BIR Ruling No. 580-2017

REPUBLIC OF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

R.A. No. 9904: RMC No. 9-2013: R.A. No. 8424:

BiR Ruling No. 399-2013:

580-2017 12/7/2017

SAN JOSE VILLAGE HHI HOMEOWNERS' ASSOCIATION, INC. SIVIII Clubhousc. Mayon Street. Brgy. Binan, Binan.Laguna 4024

Attention :Ms. Rebecca B. Leng-Ay President

Gentlemen:

This refers to your letter dated August 5. 2015, requesting on behaif of SAN JOSE VILLAGE III HOMEOWNERS' ASSOCIATION, INC. for a Certificate of Tax Fxemption enjoyed by Homeowners' Associations under Republic Act No. 9904 otherwise known as the "Magna Carta for Homeowners and Homeowners' Associations", as enunciated in Revenue Memorandum Circular No. 9-2013 which clarifies the taxability of association dues, membership fees, and other assessments/charges collected by Homeowners' Associations.

Documents submitted disclosed that SAN JOSE VILLAGE III HOMEOWNERS'

and within the jurisdiction of Binan, Laguna; and that among the purposes for which the Association was incorporated are the following: ASSOCIATiON. INC. is a residential homcowncrs' association with Taxpayer's identification Number (TIN) Board (HI.URB) under Certificale of Registration No. and duly registered with the Housing and Land Use Regulatory - that San Jose Village IlI is situated

I. To promote, improve and advance the best interest, general welfare, prosperity

and well-being of the owners, lessees, and occupants of the properties in the San Jose Village Ill in Binan. Laguna, which comprise the area described in the Provisional Description hereto as Annexes A, B. C and D. and such

Holdings. Inc.. shall include within the jurisdiction of San Jose Village III; additional or contiguous areas which the developer. Laguna Properties

2 To adopt and indertake such measures and activities as may he necessary for

the protection and security of the members of the A ssociation and their property consistent with law:

3. To initiate, organize and undertake socio-cultural projects and uctivities which will awaken community consciousness and a sense of helonging:

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4. To make, adopt and promulgate such rules and regulations concerning the use.

buildings and improvements inside the village; enjoyment and occupancy of all the property as well as the construction of

5 To levy, assess and collect fees and charges that may be required or necessary

for the efficient upkeep and maintenance of the common areas and facilities within the village as well as the maintenance of the Association and its activities;

6. To erect, construct. improve. equip, operate, supervise and muintain ornamental and functional structures inside the village:

7. To improve, tight, provide for, beautify, equip, operate, supervise and maintuin

streets, parks. playgrounds und recreational areas of the village for the general use for the owners. lessees. and occupants and their guests:

8. To sweep. clean and maintain the streets, collect and dispose of the street

sweeping, garbage, rubbish and the like, and to construct and maintain such public utilities or services as may be necessary in the premises of the village:

Y To enforce covenants, restrictions, reservations, servitude, easements, liens.

collect assessments and churges which exist or may hereafter be imposed for the benefit of the properties in the village over which the Association has jurisdiction. to enforce the decisions and the rulings of the Association over umy of the said properties, and to pay all the expenses to be incurred in connection with the foregoing:

10. To pay all expenses in connection with the organization and the conduct of

business and activities of the Association, and all licenses. taxes and charges levied or imposed against the properties of the Association:

I 1. To enter into. make, perform and carry out. or cancel and rescind coniructs of

every kind and for amy lawful purpose with any person, firm. association corporation. syndicate, domestic or foreign, or others:

12. To ho:-:. enjoy, lease, operate, maintain, and to convey, sell, leuse, transfer.

mortguge or otherwise encumber, dedicate for public use, or dispose of real or personal property in connection with or incidental to the business and activities of the Association: and

13. To do and perform any other acts and things, and to huve and exercise any accomplish the purposes for which the Association is orgunized. other powers which may be necessary convenient and appropriate to

and that the City Administrator of Binan. Laguna certified that:

