Taal Greenheights Subdivision Homeowners' Association, Inc.

October 19, 2009 BIR RULING [DA-(C-238) 611-09] DA328-06 Taal Greenheights Subdivision Homeowners' Association, Inc. 2/F Cityland Condo. 10 Tower 1 156 H.V. dela Costa Street Makati City Attention: Mr. Jorge Cuvin President Gentlemen : This refers to your letter dated January 23, 2007 stating that Taal Greenheights Subdivision Homeowners' Association, Inc. (THG, Inc.) is a non-stock, non-profit corporation duly registered with the Housing and Urban Development Coordinating Council on May 28, 2002; that it was organized pursuant to Section 30 of Presidential Decree (PD) No. 957 which states: "The owner or developer of a subdivision project or condominium project shall initiate the organization of a homeowners' association among the buyers and residents of the projects for the purpose of promoting and protecting their mutual interest and assist in their community development." that TGH, Inc. is organized to promote the best interest as well to safeguard the welfare of the lot owners and residents of the subdivision known as Taal Greenheights Subdivision located at Barangay Iruhin West, Tagaytay City, by maintaining the subdivision and its facilities, and adopting measures, consistent with laws, to enhance and regulate the use and enjoyment by its residents of said subdivision facilities; and that in order to sustain the expenses attributable to its duties and functions, THG, Inc. is constrained to assess obligatory fees/dues from its members/lot owners, which are computed proportionately to their individual membership interest in the subdivision. 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). CHIScD 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. 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. 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, 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. TaSEHC Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service