BIR Ruling No. 337-2018

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT JF FINANCE

Quezon City.

BIR Ruling No. 399-2013; R.A. No. 9904: R.A. No. 8424: RMC No. 9-2013 #337-2018 3/7/2018

Date

AYALA WESTGROVE HEIGHTS

The Clubhouse, Pili Road, Silang, Cavite 4118 HOMEOWNERS ASSOCIATION, INC Ayala Westgrove Heights,

Attention: MS. MARIA NATALIE P. OCAMPO Property Manager

Gentlemen:

9-2013 which clarifies the taxability of association dues, membership fees, and other ASSOCIATION, INC. (AWHHA for brevity) is entitled to the exemption from all taxes under Republic Act No. 9904 otherwise known as the "Magna Carta for Homeowners and Homeowners' Associations", as enunciated in Revenue Memorandum Circular No. assessment/charges collected by Homeowners' Associations. ruling This refers to your letter dated October 24, 2013 requesting for a confirmatory thatthe AYALA WESTGROVE HEIGHTS HOMEOWNERS

duly registered with the Housing and Land Use Regulatory Board under Registration No. issued the following certification in favor of AWWHA: No. Documents submitted disclosed that AWHHA, with Taxpayers Identification and that the Office of the Municipal Mayor of the Municipality of Silang has is a non-stock and non-profit residential homeowners association

such as, but limited to security, streets, garbage collection and disposal, pest control, and other similar services and facilities. Sitang, Cavite is providing basic community services to the residents of Ayala Westgrove Heights as defined in Section 3(d) of Repubiic Act (RA) No. 9904 Association, Inc. (the association) with registered address at Brgy. Inchican, "This is to certify that Ayata Westgrove Heights Homeowners

resources/budget to provide the above-mentioned services to the residents of Ayala Westgrove Heights." "This is to certify further that our office has no sufficient

provides: AWHHA bases its request for exemption on Section 18 of R.A. No. 9904, which

shall complement, support and strengthen LGUs in providing vital services to their members and help implement local government policies, programs, ordinances, and rules. "SECTION 18. Relationship with LGUs. -- Homeowner's associations

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

be tax-exempt: Provided. that such incorne 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 associations shall 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 derived from rentals of their facilities shall Where the LGUs lack resources to provide for basic services. the

of RA No. 9904. The requisite qualification that the city or municipality concerned Municipality of Silang,your request cannot be g purview of those homeowners' associations which may be exempted under Section 18 lacks resources to provide for basic services to its constituents in general being absent from the Certification issued by the Office of the Municipal Mayor of the BIR Ruling No.399-2013 dated November 7,2013 In reply thereto, we regret to inform you that AWHHA does not fall within the granted for lack of factual and legal basis

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

Income Taxes

National Internal Revenue Code of 1997 on its income derived from association dues. rentals of their facilities, trade, business and It shall be subject to the corresponding internal revenue taxes imposed under the other activities, which income should be returned for taxation.Likewise, int currency bank deposits and yield or any other monetary benefit fron instruments and from trust funds and similar arrangements, and ro subject to the 20% final withholdin wever, that interest income derived irces within the Philippines are

from it from a depository bank currency deposit system shall be subject to 7 1/2% final withhc Section 27D1 in relation to Section 57(A).both the Tax it is required to file on or before April 15 of each year a profi C balance sheet with the annual information return under oath.statin e and expenses incurred during the year and a certificate showing that there GEr en any change in its By-LawsArticles of Incorporation, manner of operation and activities as well as resources and disposition of income.

Value-Added Tax or Percentage Tax

One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00 dues, rentals of their facilities, trade, business and other activities shall be subject to the percentage tax imposed under Section 116 in relation to Section 109(W of the same Code if the gross sales or receipts from such sale of goods and services do not exceed 12% VAT imposed under Sections 108 of the Tax Code of 1997,as amended,which tax payment may legitimately be passed on to buyers of such goods and services;or 3% Likewise, AWHHA's gross receipts from operations derived from association

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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. It should be understood that AWHHA shall be constituted as withholding agent

is also required under Section 6 (C) in relation to Section 237 of the same Code to issue PhP500.00 as prescribed under Section 236 (B) of the Tax Code of 1997, as amended. It duly registered rec ipts. Finally, AWHHA is also subject to the payment of the annual registration fee of

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

Very truly yours,

CAESAR R. DULAY

K-I-NRA Commissioner of Internal Revenue 014077