Posted on
August 19, 2013 12:08:24 AM [ BusinessWorld Online ]
DONATIONS
received by homeowners’ associations are subject to taxes, the Bureau of
Internal Revenue (BIR) said.
Revenue
Memorandum Circular (RMC) 53-2013, dated Aug. 16, noted that the taxability of
fees collected by these groups had already been clarified in earlier orders.
“It has been
observed, however, that Homeowners’ Associations are receiving contributions
from members and non-members as donations in exchange for goods, services or
use of properties,” the BIR said in the circular.
It noted that
these are, according to Section 733 of Republic Act 386 or the New Civil Code
of the Philippines, “governed by the rules on contracts and remuneratory
donations...”
“Under the
above provision, it can be inferred that donation with onerous cause is not
strictly a donation since it is governed by the rules on contracts,” it said in
the circular.
“Technically,
the contributions are not given in the nature of an endowment or donation.
Rather, the amounts are in the concept of a fee or price in exchange for the
performance of a service, use of properties or delivery of an object.”
Such
donations are considered “assessments or charges” and thus subject to income
tax.
“Further,
considering that these fees are received in the conduct or pursuit of
commercial or economic activity, these fees are also subject to value-added tax
(VAT).”
The BIR also
reiterated in RMC 53-2013 that gifts, donations, or other contributions received
by homeowners’ associations -- “whether the gift is direct or indirect, and
whether the property is real or personal, tangible or intangible” -- are
subject to donor’s tax.
The tax
bureau, in RMC 62-2012 issued last Oct. 31, 2012, noted that membership fees
and other charges collected or assessed by condominium corporations or
homeowners’ associations are considered income and as such subject to taxes.
The BIR
slightly relaxed this ruling in RMC 9-2013, issued last January, and said the
fees collected would not be subject to applicable taxes if concerned local
government units certified that the associations lacked the financial resources
to cover basic services for its members. -- B. F. V. Roc
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