BIR Ruling No. 535-2017

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OI INTERNAL REVENUE

Quezon City

RA 9904: RMC No. 9-2013 BIR Ruling No. 104-2014

535-2017

2O LAS VILLAS DE MANHLA HOMEOWNERS ASSOCIATION, INC. Brgy. San Francisco. Binan. Laguna

Atlention : ATTY.FRISCO P. MARFIL

Gentlemen: President

pursuant to Section 18 of Republic Act (R.A.) No. 9904 otherwisc known as the 'Magna Carta for Homeowners and Homeowners' Associations". This refers to your letter dated May 26, 2014 requesting for tax exemption

with the Housing and Land Use Regulatory Board (HLURB) under Certificate of incorporated are the following: Registration No. Association. Inc., (TIN Documents submitted disclosed that Las Villas De Manila Homeowners dated May 13. 2002: that the purposes for which it was is a homeowner's organization registered

1. 2 4 To acquire, To construct. manage. maintain, and operate adequate facilities and To initiate and organizc socio-cultural projects and activities which will To promote, enhance and foster the development and improvement of the quality of life of the members through livelihood projects and other services for its members: awaken community consciousness and belonging; economic activities; accept donation. purchasc, own. hold : develop. lease.

D To borrow and otherwise contract indebtedness and issue notes bonds and other .evidence of indebtedness and to secure payment therefore by mortgage, pledge, exchange, seli. transfer or otherwise invest. deal in or kind and description or any interest therein. as may be necessary for the accomplishment of the purpose of the Association: To enter into. make. perform and carry oui. or cancel and rescind contracts trade, in any manner permitted by iaw, real and personal property of every mortgage, pledge or deed of trust of. or through encumbrance of any or all of its then-owned or after acquired real or personal properties and assets:

I To do and perform any others acts and things. and"to have and exercise of every kind and' for any lawful purpose with any person. firm. association. corporation. syndicate, domestic or foreign. or others:

any others powers which may be necessary. convenient and appropriate to accomplish the purposes for which the Association is organized

are provided by the Association and no assistance in any form come from the City and that the City Administrator of the City of Binan certified that the basic services

Government.

35-Y Las Villas De Manila Homeowners Association, Inc. Page 2 of 3 11-0-07

provides as follows: known as the In reply, please be informed that Section 18 of R.A. No. 9904 otherwisc "Magna Carta for Homcowners and Homeowners' Associations"

associations shall conplement, "support and strengthen LGUs in 'SECTION I8. Relationship with LGUs. Homeowners

providing vital services to their members and help implement local government policies. programs, ordinances. and rules.

in furtherance of their common gouls and activities for the benefit Associations are encouraged to actively cooperate with LGUs

of the residents of the subdivisions/villages and their emvirons.

the associations shall endeavor to tup the means to provide for the Where the LGUs lack resources to provide for busic services.

same. In recognition of the associations' efforts to assist the LGUs in providing such. basic services, association dues and income derivedfrom...rentals ..of..their.facilitiesshallbe . tax-exempt.

cleanliness. safety_ security and other basic services needed by the Provided.Thut such income and .ues shull be used for the

respective subdivisions or villages. xxx members. including the maintenance mof the facilities of their

Accordingly, we regret to inform you that Las Villas De Manila Homeowners Association, Inc. does not fall within the purview of those homeowners' associations which may be exempted "under Section"18 of R.A. No. 9904. The requisite

hence, your request cannot be granted for lack of factual and legal basis. (BiR Ruling absent from the Certification issued by City Administrator of the City of Binan qualification that the IG concerned lacks resources to provide for basic services is No. 104-2014 dated March 26,2014)

Consequently. Las Villas De Manila Homeowners Association, Inc. shall be

rentals of their facilities, trade, business and other activities. Specifically: subject to the appiicable internal revenue taxes on its income from association dues.

Income Taxes

trade, business and other activities, which income should be returned for taxation Likewise. interest income from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar from a depository bank under the expanded foreign currency deposit system shali be subject to'7 / % final withholding tax pursuant to Section 27(D)(1) in relation to before April i5 of each year a profit and loss statement and balance sheet with the annual information return under oath, stating its gross income and expenses incurred Code of 1997 on its income derived from association dues, rentals of their facilities. arrangements. and royalties derived from sources within the Philippines are subject to thc 20% final withholding tax: Provided, however, that interest income derived by it Section 57(A). both of the Tax Code of i997. Moreover, it is required to filc on or during the year and a certificate showing that there has not been any change in its By- Laws. Articles of Incorporation, manner of operation and activities as well as resources and disposition of income. It is subiect to the corresponding internal revenue taxes imposed under the Tax

Value-Added Tax or Percentage Tax

receipts from operations derived from association dues, rentals of their facilities. Likewise, Las Villas De Manila Honeowners Association. inc.'s gross

Las Villas De Manila Homeowners Association. Inc. t: 535-2017 11-20-2017 Page 3 of 3

trade. business and other activities shall be subject to the 12% VAT imposed under Sections"108 of the"Tax Code of 1997. as "amended. which lax payment may legitimately bc passed on to buyers of such goods and services; or 3% percentage tax imposed under Section 116 in relation to Section 109(1)(W) of the same Code if the gross sa.es or receipts from such sale of goods and services do not exceed One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1.919.500.00).

It should be understood that I.as Villas De Manila Homeowners Association. Inc. shall be constituted as withholding agent of the government if it acts as an employer and is employees receive compensation income subject to the withholding tax"under Section 57'of the Tax Code of (997, as amended.

Finally. Ias Villas De Manila Homeowners Association, Inc. is also subject to the payment of the annual registration fee of PhP500.00 as prescribed in Section 236 (B) of the Tax Code of 1997. as amended. It is also required under Section 6 (C) in relation to Section 237 of the same Code to issue duly registered receipts for services rendered which do not comprise income from association dues and rentals of their facilities.

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.

CAESAR R. DULAY

K-1-JRC Commissioner of Internal Revenue 01123 6