No. 026-97 First Tondo Complex Association, Inc. 2150 Velasquez St., Tondo Manila Attention: Mr. Jose Pua President and Ms. Janet Tan Secretary Gentlemen : This refers to your letter dated June 17, 2008 and November 12, 2008 requesting for exemption from income tax and value-added tax (VAT) as a non-stock and non-profit organization. ACETIa Documents submitted to this Office disclosed that First Tondo Complex Association, Inc. (FTCAI) is a non-stock, non-profit corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A199807502 dated June 9, 1998; and that FTCAI is incorporated primarily to own or hold title to the common areas in the condominium project known as the First Tondo Complex. In reply, please be informed that FTCAI's receipts of corporation 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, expenses and losses of the condominium, and from which FTCAI 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 are not subject to income tax and consequently, to the expanded withholding tax (BIR Ruling No. 103-94 dated May 16, 1994; DA-470-98 dated November 3, 1998). Pursuant to Section 105 of the 1997 Tax Code, as amended, VAT is collected upon any person, who in the course of trade or business, sells, barters, exchanges, leases goods or properties and 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 FTCAI 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) 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 as null and void. cEaCAH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service