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RMC 9-2013: Clarifying the taxability of association dues, membership fees and other assessments/charges

On January 29, 2013, BIR issued Revenue Memorandum Circular (RMC) No. 9-2013.  The circular is issued to clarify the taxability of association dues, membership fees, and other assessments/charges collected by homeowners’ associations from its homeowner-members and other entities.

Download Memorandum Circular (RMC) No. 9-2013 full text, Click Here.

Recall that RMC No. 65-2012, dated October 31, 2012, taxability of association dues, membership fees, and other assessments/charges collected by condominium corporations from its tenants and members.  Click here to download RMC No. 65-2012.

Below are the clarifications set forth in RMC 9-2013.


The taxability of association dues, membership fees, and other assessments/charges collected by a homeowners’ association from its homeowner-members and other entities are discussed hereunder.

I. Income Tax – Section 18 of R.A.  No. 9904 which exempts from taxation the association dues and income derived from rental subject to certain conditions is an implied recognition by Congress that such receipts are subject to tax under existing laws. Thus, the amounts paid in as dues or fees by homeowner-members of a homeowners’ association form part of the gross income of the latter subject to income tax. This is because a homeowners’ association furnishes its members with benefits, advantages, and privileges in return for such payments. For tax purposes, the association dues, membership fees, and other assessments/charges collected by a homeowners’ association constitute income payments or compensation for beneficial services it provides to its members and tenants. The previous interpretation that the assessment dues are funds which are merely held in trust by a homeowners’ association lacks legal basis and is hereby abandoned.

Moreover, since a homeowners’ association is subject to income tax, income payments made to it are subject to applicable withholding taxes under existing regulations.

II. Value-Added Tax (VAT) and Percentage Tax – Association dues, membership fees, and other assessments/charges collected by a homeowners’ association are subject to VAT since they constitute income payment or compensation for the beneficial services it provides to its homeowner-members.

Section 105 of the NIRC, as amended, provides:

SECTION 105. Persons Liable. — Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.

x x x

The phrase ‘in the course of trade or business’ means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity.” (Emphasis supplied)

The above provision is clear — even a non-stock, non-profit organization or government entity is liable to pay VAT on the sale of goods or services. This conclusion was affirmed by the Supreme Court in Commissioner of Internal Revenue v. Court of Appeals and Commonwealth Management and Services Corporation, (G.R. No. 125355, March 30, 2000). In this case, the Supreme Court held:

“(E)ven a non-stock, non-profit organization or government entity, is liable to pay VAT on the sale of goods or services. VAT is a tax on transactions, imposed at every stage of the distribution process on the sale, barter, exchange of goods or property, and on the performance of services, even in the absence of profit attributable thereto. The term “in the course of trade or business” requires the regular conduct or pursuit of a commercial or an economic activity, regardless of whether or not the entity is profit-oriented.

The definition of the term “in the course of trade or business” incorporated in the present law applies to all transactions even to those made prior to its enactment. Executive Order No. 273 stated that any person who, in the course of trade or business, sells, barters or exchanges goods and services, was already liable to pay VAT. The present law merely stresses that even a nonstock, nonprofit organization or government entity is liable to pay VAT for the sale of goods and services.

Section 108 of the National Internal Revenue Code of 1997 defines the phrase “sale of services” as the “performance of all kinds of services for others for a fee, remuneration or consideration.” It includes “the supply of technical advice,  assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking or project.”

On February 5, 1998, the Commissioner of Internal Revenue issued BIR Ruling No. 010-98 emphasizing that a domestic corporation that provided technical, research, management and technical assistance to its affiliated companies and received payments on a reimbursement-of-cost basis, without any intention of realizing profit, was subject to VAT on services rendered. In fact, even if such corporation was organized without any intention of realizing profit, any income or profit generated by the entity in the conduct of its activities was subject to income tax.

Hence, it is immaterial whether the primary purpose of a corporation indicates that it receives payments for services rendered to its affiliates on a reimbursement-on-cost basis only, without realizing profit, for purposes of determining liability for VAT on services rendered.  As long as the entity provides service for a fee, remuneration or consideration, then the service rendered is subject to VAT.”

