BIR Ruling No. 347-2022

BUREAU OF INTERNAL REVENUE REPUBLICOFTHE PHILIPPINES DEPARTMENT OF FINANCE

Quezon City

of the Philippines. Inc. Federation of Golf Club Section 105 of the Ta Non-Profit Clubs. Inc JUN 3 0 2022 CodeAssociation VS. BIR: CIR NS O VAT-347-2022 Person to Contact: Chief, Law Division Tel Nos. 926-55-36 / 927-09-63

Forbes Park. Makati City 35 McKinley Road Manila Polo ClubInc

Attention: Noel B.Barrameda General Manager

Centlemen:

collected by Manila PollubInc.theClubfrom its member-lessees are not subject to Value-added tax (VAT). This refers to you r:quest for confirmation of your opinion that the townhouse dues

with a venue to meet. er gage in sports activities and have social gatherings, recreation and entertainment. club with the objective of promoting social interaction among its members and providing them address at 35 Mckinley Road. Forbes Park, Makati City. The club was formed as a membership Manila Polo Club Inc. is a non-stock and non-profit co.sporation with principal office

the corporation to its mer nbe rs", the club owns forty-two (42) townhouse units located within the club premises which are leased to its members-lessees. In relation to its cbjective to establish. maintain, and lease real properties owned by

repairs. and other admini tr: tive expenses. which are provided and performed by third party form part of a pool from hich the Club draws funds in order to bear the cost for maintenance. to association dues collec ed by homeowners' associations or condominium corporations. The townhouse dues are not intended for profit but only for the purpose of answering the necessary expenses that arise from t ne operation and maintenance of the townhouse. Also, the said dues suppliers. lessees for the use of the tow nhouses. the Club also collects townhouse dues which are similar It is represented t hat aside from the rent which the Club collects from the member-

are not subject to VAT uid r that National Internal Revenue Code of 1997(Tax Code.as amended. In this regard, yot re quest for conf rmation of your opin.on that the townhouse dues

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imposed in Sections 106 to 108 of this Code.Hence.before VAT is imposed.a sale.barter or exchange of goods r properties.or sale of a service is required. course of trade or ou iness. sells. barters.exchanges, leases goods or properties, renders services and any pe son who imports goods shall be subject to the value-added tax (VAT In reply. Sec io 105 of the Tax Code, as amended. states that any person who. in the VAT-34.7.-202.2

to VAT.Thus. the Sipreme Court ruled in this wise: collected by clubs organized and operated exclusively for pleasure, recreation and other non-profit purposeslo not form part of the gross receipts of -tcreational clubs that are subject Supreme Court dechred that membership fees. assessment dues and fees of similar nature who are engaged to upply utilities and perform maintenance and repairs of the townhouses. necessary expenses or the operations and maintenance of the townhouses located within the townhouse dues sin e the same are used to pay for services rendered by third-party suppliers Club's premises. A.cordingly the Club does not derive any income from the collected In Associati n of Non-Profit Clubs, Inc. vs. Bureau of Internal Revenue'.the As represenied by the Club. the townhouse dues collected are used to defray the

Chapter I.itleII'of the 199"NIRCreads: This is true oven if such sale is on a cost-reimbursement basis. Section 105. barter or er chunge of goods or properties, or sale of a service is reguired. It is a bas ic principle that before a transaction is imposed VAT a sale

Sectic s 106 to 108 of this Code. prope ti s. renders services, and any person who imports goods shall he subject to the value-added tax (AT) imposed in of tra le or business. sells, barters,exchanges, leases goods or "Sect nn 105.Persons Liable.-Am'person who,in the course

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Service" to peak of which would then be subject to VAT under the 199? NRC(En phasis and underscoring ours commercial activity to speak of as these dues are devoted for the operationsI iaintenance of the facilities of the organization. As such, there could be no "sale, barter or exchange of goods or properties, or sale of a services fro n the club when dues are paid: hence, there is no economic or are not sut iect to VAT because in collecting sucli fees, the club is not As ANPC ap Tly pointed out, membership fees, assessnent dues, and the like selling its si rvice to the members. Conversely the members are not buving

Philippines, Inc.. th Spreme Court held that membership dues and the like are not subject to VAT.ri Similarly. in ommissioner of Internal Revenue v. Federation of Golf Clubs of the

recreutional cl hs shall not be imposed as Section 105 of NIRC delineates "Likewise. A on memberskip dues. assessment tees. and the like of

G.R.No.226449.dated ul28.2020 G.R.No. 228539. dated un 26. 2019

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underscorii g eurs) costs and n'aintenance expenses of the recreational clubs." (Emphasis and the imposit on of 'AT only on sale, barter, exchange, lease, rendering of Services. Instead, they are "capital contributions"ro defray administrative like canno be considered as payment for the purchase of goods and service or i nportation of goods. In such context membership dues and the VAT-347-202 JUN 3 0 022

considered as incom and should not be subject to VAT. townhouse dues ass ssed and collected by the Club from its members-lessees should not be the Club. and conve sely. the member-lessees are not buying services from the club when the townhouse dues are paid. There is no economic or commercial activity to speak of as the townhouse dues are ler oted for the operations/maintenance of the townhouses. Therefore. the fees and fees of sim lar nature do not pertain to the sale of services to the member-lessees by Based on th alove-quoted Supreme Court decisions. membership dues, assessment

sale. barter or exch: ng of goods or properties. or sale of a service. VAT is therefore not applicable. In view of th f oregoing. since the townhouse dues described herein do not involve a

regardless of the agg eg ite amount of the gross receipts3. 3.000.000.00. or t the 3% percentage tax if its gross receipts do not exceed Php 3.000.000.00. The gross rentals. however. from the lease of the residential units not exceeding Php 15.0 0.0 per month per unit shall be exempt from VAT and percentage tax income derived from ans of its properties. real or personal, or any activity conducted for profit. Shall be included in the lub's gross receipts which shall be subject to VAT pursuant to Section 105 of the Tax Coc e.as amended, if the Club's gross receipts from the sale exceed Php regardless of disposition. shall be subject to the corporate income tax rate of twenty five percent 25% as provided in Section 27 of the Tax Code. as amended.The income derived thereof Please note t iat the rental income earned from the lease of the Club's townhouses or

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

Very truly yours.

B 10e3a1M

Commissioner of Internal Revenue CAESAR R. DULAY 052193 K-I

Section 4.109-1.B1oi Revenue Regulations (RRNo.16-2005,as amended by RR No.13-2018 PAGE 3 of 3