By Zinnia Dela Peña (The Philippine
Star) | Updated June 27, 2014 - 12:00am
MANILA, Philippines - The Bureau of
Internal Revenue (BIR) has appealed the ruling of the Court of Tax Appeals
that condominium dues, membership fees
and other charges are not subject to income tax and withholding tax.
“The decision is a decision of a
division of the CTA and which will be appealed by the BIR to the Court en banc
by way of a motion for reconsideration,” the BIR said.
The ruling was issued by the CTA’s
third division pursuant to the case filed by Officemetro Philippines (formerly
Regus Centres Inc.), contesting the deficiency expanded withholding tax
assessed by the BIR.
In its petition, Officemetro alleged
that a portion of the rentals were payments of condominium dues that do not
form part of the taxable income of the condominium corporation and should not
therefore be subject to withholding tax.
The CTA agreed with Officemetro,
saying association dues, membership fees and other charges collected by
condominium corporations must not be included in Officemetro’s gross income and
are exempt from income tax and withholding tax.
However, Internal Revenue commissioner
Kim Henares,said the case did not touch the issue of value-added tax (VAT).
Henares said the CTA division likewise
did not rule on the validity of Revenue Memorandum Circular 065-2012, which
subjected association dues, membership fees and other charges paid by unit
owners and beneficial users to income tax, withholding tax and 12-percent VAT.
“Therefore, RMC 065-2012 is the
prevailing rule today and all concerned
taxpayers are required to comply with the provisions of RMC 065-2012,” the BIR
said.
“The BIR rulings cited in the CTA
Decision are in contrast with BIR Revenue Memorandum Circular (RMC) 065-2012,”
the BIR added.
The BIR stressed that the amounts paid
as dues or fees by members and tenants of a condominium corporation form part
of the gross income of the latter subject to income tax.
According to the BIR, since a
condominium corporation is subject to income tax, income payments made to it
are subject to applicable withholding taxes under existing regulations.
The BIR previously exempted
condominium and homeowners associations from the payment of income tax and
VAT. This was premised on the notion
that the money collected was merely held in trust to be used for administrative
expenses incurred in servicing members and does not constitute any sale of
goods or rendition of service.
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