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BIR says ‘donations’ to homeowners’ groups are taxable

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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