BIR Ruling No. 505-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

R.A. No. 9904;

RMC No. 09-2013; R.A. No. 8424;

BIR Ruling No. 399-2013

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TOWN & COUNTRY EXECUTIVE VILLAGE HOMEOWNERS ASSOCIATION,INC. Mahogany Avenue, Brgy. Mayamot, Antipolo City 1870, Rizal

Attention: ATTY. NICKY EARLE L. HORTILLAS

Vice-President - TCEVHA

Gentlemen:

Circular No. 9-2013 which clarifies the taxability of association dues, membership fees, and other HOMEOWNERS' ASSOCIATION, INC. pursuant to Republic Act No. 9904 otherwise known as the assessments/charges collected by Homeowners' Associations. "Magna Carta for Homeowners and Homeowners' Associations", as enunciated in Revenue Memorandum from income tax and value-added tax/percentage tax of TOWN & COUNTRY EXECUTIVE VILLAGE This refers to your letter dated April 18, 2017, requesting for a ruling confirming the exemption

HOMEOWNERS ASSOCIATION, INC., with Taxpayers Identification No. stock and non-profit residential homeowners' association duly registered with the Housing and Land Use Regulatory Board (HLURB) under Registration No. Documents submitted disclosed that TOWN & COUNTRY EXECUTIVE VILLAGE ; that it is situated and within the jurisdiction of is a non-

following: the City of Antipolo; and that among the purposes for which the Association was incorporated are the

1. To construct, manage, maintain and operate adequate facilities and services for its

members in accordance with the policies, guidelines, rules and regulations under subdivision. Corollary thereto to maintain and operate the water works system (in the subdivision) which the Association is duty bound to accept from the developer of the existing laws and the Deed of Restrictions imposed on all lot/homeowners in the subdivision;

2 To initiate and organize socio-cultural projects and activities which will waken

community consciousness and belonging; 3. To promote, enhance and foster the development and improvement of the quality of life of the members through livelihood projects and other economic activities, in

4 To acquire, purchase, own, hold, develop, lease, mortgage, pledge, exchange, sell. the laws of the Republic of the Philippines; accordance with the rules and regulations of the Home Financing Corporation and of

necessary for the accomplishment of the purposes of the Association; personal property to every kind and description or any interest therein, as may be transfer, or otherwise invest, trade or deal in, any manner permitted by law, real and

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8. 5. To borrow or otherwise contract indebtedness and issue notes, bonds and other Any profits derived from the herein above mentioned activities shall not inure to any To adopt, amend and repeal its By-Laws subject to the approval of the Home Financing reasonable compensation of officers, staff members and consultants for actual and To enter into, make, perform and carry out, or cancel and rescind contracts of every inhibitions against distribution of profits, shall not be construed to preclude substantive services rendered in the furtherance of the purposes of the Association, if such compensation is expressly allowed by the By-Laws; evidence of indebtedness and to secure payment therefore by mortgage, pledge or deed of trust of, or any encumbrance upon on any or all of its then owned or after-acquired real or personal properties and assets: kind and for any lawful purpose with any person, firm, association, corporation, syndicate, domestic or foreign, or others; of the members or officers but shall be exclusively owned by the Association. The

9 To do and perform any other acts and things, and to have and exercise any other Corporation; and

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

and that the City Planning and Development Office, through Ms. Rowena T. Zapanta, issued a Certificate dated April 7, 2017, stating that:

registered with the Housing and Land Use Regulatory Board (HLURB), with Registration Association, Inc., located in Brgy. Mayamot, Antipolo City is a homeowner's association No. "This is to certify that Town & Country Executive Village Homeowners dated 14 November 2013, and provides the services for the cleanliness, safety,

services to their members and help in the implementation of local government policies. programs, ordinances, and rules. known as the Magna Carta for Homeowners and Homeowner's Association, as those referring to services and facilities that redound to the benefits of all homeowners, which complement the needed funds by the City Government of Antipolo in providing vital by the members and/or association that fall within the purview of the "basic services security and other basic services including maintenance for the common facilities needed community services and facilities ", defined under Section 3 (d) of RA No. 9904 otherwise

to Bureau of Internal Revenue (BIR) Revenue Memorandum Circular (RMC) No. 9-2013, dated 29 January 2013, granting tax exemption for homeowner 's association. Village Homeowners Association relative to its application for a tax exemption, pursuant This certification is being issued upon the request of Town & Country Executive