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"hasic services as defined hy Republic Act No. 9904. rendered to its constituents are being provided for by the Association iself and no assistance in any form shall come from the City Government. "

SAN JOSE VILLAGE IH HOMEOWNERS' ASSOCIATION. INC. bascs its exemption

on Section 18 of R.A. No. 9904. which provides:

"SECTION 18. Relationship with LGUs. --- Homeowners' associations shali complement, support and strengthen 1.GUs in providing vital services to their members and help impiement locat government policies, programs, ordinances, and rules Associations are encouraged to actively cooperate with LGUs in furtherance of their common goals and activities for the benefit of the residents of the subdivisions/villages and their environs.

Where the LGUs lack resources to provide for basic services, the 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 be lax-exempt: Provided, That such income and dues shall be used for the cleanliness, safety security..and__other basic services needed.by the members. including ihe maintenance of the facilities of their respective subdivisions or villages. xxx

In reply thereto, we regret to inform you that SAN JOSE VILLAGE III HOMEOWNERS ASSOCIATION, INC. does not fall within the purview of thosc homcowners' associations which may be exempted under Section 18 of RA No. 9904. The requisite qualification that the city or municipality concerned lacks resources to provide for basic services to its constituents in general and that thc associations shall endeavor to tap the means to provide for the same is absent from the Certification issued by the Office of the City Administrator of Binan. I.aguna. hence, your request cannot be granted for lack of factual and legal basis. (BIR Ruling No. 399- 2013 dated November 7, 2013)

Consequently. SAN JOSE VILLAGE III HOMEOWNERS' ASSOCIATION, INC. sha!! be subject to the appiicable internal revenue taxcs on its income from association dues, rentals of their facilities, trade, business and other activities. Specifically:

Income Taxes

It shall be subject to the corresponding internal revenue taxes imposed under the National Internal Revenue Code of 1997 on its income derived from association dues. rentals of their facilities. trade, business and other activities, which income should be returned for taxation.

however, that interest income derived from it from a depository bank under the expanded foreign 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. currency deposit system shall be subject to 7 1/2% final withholding tax pursuant to Section 27 Likewise. interest income from currency bank deposits and yield or any other monetary benefit

(D) (1) in relation to Section 57 (A), both of the Tax Code of 1997. Moreover, it is required to file

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a certificate showing that there has not been any change in its By-Laws, Articles of Incorporation. information return under oath, stating its gross income and expenses incurred during the year and on or before Apri! 15 of each year a profit and loss statement and balance sheet with the annual

manner of operation and activities as well as resources and disposition of income.

Value-Added Tax or Percentage Tax

the same Code if the gross sales or receipts from such sale of goods and services do not exceed receipts from operations derived from association dues, rentals of their facilities. trade, business of 1997, as amended, which tax payment may legitimately be passed on to buyers of such goods and services; or 3% percentage tax imposed under Section l 16 in relation to Section 109(W) of One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00). and other activities shall be subject to the 12% VAT imposed under Sections 108 of the Tax Code Likewise, SAN JOSE VILLAGE IHI HOMFOWNERS' ASSOCIATION. INC.`s grOSs

It shouId be understood that SAN JOSE VILLAGE III HOMEOWNFRS

Section 57 of the Tax Code of 1997, as amended. 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 withhoiding tax under

Section 237 of the same Code to issue duly registered receipts. subject to the payment of the annual registration fee of PhP500.00 as prescribed in Scction 236 (B) of the Tax Code of 1997, as amended. It is aiso required under Section 6 (C) in relation to Finaly. SAN JOSE VILLAGE HHI HOMEOWNERS: ASSOCIATION. INC. is alsO

upon 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

Very truly yours.

1awom

Commissioner of Internal Reye CAESAR R. DULAY 011"6 4 0

K-I-JAC