By Iris C. Gonzales (The Philippine
Star) | Updated November 19, 2012 - 12:00am
MANILA, Philippines - The Bureau of
Internal Revenue (BIR), the government’s main revenue collecting agency, has
removed the tax exemptions previously granted to condominium operators for the
association dues and membership fees they charge their tenants.
In a recent circular, BIR Commissioner
Kim Henares said the issuance clarifies previous interpretation that
effectively exempts such dues and fees from taxes.
“Gross receipts of condominium
corporations including association dues, membership fees and other assessments
and charges are subject to value added tax (VAT), income tax and income
payments made to it are subject to applicable withholding taxes under existing
regulations,” Henares said.
In the past, the BIR issued several
rulings exempting from income tax the charges collected by condominium
corporations from its members on the ground that the association dues are
merely held in trust by operators to be used for operating and maintenance
costs.
The BIR said that the previous rulings
also exempted association dues from VAT, saying that “condominium corporations
do not sell, barter or exchange goods and property nor does it render service
for a fee but merely implements the administration of the required services to
collect the associated dues from the unit owners pursuant to its corporate
purpose as trustee of the fund.”
However, in the circular, Henares
clarified that this previous interpretation is wrong.
She said the association dues,
membership fees and other assessments or charges collected by a condominium
corporation constitute income payments or compensation for beneficial services
it provides to its members and tenants.
“The previous interpretation that the
assessment dues are funds which are merely held in trust by a condominium
corporation lacks legal basis and is hereby abandoned,” Henares said.
Furthermore, she said association
dues, membership fees and other assessments and charges collected by a
condominium corporation are subject to VAT since they constitute income payment
or compensation for the beneficial services it provides to its members and
tenants.
The BIR made the clarification as part
of efforts to raise more revenues. This year, the agency is tasked to collect
P1.066 trillion.
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