18 DEC 21g

Republic of the Philippines iets
HOUSE OF REPRESENTATIVES #9 fF
Quezon City, Metro Manila Hespadde
FIFTEENTH CONGRESS
‘Third Regular Session

House Bili No. 6768

Introduced by BAYAN MUNA _
Rep. NERE JAVIER COLMENARES and Rep. FEDDY A. CASINO

AN ACT CLASSIFYING THE ASSOCIATION DUES AND MEMBERSHIP FEES
COLLECTED BY HOMEOWNERS ASSOCIATIONS OR CONDOMINIUM
CORPORATIONS FROM THEIR MEMBERS OR TENANTS AS EXCLUDED
FROM INCOME TAX AND VALUE ADDED TAX

EXPLANATORY NOTE

‘The executive department always has a simple solution to its budgetary needs and its
chronic fiscal deficit—taxation. Government does not seem to notice that the Bureau of
Intemal Revenue and the Bureau of Customs continue to fail in meeting their revenve targets
due to corruption and inefficiency, that bithions of pesos in income are lost due to sweetheart
deals with foreign investors and favored cronies, that hundreds of billions of pesos in public
funds are lost in corrupt transactions and projects, that billions more are lost because of
inefficiency, incompetence and red tape, and another round of hundreds of billions are lost in
the payment of debts that were spent on overpriced projects attended by corruption and
irregularities.

‘A government that has failed to address misplaced profligacy, incompetence,
inefficiency and corruption has no moral authority to impose taxes on the people already
crippled by rising prices, and unemployment. This lack of moral authority is never more
pronounced than government attempts to tax a basic need of the peopte enshrined it is
constitutional right to shelter—housing.

This bill seeks to exclude from income tax and value-added tax the association dues
ot membership dues paid by homeowners to their housing association or condominium
corporations for the upkeep and maintenance of their housing tenements, comnton areas of
their condominium buildings and other items that will help ensure a safe and healthy
environment for homeowners.

Association or membership or condominium dues cannot be considered income of the
Association because it can only be spent on the intended purpose of homeowners who placed
it in trust of the homeowners association or condeminium corporations. The association has


no discretion in the use or spending of these funds since these are not their “income” subject
to their disposition.

Certainly the funds cannot also be deemed as payment for sale ot services or any
transaction subject to VAT. These are payment by the members to hire security or janitorial
services, and other maintenance work, all of which will later on be subject to VAT, initially
held in trust by the association and cannot therefore be subject to another VAT.

The BIR itself had issued several rulings in the past which exempts from income tax
the assessments/charges collected by condominium corporations from its members, on the
ground that the collection of association dues and other assessments/charges were merely
held in trust to be used solely for administrative expenses in implementing its purposes, such
as operating, managing and maintaining the condominium, and from which no gain or profit
can be realized by the condominium corporation from the receipt thereof.

There is a housing problem in the country and government should not only build
housing units for the people to address this problem but must also encourage those who are
capable of owning a house to invest in the building or owning of a home of their own.
Encouraging people who can afford to invest in or acquire their own homes, is never more
pronounced because government claims to be incapable of building houses to solve the lack
of housing. In fact, taxing association dues practically goes against all government policies in
response 10 the housing shortage including policies related to encouraging low cost or
socialived housing for the poor and those who cannot afford their housing needs

Taxing association or membership dues will not only increase the cost of owning a
home but will discourage people from investing in acquiring or building their homes. which
will surely exacerbate the housing crisis in the country.

In view of the foregoing, approval of this bill, which exempts membership and
association dues from income and value added tax, is earnestly sought.

Approved,

AL
YAVIER COLMENARES| Y A. CASINO
Bayan Muna Party List Bayan Muna Party List


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

FIFTEENTH CONGRESS
‘Third Regular Session

House Bill No. 6768

Introduced by BAVAN MUNA .
Rep. NERI JAVIER COLMENARES and TEDDY A. CASINO

AN ACT CLASSIFYING THE ASSOCIATION DUES AND MEMBERSHIP FEES
COLLECTED BY HOMEOWNERS ASSOCIATIONS OR CONDOMINIUM
CORPORATIONS FROM THEIR MEMBERS OR TENANTS AS EXCLUDED
FROM INCOME TAX AND VALUE ADDED TAX

Be it enacted by the House of Representatives and the Senate of the Philippines in Congress
assembled:

Seetion 1. Section 30 paragraph C of Republic Act 8424 as amended or the Nationai Internal
Revenue Code is amended to read as follows:

Section 30. Exemptions from Tax on Corporations. ~ The following organizations
shail not be taxed umder this Title in respect to income received by them as such:

XXX,

(C) A beneficiary society, order or association, operating for the exclusive benefit of
the members such as a fraternal organization operating under the lodge system, or
mutual aid association or a non-stock corporation organized by employees providing
for the payment of life, sickness, accident. or other benefits exclusively to the
members of such society, order, or association, or non-stock corporation or their
dependents, OR A NON-PROFIT CONDOMINIUM CORPORATION OR
HOMEOWNERS’ ASSOCIATION HOLDING IN TRUSi ASSOCIATION OR
MEMBERSHIP DUES FOR THE BENEFIT OF THE MEMBERS;

Section 2. Section 32 (B) of the Republic Act No. 8424 as amended or the National Internal
Revenue Code is amended to read as follows:

“Seetion 32, Gross Income. —
“(A) General Definition. 200%


“(B) Exclusions from Gross Income. - The following items shall not be included in
gross income and shall be exempt from taxation under this title:

“(1 xx,
(2) xxx

“(7) Miscellaneous Items. —

“€a) xxx

“Qb) xxx

“(f) GSIS, SSS, Medicare and Other Contributions. - GSIS, SSS, Medicare and Pag-
ibig contributions, and unioa dues of individuals AND AMOUNTS PAID AS
ASSOCIATION DUES AND MEMBERSHIP FEES COLLECTED BY A
CONDOMINIUM CORPORATION OR A HOMEOWNERS’ ASSOCIATION
FROM THEIR MEMBERS OR TENANTS.”

ae ne Aa bn men an Sonne

“Section 109. Exempt Transactions. - The foilowing shall be exempt from the value-
added tax

(t) Gross receipts from lending activities by credit or multi-purpose cooperatives duly
registered with the Cooperative Development Authority whose lending operation is
limited to their members, GROSS RECEIPTS OF CONDOMINIUM
CORPORATIONS OR HOMEQWNERS” ASSOCIATION FOR AMOUNTS PAID
AS ASSOCIATION DUES OR MEMBERSHIP FEES COLLECTED BY A
CONDOMINIUM CORPORATION OR A HOMEOWNERS’ ASSOCIATION
FROM THEIR MEMBERS OR TENANTS.”

Section 4. Repeating clause—Ail laws, decrees, resolutions, orders or ordinances or parts
thereof inconsistent with this Act, are hereby repealed, amended or modified accordingly.

Section 5. Effectivity. - This taw shall take effect after fifteen days following its publication
for two consecutive weeks in the newspaper of general circulation in the Phiippines.

Approved.