Condominium Unit Owners Cannot Apply Payments for Renovation of Condominiums as Input VAT

June 22, 1999 BIR RULING NO. 081-99 000-00 081-99 6776 Ayala Avenue Condominium Corporation 6776 Ayala Avenue, Makati City Attention: Ms . Ma . Virginia S . Gutierrez Building Administrator Gentlemen : This refers to your letter dated March 12, 1998 stating that the 6776 Ayala Avenue Condominium Corporation is a non-stock, non-profit and non-VAT domestic corporation duly registered with the Securities and Exchange Commission (SEC); that in 1997, the condominium started its general renovation up to the present; that being a condominium, all contracts and payments are entered into by and through the condominium corporation; and that all operational expenses including the cost for the renovation is shouldered proportionately by the individual unit owners (members of the corporation.) Based on the foregoing, you now raised the following issues: 1. Whether or not your unit owners who are VAT-registered companies can apply their payments for the renovation as their VAT input; 2. If in the affirmative, the procedure for the availment of this benefit the fact that the official receipts from the individual contractors are issued in the name of the condominium corporation; LibLex 3. Whether or not they (unit owners) can use the official receipts issued by the condominium corporation to the unit owners upon payment of their share in the renovation cost, as supporting document to claim for VAT input; and 4. Whether or not you can issue a certification, certifying the share of the individual unit owner in every official receipt issued by the contractor to the condominium corporation and attaching the photocopy of the official receipt therein. In reply, please be informed that Section 4.104-5 of Revenue Regulations No. 7-95 provides that input taxes shall be allowed only if the domestic purchase of goods, properties or services is made in the course of trade or business. However, the input tax should be duly supported by an invoice or receipt showing the information required under Sections 113(A) and 237 [formerly Sections 108(a) and 238] of the Tax Code of 1997. In the instant case, the invoices or receipts issued by the individual contractors who undertook the renovation of the building are admittedly in the name of the condominium corporation. Such being the case, the unit owners although VAT-registered companies cannot apply their payments for the renovation of the condominium as input VAT to be credited against their output VAT. Answers to questions 2 and 3 are no longer necessary in view of our answer to question no. 1. On question No. 4, please be informed that there is no law, rule or regulation prohibiting the condominium corporation from issuing a certification certifying the share of the individual unit owner in every official receipt issued by the contractor and attaching the photo copy of the said official receipt. However, and as aforesaid the said certification cannot be used for the purpose of claiming input VAT by the unit owners although they can use the same as substantiation for deductibility of business expenses for income tax purposes. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue