Cordova Condominium Corporation

August 26, 2009 BIR RULING [DA-(C-189) 478-09] RA 9337; DA-(VAT-019) 336-08, DA-304-04 Cordova Condominium Corporation 138 Valero cor. Sedeno Sts. Salcedo Village, Makati City Attention: Ms. Concesa B. Dadiz Building Administrator Gentlemen : This refers to your letter dated November 26, 2008, requesting for exemption from income tax and value-added tax. It appears that Cordova Condominium Corporation with TIN 000-530-981-000 is a non-stock, non-profit corporation with SEC Registration No. 0106283 dated August 5, 1982. The primary purpose for which it was formed is to own or hold title to the common areas of the Cordova Apartments, which has been constituted pursuant to the provisions of Republic Act (R.A.) No. 4726, otherwise known as the Condominium Act, on the properties described in and brought under the operation of said act by the "Master Deed and Declaration of Restrictions" and to manage said condominium project pursuant to and in accordance with said act. In reply, please be informed that income earned by domestic corporations is subject to the thirty-five (35%) regular corporate income tax under Section 27 (A), as amended by Republic Act (R.A.) No. 9337. Nevertheless, collections being paid by unit owners for the maintenance of common areas of a condominium building is not subject to income tax since no income is generated therefrom. (BIR Ruling No. DA-126-00 dated February 24, 2000 and BIR Ruling DA-196-01 dated October 17, 2001). SICaDA The receipts of condominium dues from the unit owners which are merely held in trust and which are to be used solely for administrative expenses, utilities and maintenance of the common areas for the benefit of the unit owners and from which Cordova Condominium Corporation could not realize any gain or profit are not includible in Cordova Condominium Corporation's gross income. Hence, the same is not subject to income tax and consequently to the EWT. (BIR Ruling No. DA-304-2004 dated June 2, 2004) Furthermore, the expenses which are incurred by the advancing party for the benefit and for the account of the party accommodated, can be considered reimbursable expenses not forming part of gross receipts of the advancing party subject to tax. Since the party seeking reimbursement does not sell, barter, exchange, nor lease any food or property and neither does it render any service to the party accommodated, the reimbursement transactions are not subject to the twelve percent (12%) VAT. (VAT Ruling No. 026-97 dated April 1, 1997) The mere collection of purely reimbursable costs billed, for instance, in the name of a client but collected through a broker or agent shall not be subject to the 12% VAT provided that such fact of reimbursement is clearly shown in the billing and/or official receipt (VAT Ruling No. 048-97 dated July 11, 1997) and being reimbursement of expenses without any mark-up or profit element (BIR Ruling No. 001-90 dated January 4, 1990) and not charges for services, should not be considered as part of gross receipt for purposes of the EWT. (BIR Ruling No. 129-92 dated April 20, 1992) In view of all the foregoing, this Office is of the considered opinion that receipts of mere reimbursements with no mark-up or profit element of utility charges paid in behalf and for the account of the tenants/members and not being charges for sale of goods or services, shall not form part of Cordova Condominium Corporation's gross income subject to the EWT and the 12% VAT. 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. SETAcC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service