Adelina I-B Homeowners Association, Inc.

October 19, 2009 BIR RULING [DA-(C-240) 613-09] Secs. 32 & 105; BIR Ruling No. DA-008-00 & DA-196-01 Adelina I-B Homeowners Association, Inc. Adelina I-B, San Antonio, San Pedro, Laguna Attention: Col. Romulo A. Allosada (Ret.) President Gentlemen : This refers to your undated letter, received by this Office by way of 2nd Indorsement dated April 14, 2009 from Revenue Region No. 9-San Pablo City, requesting tax exemption of Adelina I-B Homeowners Association, Inc. as non-stock, non-profit corporation. It is represented that Adelina I-B Homeowners Association, Inc., with Taxpayer Identification No. 269-079-483-000, is a homeowner's association duly registered with the Home Financing Corporation under then Ministry of Human Settlements under Reg. No. 01-1054 dated March 22, 1988; that some of the purposes for which said non-stock, non-profit corporation was formed are as follows: 1) To construct, manage, maintain and operate adequate facilities and services for its members; 2) To initiate and organize socio-cultural projects and activities which will awaken community consciousness and belonging; 3) To promote, enhance and foster the development and improvement of the quality of life of the members through livelihood projects and other economic activities; 4) To acquire, accept donations, purchase, own, hold, develop, lease, mortgage, pledge, exchange, sell, transfer or otherwise invest, deal in or trade, in any manner permitted by law, real and personal property of every kind and description, or any interest therein, as may be necessary for the accomplishment of the purposes of the Association. aETAHD that the Association collects from its homeowners, membership fees, maintenance dues, contributions for its programs and activities and other special assessments; that in support of its request, the following documents were submitted: 1) BIR Certificate of Registration; 2) Affidavit of Non-Forum Shopping; 3) Articles of Incorporation and By-laws; 4) Certificate of Incorporation from the Home Financing Corporation; and 5) Audited Financial Statements. 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 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 is not subject to income tax or any withholding tax. (BIR Ruling No. DA-515-04 dated September 30, 2004) Pursuant to 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 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. Thus, if the association sells, barters, exchange, lease goods or property or render service for a fee, it is subject to VAT. However, the Association's receipts of the association dues and other assessments/charges are not subject to the 12% VAT as it 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 (BIR Ruling No. DA-008-00 dated January 5, 2000 and DA-196-01 dated October 17, 2001) 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 as null and void. AEIHCS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service