Tax notes: Income and withholding taxes on condo dues

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Monday, July 7, 2014


UNDER Revenue Memorandum Circular No. 065-12, the Bureau of Internal Revenue (BIR) clarified that association dues, membership fees and other charges paid by unit owners and/or beneficial users to condominium corporations are subject to income tax, expanded withholding tax and 12% value-added tax (VAT).

The BIR emphasized that the amounts paid in 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 and gross receipts subject to VAT since a condominium corporation furnishes its members and tenants services with benefits, advantages, and privileges in return for such payments.

However, in a recent Court of Tax Appeals (CTA) decision [CTA Case No. 8382, June 3, 2014], the CTA ruled that “association/condominium dues, membership fees and other assessment/charges collected by the condominium corporation from its members, which are merely held in trust and which are to be used solely for administrative expenses in implementing their purpose(s) to protect and safeguard the welfare of the owners, lessees and occupants, provide utilities and amenities for their members, and from which, the condominium corporation could not realize any gain or profit as a result of their receipt thereof, must not be included in the condominium corporation’s gross income. This means that the same are not subject to income tax and withholding tax.

Nevertheless, it is important to note that this interpretation of the income and withholding tax treatment on condominium dues is not yet final since the Supreme Court, as final arbiter, has yet to determine whether or not to acquiesce to the findings of the CTA.

(Source: Punongbayan & Araullo)

Published in the Sun.Star Cebu newspaper on July 08, 2014.

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