The Office of the City Mayor of Antipolo on April 25, 2017 further certified that:

repairs and cleaning of the streets in the subdivision, garbage collection and disposal and other similar services and facilities. providing the basic services and facilities that redound to the benefit of all homeowners foremost of which is providing security services, street and vicinity lights, maintenance "As such and subject to fund availability, the homeowners ' association has been

such basic services notwithstanding its clear mandate under applicable laws, rules and regulations. ' However, the homeowners'-association lacks sufficient resources to fully provide

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bases its claim for tax exemption on Section 18 of R.A.No.9904,which provides TOWN & COUNTRY EXECUTIVE VILLAGE HOMEOWNERS'ASSOCIATION,INC.

complement, support and strengthen LGUs in providing vital services to their members and help implement local government policies, programs, ordinances, and rules. SECTION 18.RelationshipwithLGUs. Homeowners' associations shall

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

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. xxx 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 Where the LGUs lack resources to provide for basic services, the associations shall

associations which may be exempted under Section 18 of RA No. 9904. The requisite of the law that the certifications issued by the Office of the Mayor of the City of Antipolo, thus, your request cannot be HOMEOWNERS ASSOCIATION, INC. does not fall within the purview of those homeowners city or municipality concerned lacks resources to provide for basic services is absent from the two (2) granted for lack of factual and legal basis. (BIR Ruling No.399-2013 dated November 7, 2013) In reply thereto, we regret to inform you that TOWN & COUNTRY EXECUTIVE VILLAGE

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

Income Tax

deposits and yield or any other monetary benefit from deposit substitute instruments and from trust funds 20% final withholding tax; provided, however, that interest income derived from it from a depository bank under the expanded foreign currency deposit system shall be subject to 15%' final withholding tax 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. Revenue (NIRC) 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 from currency bank and similar arrangements, and royalties derived from sources within the Philippines are subject to the pursuant to Section 27 (D) (1) in relation to Section 57 (A), both of the Tax Code of 1997, as amended. It shall be subject to the corresponding internal revenue taxes imposed under the National Internal

Value-Added Tax or Percentage Tax

fees, rentals of its facilities,other assessments and charges on a purely reimbursement basis, shall be ASSOCIATION, INC.'s gross receipts from operations not derived from association dues, membership Likewise,TOWN&COUNTRYEXECUTIVEVILLAGEHOMEOWNERS

As amended by Republic Act No. 10963 G

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subject to the 12% VAT as imposed under Section 108 of the Tax Code of 1997, as amended, or to the 3% percentage 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)2.

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. HOMEOWNERS ASSOCIATION, INC. shall be constituted as withholding agent of the government if It should be understood that TOWN & COUNTRY EXECUTIVE VILLAGE

INC. is also subject to the payment of the annual registration fee of PhP500.00 as prescribed in Section 236 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. (B) of the Tax Code of 1997, as amended. It is also required under Section 6 (C) in relation to Section 237) Finally,TOWN & COUNTRY EXECUTIVE VILLAGE HOMEOWNERSASSOCIATION

investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon

Very truly yours,

K-1-JAC Commissioner of Internal Revenue Aa CAESAR R. DULAY $ 036573

COPY FURNISHED:

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

2 R.A. 10963 increased the VAT threshold from P1,919,500.00 to P3,000,000.00 effective January 1, 2018.