Bureau of Local Government Finance Opinion

August 4, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION Mr. Gary A. Llamas Chief Business Permits & Licensing Office Muntinlupa City Sir : This refers to your letter dated July 11, 2014 requesting a ruling concerning Bureau of Internal Revenue (BIR) Memorandum Circular No. 9-2013, dated January 29, 2013, relative to the taxability of association dues, membership fees, and other assessment/charges collected by homeowners' association from its homeowner-members and other entities. In view of the above, that Office seeks to be enlightened in the imposition of local taxes, licenses and fees due to homeowners' associations, which line of business is classified as "non-stock/non-profit". HTcADC In this connection please be informed that this Bureau is not in a position to render a ruling with respect to said BIR Memorandum Circular, the matter being within the jurisdiction of the BIR, a co-equal agency within the Department of Finance (DOF) as with this Bureau. Rather, we are obliged to comment on the issue based on the pertinent provisions of R.A. No. 9904 entitled "AN ACT PROVIDING FOR A MAGNA CARTA FOR HOMEOWNERS AND HOMEOWNERS' ASSOCIATIONS, AND FOR OTHER PURPOSES", particularly Section 18 thereof, which provides: "Section 18. Relationship with LGUs. Homeowners' associations shall complement, support and strengthen LGUs in providing vital services to their members and help implement local government policies, programs, ordinances, and rules. Associations are encouraged to actively cooperate with LGUs in furtherance of their common goals and activities for the benefit of the residents of the subdivisions/villages and their environs. Where the LGUs lack resources to provide for basic services, the associations shall endeavor to tap the means to provide for the same. In recognition of the associations' efforts to assist the LGUs in providing such basic services, association dues and income derived from rentals of their facilities shall be tax-exempt : Provided , That such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities of their respective subdivisions or villages. ( Emphasis ours ) LGUs shall, upon due notice, hold public consultations with the members of the affected associations, especially their officers and directors, where proposed rules, zoning and other ordinances, projects and/or programs affecting their jurisdiction and surrounding vicinity are to be implemented prior to the effectivity or implementation of such rules, zoning, ordinances, projects or programs: Provided , That in cases of zonal reclassification, the approval of a simple majority of homeowners shall be required. Such public consultations shall conform to the manner as specified in Rule XI, Article 54 of the implementing rules and regulations of Republic Act No. 7160, otherwise known as the Local Government Code of 1991." In view of the preceding provisions of law and as far as local business tax is concerned, it is viewed that association dues, membership fees, and other assessment/charges collected by homeowners' association, regardless of whether such association is non-stock, non-profit or not, is exempted from local taxes. However, it is worth mentioning that such exemption is qualified by the condition that such income and dues shall be used exclusively for the cleanliness, safety, security and other basic services needed by the members, including the maintenance of the facilities within the respective subdivisions or villages, which the LGU concerned may lack the necessary resources to provide the same. Impliedly however, non-compliance to such requites in the use of income and dues collected by the association from its members would negate such exemption privileges. aScITE As regards regulatory fees and charges imposed under the police powers of the LGUs, there is no clear proviso for the same under the abovequoted provision of law. Needless to say, the exemption refers only to tax and therefore, to include regulatory fees and charges to such exemption would amount to expanding the application of the provision of law. We hope that this will help clarify matters. Very truly yours, (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director