BIR Ruling No. 674-2017

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Bureau of Internat Revenue Ruling

"Republic Act (RA)~No. 9904: (RMC) No. 9-2013; and RMC No. 53-2013 RA No. 8424, as amended; Revenue Memorandum Circular Date: December"27, 201? :674-2017 Person to Contact: Chief, Law Division Tel. Nos. 926-55-36 / 927-09-63

PERPETUAL VILLAGE HOMEOWNER'S ASSOCIATION, INC Perpertual Village Multi-purpose Building Daang Hari St., Perpetual Village, Bagong Tanyag. Taguig City.

Attention: MR. SAMSON PANGANIBAN President

Gentlemen:

This refers to your letter dated January 11, 2016 requesting for tax exemption of Perpetual Village Homeowner's Association, Inc. under Republic Act (R.A.) No. 9904 otherwise known as the "Magna Carta for Homeowners and Homeowners' Associations."" as cnunciated in Revenue Memorandum Circular (RMC) No. 9-2013 which clarifies the taxability of association dues, membership fees, and other assessments/charges collected by Homeowners' Associations.

It is represented that Perpetual Village Homeowner's Association Inc. provides the foilowing basic services that redound to the benefit of all homeowners:

1) Security of the Subdivision:

3) Maintenance, repairs and cleaning of streets; and 2) Street and vicinity lights;

4) Sports facilities maintenance.

In reply, piease be informed that homeowners' associations are not tax exempt entities. For tax purposes, the association dues, membership fees, and other assessiments/charges collected' by a homeowners' association constitute income payments or compensation for beneficial services it provides to its members and tenants'. However. RA No. 9904 provides for tax relief as follows:

"Section 18. Relationship with LGUs. - Homeowners' associations shall complement, support and strengthen LGUs in providing vital services to

1 Revenue Memorandum Circular (RMC) No. 9-2013

Perpetual Village Homeowner's Association, Inc t: 674 -2017 12//20 Page 2 of 3

their members and help implement local government policies, programs. ordinances. and rules.

furtherance of their common goals and activities for the benefit of the residents of the suhdivisions/villages and their environs. Associations are encouraged to actively cooperate with LGUs iu

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 associations_ shall endeavor to iap the means to provide for the same. Ir. recognition of the associations'efforts to assist_the LGUs in providing such basic services. ussociation dues and income derived from rentals_of their members, including the maintenance_of the facilities oftheir respective subdivisions or villages. (Underscoring supplied) Where the LGUs lack resources to_provide for basic services, the

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(LGU) from rental of its facilities as an incentive to the association for providing basic services to its members and homeowners which otherwise should be provided by the Local Governnient Unit The law therefore specifically exempts from income tax, association dues and incomc

receipts derived from association dues and rentals of facilities 'or properties in the name of the members. including the maintenance of the facilities of their respective subdivision or villages income tax, value-added tax or percentage tax, whichever is applicable, only on its income or VILLAGE HOMEOWNER'S ASSOCIATION, INC. Provided, that such income and dues shall be used for the cleanliness, safety, security and other basic services needed by the community services and facilities needed by the members of the Association, this Office rules that PERPETUAL VILLAGE HOMEOWNER'S ASSOCIATION,INC. is exempt from thru the Local Housing Office certified that it lacks available resources to provide basic Association, or are owned by the City of Taguig and under administration of the PERPETUAL From the foregoing, and considering that the Office of the City Mayor of 'Taguig City

taX return which PERPETUAL VILLAGE HOMEOWNER'S ASSOCIATION,INC. wi!i file on or before the 15th day of the fourth month of each year. It is requested that a copy of this letter of exemption be attached to the annual income

pertinent records of PERPETUAL VILLAGE HOMEOWNER'S ASSOCIATION, INC. to determine compliance with the conditions set forth in this letter of tax exemption and tax Hiabilities, if any. provision of existing general or special law to the contrary notwithstanding, the Revenue District Officer shall conduct an audit of the returns filed, the books of accounts and other Under Section 235 of the National Internal Revenue Code of 1997, as amended, any

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 National Internal Revenue Code of 1997, as amended. It should be understood that PERPETUAL VILLAGE HOMEOWNER'S

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 thcir also subject to the payment of the annual registration fee of Php500.00 as prescribed in Section 236(B) of the National Internal Revenue Code of 1997, as amended. It is also rcquired under Finaily, PERPETUAL VILLAGE HOMEOWNER'S ASSOCIATION, INC. is

facilities.

Perpetual Viflage Homeowner's Association, Inc. Page 3 of 3 :-674-2017 12/27/2017

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

Very truly yours. ARuany V

KI-JESS K1-FR-16-1115 Commissioner of Internal Revenue CAESAR R. DULAY 012184

Copy Furnished:

3/F. Bonifacio Techi. Center, 31st St.. cor. 2nd Ave.. Crescent West Park. Bonifacio Global City. Taguig City REVENUE DISTRICT OFFICER Revenue District No. 44 Taguig-Pateros