f • 
SIXTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE pmLIPPINES 
) 
First Regular Session 
) 
SENATE 
S.No. 717 
S"l1rth 
(@:H':f !A Hll!- :it.'ff .. br~ 
'13 
JUL 10 A9 :56 
RECEIVw,:n BY:--tr~-f' 
-----------------------------------------------------* 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
This bill seeks to 
exempt association dues, 
membership fees, 
and other 
assessments/charges collected by condominium corporations from the Value-Added Tax (VAT). 
Late last year, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum 
Circular (RMC) No. 65-2012 which effectively abandoned a long-standing BIR Ruling that 
association dues, membership fees, and other assessments/charges collected by condominium 
corporations are exempt from income and value-added tax (VAT). The only basis that the BIR 
could cite was its opinion that these fees or. charges constitute income payment or compensation 
in favor of the condominium corporations for the beneficial services it provides to its membeis . 
and tenants. However, it must be borne in mind that these fees and charges are merely held in 
trust by condominium corporations and are used exclusively for administrative purposes, i.e., for 
the maintenance and operations ofthe condominium. 
The corporate purposes of a condominium corporation as provided under Republic Act 
No. 4726 shall be limited to the holding of the common areas, either in ownership or any other 
interest in real property recognized by law, to the mimagement of the condominium project and 
such other purposes as may be necessary, convenient or incidental to the accomplishment of said 
purposes. It cannot be denied that condominium unit owners benefit from the services provided 
by the condominium corporations. However, the said corporations do not render services for a 
fee but merely act as managers and trustees of the association dues and fees to be used for 
maintenance and expenses for utilities. 
These fees do not constitute income payments or 
remuneration for services rendered by the condominium corporation. Hence, not subject to 
VAT. 
Nonetheless, it cannot be over-emphasized that the RMe issued by the BlR will impose 
additional burden to condominium unit owners. While it is the condominium corporation who 
will be liable for the payment of VAT, the same is an indirect tax, which can be shifted or passed 
on to the condominium unit owners. Therefore, it does not come as a surprise that many middle-
income earners who are condominium unit owners have been very vocal about their opposition 
to this latest tax imposition by the BIR. 
It is high time that a law must be passed that will lessen the impact of the rising cost of 
Jiving in Metro Manila and other urban areas. The imposition of V AT on association dues, 
membership fees, and other assessments/charges collected by condominium corporations by the 
BIR will certainly affect the majority of our country's middle-income earners, who are the major 
clients of the condominium corporations and are considered to be the economy's driving force. 
In view of the foregoing consideration, approval of this bill i 
. ghly recommended. 
,Hill 


'£'1"1111110 
SIXTEENTH CONGRESS OF THE REPUBLIC ) 
(~fft;f l.lf tile ;!.-"f1'rfar~ 
OF THE PIDLIPPINES 
) 
First Regular Session 
) 
"13 
JUL 10 1'19:56 
SENATE 
S. No.71? 
Introduced by Senator Ralph G. Recto 
AN ACT 
EXEMPTING MEMBERSHIP FEES, AND OTHER ASSESSMENTS/CHARGES 
COLLECTED BY CONDOMINIUM CORPORATIONS FROM VALUE-ADDED 
TAX, AMENDING FOR THE PURPOSE SECTION 109 (1) OF THE NATIONAL 
INTERNAL REVENUE CODE OF 1997, AS AMENDED. AND FOR OTHER 
PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
1 
Section 1. 
Section 109 (l) of the National Internal Revenue Code of 1997, as 
2 
amended is hereby further amended to read as follows: 
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"SEC.109 Exempt Transactions. - (I) Subject to the provisions of 
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Subsection (2) hereof, the following transactions shall be exempt from the 
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value-added tax: 
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"(A) xxx; 
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Section 2. 
"(X) 
ASSOCIATION DUES, MEMBERSIDP FEES AND 
OTHER 
ASSESSMENTS/CHARGES 
COLLECTED 
BY 
CONDOMINIUM 
CORPORATIONS 
FROM 
THEIR 
MEMBERS AND TENANTSILESSEES. 
"xxx." 
Implementing Rules and Regulations. - The Secretary of Finance, shall, 
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upon the recommendation of the Commissioner of Internal Revenue, promulgate not later 


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than thirty (30) days upon the effectivity of this Act the necessary rules and regulations for its 
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proper and effective implementation. 
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Section 3. 
Repealing Clause. - All laws, Acts, Presidential Decrees, Executive 
Orders, issuances, presidential proclamations, rules and regulations or parts thereof which are 
contrary to and inconsistent with any provision of this Act are hereby repealed, amended or 
modified accordingly. 
Section 4. 
Effectivity. - This Act shall take effect fifteen (15) days after its 
complete publication either in the Official Gazette, or in at least two (2) newspapers of 
general circulation. 
Approved, 
2