Mrs. Ellen Rose Manuel-Pineda, CPA

July 9, 2010 BIR RULING [DA-(VAT-020) 120-10] Section 105; VAT Ruling No. 012-96 Mrs. Ellen Rose Manuel-Pineda, CPA 2784 Buencamino Street, Poblacion Makati City Madam : This refers to your letter dated April 3, 2009 requesting in behalf of your client, Calatagan Golf Club, Inc., with Taxpayers Identification No. 000-532-804-000, for confirmation of your opinion that the monthly membership dues billed by it to its members who are stockholders or assignees of the stockholders are not subject to value-added tax (VAT) imposed under Section 108 of the Tax Code of 1997, as amended. It is represented that the Calatagan Golf Club, Inc. was incorporated on April 8, 1976 as a non-profit organization mainly to foster and promote the game and operate and maintain a golf course and country club for social and recreational activities. The golf club bills and collects membership dues from the members primarily to cover expenses related to the maintenance of the golf course facilities and premises of the club. Any excess membership dues over any maintenance expenses are utilized for the improvements of the club facilities. Furthermore, no part of the golf club's funds inures to the benefit, directly or indirectly, of any of its members or stockholders. In reply, please be informed that Section 105 of the Tax Code of 1997, as amended, provides: "SEC. 105. Persons Liable. Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code. xxx xxx xxx 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 nonstock, nonprofit 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. . . . ." Such being the case, a nonprofit organization like the Calatagan Golf Club, Inc. may be subject to the value-added tax if it engages in the regular conduct or pursuit of a commercial or an economic activity for profit. Since the operation of the golf club, in itself, and the billing and collection of membership dues from members/stockholders are not the business activities mentioned in Sections 106 to 108 of the Tax Code, as amended, the monthly membership dues being billed by your client to its members are not subject, therefore, to the 12% VAT. (VAT Ruling No. 012-96 dated June 24, 1996) n 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner n Note from the Publisher: Written as BIR Ruling No. 012-96 dated June 24, 1996" in the original document.