BIR Ruling No. 575-2020

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE Quezon City

R.A. No. 9904; R.A. No. 10963; RMC No. 09-2013; BIR Ruling No.399-2013

OT-0575-2020 OCT 0 6 2020

Marcos Highway, Brgy. Mayamot, Antipolo City VERMONT PARK RESIDENTS ASSOCIATION, INC. 218 Multi-Purpose Hall, Harrison St., Vermont Park Exec. Village,

Attention:ATTY. JULIO REGINO I. DESAMITO, JR. President

Gentlemen:

exemption from income tax and value-added tax/percentage tax of VERMONT PARK Memorandum Circular No. 9-2013 which clarifies the taxability of association dues, membership fees, and other assessments/charges collected by Homeowners' Associations. RESIDENTS ASSOCIATION, INC. pursuant to Republic Act No. 9904 otherwise known as the "Magna Carta for Homeowners and Homeowners' Associations", as enunciated in Revenue This refers to your letter dated November 10, 2014, requesting for a ruling confirming the

Documents submitteddisclosedthatVERMONTPARK RESIDENTS ASSOCIATION, INC.with Taxpayers Identification No. . is a non-stock and non-profit residential homeowners' association, and duly registered with the Housing and Land Use Regulatory Board (HLURB) under Certificate of Registration No. 20007; that it is situated

and within the jurisdiction of Antipolo City; and that among the purposes for which the Association

was incorporated are the following:

1. To initiate and promote a healthy and harmonious neighborhood by developing the civic, spiritual, social and cultural awareness and consciousness of its members;

2. To conduct and sponsor seminars, symposia and technical training to be conducted

by expert trainers and resource speakers;

3. To promote and maitain peace and order as well as cleanliness in the community

in coordination with the proper government agencies;

4. To act as intermediary with the different government agencies tasked with the

delivery of basic necessities and services to the community;

5. To seek the assistance and guidance of government and private institutions

necessary to achieve the full realization of the association's objectives:

6 To organize and undertake workshop for livelihood projects and other socio-

economic activities, for the benefits of its members; and

7. To do and perform all other acts and deeds as may be necessary, convenient and

appropriate for the accomplishment of the foregoing purposes.

VERMONT PARK RESIDENTS ASSOCIATION, INC. Page 2 of 3 qui ia o2

and that the letter of Ms. Rowena T. Zapanta from the City Planning and Development Office of Antipolo City, dated June 08, 2018, states that:

City Government, cannot just issue such certification' required by the BIR, for the sole purpose of facilitating the HOA's income tax exemption. Further, the reason 3(d) of RA 9904, is due to the fact that the subdivision road lots and open spaces are still not donated to the City Government, hence, the same remains a private why the City Government currently not rendering the basic services under Section property "The City Legal Office has rendered again its legal opinion stating that the

exemption on Section 18 of R.A. No. 9904, which provides; VERMONT PARK RESIDENTS ASSOCIATION,INC. bases its claim for tax

complement, support and strengthen LGUs in providing vital services to their members and help implement local government policies, programs, ordinances, and rules. "SECTION18.RelationshipwithLGUs. Homeowners'associationsshall

common goals and activities for the benefit of the residents of the subdivisions/villages and their environments. Associations are encouraged to actively cooperate with LGUs in furtherance of their

the members, including the maintenance of the facilities of their respective subdivisions or villages. xxx 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 endeavor to tap the means to provide for the same. In recognition of the associations' Where the LGUs lack resources to provide for basic services, the associations shall

may be exempted for income tax under Section 18 of RA No. 9904 considering that the requisite qualification that the city or municipality concerned must be lacking in resources to provide for basic services is absent from the certification issued by the City Planning and Development Office of City of Antipolo. (BIR Ruling No.399-2013 dated November 7, 2013) ASSOCIATION, INC. does not fall within the purview of those homeowners' associations which In reply thereto, we regret to inform you that VERMONT PARK RESIDENTS

facilities, trade business and other activities. Specifically: subject to the applicable internal revenue taxes on its income from association dues, rentals of their Consequently, VERMONT PARK RESIDENTS ASSOCIATION, INC., shall be

Income Tax

Internal Revenue Code of 1997, as amended, on its income derived from association dues and rentals of its facilities, which income should be returned for taxation. Likewise, interest income It shall be subject to the corresponding internal revenue taxes imposed under the National

from currency bank deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds and similar arrangements, and royalties derived from sources within the Philippines are subject to the 20% final withholding tax; provided, however, that interest

Certification from the local government unit, having jurisdiction (CITY or MUNICIPALITY) over the HOA, identifying that the basic services being rendered by the homeowners' association and stating that such City or Municipality lacks resources to render such services.

UERMONT PARK RESIDENTS ASSOCIATION, INC. Page 3 of 3 01-0575-2020 OCT 0 6 2020

income derived from it from a depository bank under the expanded foreign currency deposit system shall be subject to 15%2 final withholding tax pursuant to Section 27 (D) (1) in relation to Section 57 (A), both of the Tax Code of 1997, as amended. Moreover, it is required to file on or before April 15 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 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.

Value-Added Tax or Percentage Tax

association dues, membership fees, and other assessment/charges collected in purely VERMONT PARK RESIDENTS ASSOCIATION,INC.'s gross receipts from

However, gross receipts from the operation not derived from rental of its facilities, association reimbursement basis by a homeowners' association are not subject to VAT3 or percentage tax. dues, membership fees, other assessment and charges collected in purely reimbursement basis shall

be subject to the 12% VAT imposed under Section 108 of the Tax Code of 1997, as amended, or to the three percent (3%) tax imposed under Section 116 in relation to Section 109(BB) of the same Code if the gross sales or receipts from such sale of goods and services do not exceed Three Million

Pesos (P3,000,000.00)4.

It should be understood that VERMONT PARK RESIDENTS ASSOCIATION, INC. shall be constituted as withholding agent of the government if it acts as an employer and its

employees receive compensation income subject to the withholding tax under Section 57 of the

Tax Code of 1997, as amended.

Finally, VERMONT PARK RESIDENTS 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,

eusauas

CAESAR R. DULAY

Commissioner of Internal Revenue

K- 036851 COPY FURNISHED: REVENUE REGION NO. 7B - East NCR Attention: Revenue District Office No. 45 -- Marikina City

PHILIPPINE COUNCIL FOR NGO CERTIFICATION (PCNC) 6/F SCC Bldg., CFA-MA Compound, 4427 Interior Old Sta. Mesa Road, Sta. Mesa 1016 Manila

2 As amended by Republic Act No. 10963. 3 Section 4.109-1(B)(1)(y) of Revenue Regulation (RR) No. 13-2018. 4 Republic Act No. 10963 (TRAIN Law) increase the VAT threshold from P1,919,500 to P3,000,000.00 effective Jan. 01, 2018.