BIR Ruling No. 602-2020

REPUBLIC OF THE PHILIPPINES

DEPARTMENTOF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

R.A. No. 9904;

R.A. No. 8424:

RMC No. 09-2013;

BIR Ruling No..399-2013

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VILLA MARGARITA HEIGHTS I

HOMEOWNERSASSOCIATION,INC.

Villa Margarita Heights I Multi-Purpose Hall,

Molave St., Brgy. Looc, Calamba City 4027, Laguna

Attention: LENA D. GUELAS Treasurer

Gentlemen:

This refers to your letter, dated February 15, 2019, as indorsed by the Regional Director,

Revenue Region No. 9B -- LaQueMar, San Pablo City, Laguna, requesting for tax exemption of

VILLA MARGARITA HEIGHTS I HOMEOWNERS ASSOCIATION,INC., pursuant to

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.

DocumentssubmitteddisclosedthatVILLAMARGARITAHEIGHTSI

HOMEOWNERSASSOCIATION, INC.,is a non-stock and non-profit residential

homeowners' association, with Taxpayers Identification Number (TIN) duly

registered with the Housing and Land Use Regulatory Board (HLURB) under Registration No.

I; that it is situated and within the jurisdiction of Calamba City; and that among the

purposes for which the Association was incorporated are the following:

1 To construct, manage, maintain and operate adequate facilities -and services

for its members;

2. To initiate and organize socio-cultural projects and activities to awaken

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

4 To acquire, accept donations, purchase, own, hold, develop, lease, mortgage, activities;

pledge, exchange, sell, transfer or otherwise invest, deal in or trade, in any

manner permitted by law and the rules and regulations of government

regulatory or licensing agencies, real and personal properties to every kind

and description, or any interest therein, as may be necessary for the

accomplishment of the purposes of the association.

5 To borrow or otherwise contract indebtedness and issue notes, bonds and other

evidence of indebtedness and to secure payment therefore by mortgage, pledge

or deed of trust, or through encumbrance on any or all of its then-owned or

after acquire real or personal properties and assets as may be permitted by

law.

VILLA MARGARITA HEIGHTS I HOMEOWNERS' ASSOCIATION, INC. Page 2 of 3 OT-0602 -2020

6.To enter into, make, perform and carry out, or cancel and rescind contracts of 7 To do and perform any other acts and things, and to have and exercise any every kind and for any.lawful purpose with any person, firm, association, corporation, syndicate, domestic or foreign, or others;

accomplish the purpose for which the association is organized. other powers which may be necessary, convenient and appropriate to

Certification dated November 19, 2019, stating that: and that the Office of the City Housing Settlements Department, City of Calamba, issued a

to avail of the services of Calamba Water District. Hence, they have put up their own manual jetmatic pumps as their water source facility. " for this basic service. It was in fact the decision of the homeowners themselves not "xxx... However, it is not to say that the LGU lacks the resources to provide

its claim for tax exemption on Section 18 of R.A.No. 9904, which provides; VILLA MARGARITA HEIGHTS I HOMEOWNERS' ASSOCIATION, INC. bases

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

of their 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

maintenance of the facilities of their respective subdivisions or villages. xxx Safety, security and other basic services needed by the members; including the 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. 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. Where the LGUs lack.resources to provide for basic services, the associations

qualification that the city or municipality concerned lacks resources to provide for basic hence, your request cannot be granted for lack of factual and legal basis. (BIR Ruling No. 399- HOMEOWNERS' ASSOCIATION, INC. does not fall within the purview of those homeowners associations which may be exempted from tax under Section 18 of RA No. 9904. The requisite services is absent from the letter issued by the Office of the City Housing Settlements Department, 2013 dated November 7, 2013) In reply thereto, we regret to inform you that VILLA MARGARITA HEIGHTS I

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

Income Tax

rentals of its facilities, which income should be returned for taxation. Likewise, interest income Internal Revenue Code of 1997, as amended, on its income derived from association dues and from currency bank deposits and yield or any other monetary benefit from deposit substitute It shall be subject to the corresponding internal revenue taxes imposed under the National

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VILLA MARGARITA HEIGHTS I HOMEOWNERS' ASSOCIATION, INC.

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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

income derived from it from a depository bank under the expanded foreign currency deposit system

shall be subject to 15%' 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

Likewise, VILLA MARGARITA HEIGHTS I HOMEOWNERS' ASSOCIATION,

INC.'s gross receipts from rentals of its facilities and gross receipts from operations not derived

from association dues, membership fees, other assessments and charges collected in a purely

reimbursement basis, shall be subject to the 12% VAT as imposed under Section 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% 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 should be understood that VILLA MARGARITA HEIGHTS I HOMEOWNERS

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, VILLA MARGARITA HEIGHTS I HOMEOWNERS' 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.

ousawee

Commissioner of Internal Revenue CAESAR R. DULAY

K-1-JAC 036955

1 As amended by Republic Act No. 10963 2 R.A. 10963 increased the VAT threshold from P1,919,500.00 to P3,000,000.00 effective January 1, 2018.