Condo dues not subject to tax: SC

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The Supreme Court ruled as invalid a circular issued by the Bureau of Internal Revenue (BIR) imposing a 12-percent value-added tax and a 32- percent income tax on membership fees and association dues levied by condominium operators on their tenants and members.

The decision released by the SC’s First Division on Wednesday upheld the ruling of the Makati City RTC Branch 14 and its order on December 2013 granting the petition of First E-Bank Tower Condominium Corp. questioning BIR Memorandum Order Circular 65-2012.

In upholding the Makati RTC’s ruling, the SC said a condominium corporation is not designed to engage in activities to generate income that would warrant the imposition by the BIR of VAT and income taxes.

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It explained that under Republic Act 4726 or the Condomuminium Act, a condominium is an interest in a unit in a residential, commercial or industrial building and an undivided interest in common, directly or indirectly, in the land in which it is located and in other common areas of the said building.

The SC said to better administer the building, the said law allows the creation of a condominium corporation for the purpose of holding title to its common areas.

It added under RA 4726, condo unit owners automatically become members or shareholders of the condominium corporation.

Likewise, the SC said under the same law condominium corporation as the management body of the building may only act for the benefit of unit owners in disposing tangible and intangible personal property by sale or otherwise in proportion to the unit owners’ respective interest in the common areas.

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