Swire Elan Suites Condominium Corporation

October 2, 2009 BIR RULING [DA-(C-223) 578-09] Sections 32 & 105; BIR Ruling No. DA-362-2000 & DA-426-2004 Swire Elan Suites Condominium Corporation No. 49 Annapolis Street Greenhills, San Juan Attention: Engr. Joel D. Vinculado Building Administrator Gentlemen : This refers to your letter dated July 16, 2009 requesting for a certification that Swire Elan Suites Condominium Corporation is a non-stock, non-VAT and non-profit entity. aCcADT Documents show that Swire Elan Suites Condominium Corporation ("Association"), with Taxpayer Identification No. 006-664-486-000, is a non-stock, non-profit association organized and operated for, among others, the following purposes: To own or hold title to the common areas in the condominium project known as the Swire Elan Suites Condominium Corporation; To manage the said Project pursuant to and in accordance with the provisions of Republic Act No. 4726 and the Master Deed; To provide and contract services for public utilities, maintenance, repairs, sanitation of common areas, including administrative, legal, accounting, engineering and other professional and technical services; To levy and collect assessments and penalties against the owners of unit as are provided for in the Master Deed and/or approved and authorized by the Board of Directors; and To exercise such other powers as are necessary, incidental or convenient to the accomplishment of the foregoing purposes. To implement the administration of the above responsibilities, the Association collects association dues and assessments of the Association from unit owners. The funds of the Association shall be derived from admission fees, annual dues and special assessments of members, gifts, or donations. In reply, please be informed that the Association's receipts of the association dues and other assessments/charges collected from the members, 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 is not subject to income tax and consequently to withholding tax on its collection of association dues, membership fee, insurance premium, real property taxes, power and water and other receipts/miscellaneous fees. cIACaT Moreover, in reimbursement-of-cost transactions, 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. Provided, that if the reimbursement of expenses is without any mark-up or profit element (BIR Ruling No. 001-90 dated January 4, 1990) and not charges for services, it should not be considered as part of gross receipt for purposes of the expanded withholding tax (BIR Ruling No. 129-92 dated April 20, 1992). Thus, receipts of mere reimbursement of cost 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 the Association's gross income subject to the expanded withholding tax (BIR Ruling No. 362-08 dated June 13, 2008). Finally, since the Association does not sell, barter, exchange, lease goods or property 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 for payment of common expenses, it is not subject to the value-added tax on such activity (BIR Ruling No. DA-426-2004 dated August 10, 2004 and BIR Ruling No. DA-362-2000 dated October 23, 2000). 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. HAaDTE Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service