The Supreme Court rejected the Bureau of Internal Revenue (BIR) circular, which aimed to impose a 12-percent value-added tax and 32-percent income tax on association dues, membership fees, and other charges from condominiums.
In a decision released Wednesday, the SC’s First Division sustained the resolution issued by the Makati City Regional Trial Court Branch 14, and its order dated Dec. 18, 2013, that granted the plea of First E-Bank Tower Condominium Corp. to void BIR Revenue Memorandum Circular 65-2012 issued on Oct. 31, 2012.
“Clearly, RMC No. 65-2012 expanded, if not altered, the list of taxable items in the law. RMC No. 65-2012, therefore, is void. Besides, where the basic law and a rule or regulation are in conflict, the basic law prevails,” the Supreme Court ruled.
“Similarly, therefore, association dues, membership fees, and other assessments/charges are not subject to income tax because they do not constitute profit or gain. To repeat, they are collected purely for the benefit of the condominium owners and are the incidental consequence of a condominium corporation’s responsibility to effectively oversee, maintain or even improve the common areas of the condominium as well as its governance.”
BIR cannot impose value-added tax in condominiums
The high court also ruled the BIR’s circular validity, which had pending for six years, “is imbued with public interest.”
“For numerous Filipino families, professionals and students have, for quite some time now, opted for condominium living as their new way of life. The matter of whether indeed the contributions of unit owners solely intended for maintenance and upkeep of the common areas of the condominium building are taxable is imbued with public interest,” the high court said.
“Suffice it to state that taxes, being the lifeblood of the government, occupy a high place in the hierarchy of State priorities, hence, all questions pertaining to their validity must be promptly addressed with the least procedural obstruction,” it added.
In rejecting RMC No. 65-2012, the Supreme Court stressed out that a condominium corporation is not designed to hold activities that generate income or profit that would allow the imposition of VAT and income tax.
The high court said Republic Act 4726 or the Condominium Act sanctioned condominium corporations.