VAT Ruling No. 012-96

June 24, 1996 VAT RULING NO. 012-96 Section 99-007-012 Carlos J. Valdes & Co. 7th Flr. don Chua La Bldg., Alfaro St. cor. H.V. dela Costa St., Salcedo Village, Makati City Attention: Antonio V . Cruz Partner Gentlemen : This refers to your letter dated January 9, 1996 stating that your client, Valley Golf and Country Club, Inc., is a non-profit organization organized mainly to foster and promote the game and operate and maintain a golf course and country club for social and recreational activities; that no part of its net income inures to the benefit, directly or indirectly of any of its members or stockholders; that membership dues billed are collected from the members primarily to cover expenses related to the maintenance of the golf course facilities and premises of the club; and any excess membership dues over any maintenance expenses are utilized for the improvements of the club facilities. Based on the foregoing, you now request for confirmation of your opinion that the monthly membership dues being billed by your said client to its members who are stockholders or assignees of stockholders are not subject to VAT. cdll In reply, please be informed that Section 99 of the National Internal Revenue Code, as amended by R.A. 7716, provides: "SEC. 99. 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 liable to the value-added tax (VAT) imposed in Sections 100 to 102 of this Code. 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." Such being the case, a non-profit organization like the Valley Golf and Country Club may be liable 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 course and country club, in itself, and the billing and collection of membership dues from members/stockholders are not the business activities mentioned in Sections 100 to 102 of the Tax Code, as amended, the monthly membership dues being billed by your client to it members are not subject to the 10% VAT. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue