Primavera Homeowners Association, Inc. (PHAI)

December 11, 2009 BIR RULING [SH-(130) 768-09] Revenue Regulation 11-2008 Primavera Homeowners Association, Inc. (PHAI) Primavera Homes, Bayugo-Buliran Road, Barangay San Luis, Antipolo City Attention: Ms. Vida C. Diasanta President Gentlemen : This refers to your letter dated September 23, 2009 requesting exemption from the payment of annual registration fees pursuant to Revenue Regulation No. 11-2008 in relation to Section 236 of the National Internal Revenue Code of 1997, as amended. AaSTIH The facts, as represented, are as follows: PHAI is a non-stock, non-profit domestic corporation duly registered with the Home Insurance and Guaranty Corporation under HIGC Registration No. 04-4287 dated September 21, 1998. The purposes, among others, for which it was organized are to: 1.) construct, manage, maintain and operate adequate facilities and services for its members; 2.) initiate and organize socio-cultural projects and activities which will awaken community consciousness and belonging; 3.) promote, enhance and foster the development and improvement of the quality of life of the members through livelihood projects and other economic activities; and 4.) 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. It is further represented that PHAI has not been registered with the Bureau of Internal Revenue; that it wishes to be registered with said Bureau in order to secure a Taxpayers Identification Number (TIN) for the purpose of issuing official receipts; and that it seeks clarification whether a homeowner's association is liable for annual registration fees. In reply, please be informed that Section 10 of Revenue Regulation No. 11-2008 provides that the imposition of annual registration fees shall not apply to entities enumerated therein, to wit: "SECTION 10. Annual Registration Fee (RF). An annual registration fee (RF) in the amount of Five Hundred Pesos (P500.00) for every separate or distinct establishment or place of business shall be paid upon registration and every year thereafter on or before January 31 by every person subject to any internal revenue tax. aSACED However, the following shall be exempt from the imposition of annual registration fee: xxx xxx xxx (7) Tax exempt persons such as those enumerated under Section 30 of the Code, as amended, in pursuance of tax-exempt activities; (8) Non-stock/non-profit organizations not engaged in business; . . ." However, exemption from annual registration fees pursuant to Section 10 does not include exemption from the fact of primary registration. Revenue Regulation No. 11-2008 defines 'primary registration' as the process by which a person, whether an individual, including estates and trusts, or a corporation and other juridical entities, upon application and full compliance with the registration requirements prescribed in these Regulations, is registered with and consequently included in the registration database of the Bureau of Internal Revenue (Bureau). Primary registration involves two stages, namely: (1) application and the issuance of the Taxpayer Identification Number (TIN); and (2) subsequent registration of the employment, business, profession and/or undertaking which the person, natural or juridical, intends to pursue on account of which he/it is expected to regularly file tax returns, pay taxes and fees prescribed for by the Code, as amended. In relation to the foregoing, Section 3 (B) of the same regulations is clear that even non-taxable entities are required to register with the Bureau. Moreover, a TIN is required (hence, registration) to be secured before a non-stock, non-profit organization can issue official receipts. Section 3 (B) provides: "SECTION 3. Initial Stage of Primary Registration: Application and Issuance of Taxpayer Identification Number (TIN). xxx xxx xxx (B) Persons Who Are Required or Who May Secure TIN. (1) Every person subject to any national internal revenue tax namely: income tax, estate and donor's taxes, value-added tax, percentage tax, excise tax, and documentary stamp tax, including its branches (for purposes of securing branch code); (2) Any person who, although exempt from the imposition of the taxes imposed under the Code, as amended, is nevertheless required to withhold taxes on account of his/its income payments made to taxable individuals or entities; cSEaDA (3) Pursuant to Section 236 (J) of the Code, as amended, any person required under the authority of said Code, as amended, to make, render or file a return, statement or other document whereby he/it is required to indicate his/its TIN in such return, statement or document filed with the BIR for his/its proper identification for tax purposes, and which he/it shall indicate in certain documents, such as, but not limited to the following: xxx xxx xxx e) Documents to be filed or registered with the Securities and Exchange Commission (SEC); f) Building construction permits to reflect the TINs of owners and contractors of buildings and civil works; g) Application to open bank account and application for loan with banks, financial institutions and other financial intermediaries; h) Application for Mayor's Permit; xxx xxx xxx j) Other documents such as the following: i) Official receipts, invoices and vouchers required to be issued by persons engaged in business, non-governmental organizations, including non-stock, non-profit organizations or foundations ; . . ." Likewise, Section 3 (C) of Revenue Regulation No. 11-08 even directs a Homeowners' Association, such as PHAI, to submit its Certificate of Registration from the appropriate government agency in registering with the Bureau further indicating such entities are required to register with the Bureau. "SECTION 3. Initial Stage of Primary Registration: Application and Issuance of Taxpayer Identification Number (TIN). xxx xxx xxx (C) BIR Form, Basic Information, Documentary Requirements, Other Modes and Venue in Securing TIN. xxx xxx xxx (2) Documentary Requirements. The accomplished Application for TIN forms must be submitted to the concerned RDO indicated in Subsection (4) hereof, together with the photocopy of the following documents: xxx xxx xxx (b) Non-individual In addition to the submission of the proof of authority given to the duly authorized representative, the following shall likewise be required: xxx xxx xxx b.2 Cooperatives Cooperative Development Authority (CDA) Registration and Articles of Cooperations; b.3 Homeowners' Association Certificate of Registration issued by Housing and Land Use Regulatory Board (HLURB) ; b.4 Government Agencies/Instrumentalities, LGUs, GOCCs Unit or Agency's Charter; . . ." Based on the foregoing, this Office so holds that PHAI is exempt from the payment of annual registration fees but not the fact of primary registration. Consequently, PHAI is liable for late registration under Section 20 of Revenue Regulation No. 11-2008 considering that PHAI is voluntarily registering with the Bureau. HEScID However, the exemption from the payment of annual registration fees by the entities enumerated under Section 10 is predicated on the notion that their undertakings/endeavors are not directed nor intended to generate income/profit. Accordingly, should any profit-oriented activity be pursued by said entities which already partakes the nature of an activity similar to those undertaken by those engaged in business, the same shall be treated as an activity in pursuance of a business for which the payment of annual registration fee must be imposed and therefore, PHAI shall be subject to income tax and value-added tax. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service