Sunday, December 05, 2021

‘Stop BIR from collecting condo association dues’

A LAWYER has asked the Supreme Court to stop the Bureau of Internal Revenue (BIR) from collecting value -added tax on condominium dues.

Fritz Bryan Anthony Delos Santos filed a petition for certiorari against BIR Commissioner Kim Henares before the High Court last Feb. 12.

Delos Santos argued that the 12-percent VAT being collected from condominium owners has no legal basis.

Delos Santos, son of Associate Justice Edgardo Delos Santos of the Court of Appeals Cebu Station, owns a unit at the Classica Tower 2 Condominium in Makati City.

In October 2012, Henares issued Revenue Memorandum Circular 65-2012 imposing 12-percent VAT on association dues paid by condominium unit owners.

Henares pointed out that the association dues form part of the gross income of the condominium corporations, which are subjected to income tax.

In the petition, Delos Santos, however, questioned Henares’s decision in “unduly expanding and extending” the coverage of Sections 105 and 108 of the National Internal Revenue Code.

“Nothing is consumed or used by the unit owners when they contribute for the defrayal of maintenance costs because VAT is a tax on consumption,” said Delos Santos in his petition.

A condominium corporation, he pointed out, does not receive any valuable consideration when it collects association dues because it merely holds the amount in a “fiduciary capacity.”

“Therefore, in collecting association dues and paying these amounts to sellers of maintenance service and supplies, the condominium corporation does not earn anything so it cannot be considered to have been engaged in any commercial or economic activity,” he said.

The association dues cannot be considered as “gross receipts” since these are not service fees.

The amounts are just “held in trust” by the condominium corporation for unit owners solely for maintenance costs.

Delos Santos asked the High Court to declare as invalid BIR Memorandum Circular 65-2012 for having been issued without legal basis.

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