BIR to homeowners associations: No more tax perks

MANILA, Philippines – The Bureau of Internal Revenue (BIR) has removed the tax perks given homeowner associations nationwide. 

Under Revenue Memorandum Circular 9-2013 dated January 29, 2013, homeowner associations, including those in the posh Forbes Park and Dasmarinas Village in Makati City, are now required to pay value-added tax (VAT). 

Therefore, like condominium operators, homeowner associations no longer enjoy tax exemptions on their dues and membership fees.

“For tax purposes, the association dues, membership fees and other assessments/charges collected by a homeowners association 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 homeowners’ association lacks legal basis and is hereby abandoned,” BIR Commissioner Kim Jacinto-Henares said.

Wrong interpretation

Prior to the circular, homeowners associations enjoyed tax incentives under Republic Act 9904, otherwise known as the “Magna Carta for Homeowners and Homeowners Associations.”

Section 18 of RA 9904 states that where local government units lack resources to provide for basic services, the associations shall endeavor to tap their means to provide for the same. 

The BIR said previous rulings 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 interpretation was wrong.

She said association dues, membership fees and other assessments or charges collected by a condominium corporation are income payments or compensation for beneficial services it provides to its members and tenants.

“RA 9904, which exempts from taxation the association dues and income derived from rental subject to certain conditions, is an implied recognition by Congress that such receipts are subject to income tax,” Henares said. 

“Thus, the amounts paid in as dues or fees by homeowner-members of a homeowners association form part of the gross income of the latter subject to income tax. This is because a homeowners association furnishes its members with benefits, advantages and privileges in return for such payments,” she added.

Forbes and Dasma residents pay association dues of P23 per square meter every month.

The BIR hopes to raise P1.253 trillion this year, higher than its 2012 goal of P1.066 trillion. – Rappler.com