Accordingly, the gross receipts of homeowners’ associations including association dues, membership fees, and other assessments/charges are subject to VAT, income tax and income payments made to it are subject to applicable withholding taxes under existing regulations.

Those exempt from the payment of VAT under Section 109(V) are liable to pay percentage tax. Section 116 provides:

SEC. 116. Tax on Persons Exempt from Value-Added Tax (VAT). — Any person whose sales or receipts are exempt under Section 109 (V) of this Code from the payment of value- added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales of receipts: Provided, That cooperatives shall be exempt from the three percent (3%) gross receipts tax herein imposed.”

As clearly stated in the law, non-VAT registered entities exempt under Section 109 (1) (V) of the NIRC, as amended, are covered by percentage taxes.


Pursuant to Section 18 of RA No. 9904, the association dues and income derived from rentals of the homeowners’ association’s properties may be exempted from income tax, VAT and percentage tax subject to the following conditions:

  1. The homeowners’ association must be a duly constituted “Association” as defined under Section 3(b) of RA No. 9904;
  2. The local government unit having jurisdiction over the homeowners’ association must issue a certification identifying the basic services being rendered by the homeowners’ association and therein stating its lack of resources to render such services notwithstanding its clear mandate under applicable laws, rules and regulations. Provided further, that such services must fall within the purview of the “basic community services and facilities” which is defined under Section 3(d) of RA No. 9904 as those referring to services and facilities that redound to the benefit of all homeowners and from which, by reason of practicality, no homeowner may be excluded such as, but not limited to: security; street and vicinity lights; maintenance, repairs and cleaning of streets; garbage collection and disposal; and other similar services and facilities.; and
  3. The homeowners’ association must present proof (i.e. financial statements) that the income and dues are used for the cleanliness, safety, security and other basic services needed by the members, including the
    maintenance of the facilities of their respective subdivisions or villages.

If you want to download it directly from the BIR website, Click Here.

Share us your thoughts! 😉

Orlando Calundan is a Certified Public Accountant by profession, a blogger by passion, a lawyer by ambition, a giver by affection and a simple guy who wants to make a difference.

  • robert

    does that mean that homeowner associations will be taxed now (with VAT and income tax if certain requirements are not met) in the same manner as condo associations?

    • Absolutely Sir Robert! I want to emphasize these texts of the RMC No. 9-2013:

      “The previous interpretation that the assessment dues are funds which are merely held in trust by a homeowners’ association lacks legal basis and is hereby abandoned.”

      Now, if ALL of the conditions under “EXEMPTION UNDER REPUBLIC ACT NO. 9904″ above are not meet, receipts of homeowners’ association from home owners are subject to VAT/percentage tax, income tax and, subject to existing regulations, to withholding taxes.

      That is the law, we can’t change it. It’s how the regulators interpret it that matters.. 😉

      • rey
      • Hi Sir Rey,

        The link you just have provided just explained how the RMC No. 9-2013 came about. The exemption it pointed out in that news is exactly the exemption stated “EXEMPTION UNDER REPUBLIC ACT NO. 9904” section, which also provided for the requirements for a homeowners’ association to be qualified.

        I may have not got what you are pointing out, but the news has just highlighted some provisions of the RMC No. 9-2013

  • Desiree Rose

    ask ko lang din po kung may Vat na po ito? tama po ba na sa resibo ay hiwalay ang resibo ng 12% vat at another receipt for our condo dues?

    • Hello Ms. Desiree Rose! Opo, pag hindi po na-comply ang mga exemption requirements, VATable po ang association dues, membership fees and other assessments/charges.

      Isang resibo lang po, hindi kailangang hiwalay. May tinatawag po na invoicing requirements ang BIR na kailangang ang gagamitin na resibo ay nakalagay ang TIN ng taxpayer at nakalagay na “VAT”. Sa resibo po, nakalagay po dapat yung breakdown ng binayaran. Example po:

      Association dues P100,000
      VAT 12,000
      Total P112,000

      Ang requirement po na ito ay iba pag ang association ay hindi subject sa VAT pero subject sa percentage tax.

      • cai

        with regards to your reply”Ang requirement po na ito ay iba pag ang association ay hindi subject sa VAT pero subject sa percentage tax”, when does assoc be subject to percentage tax instead of vat? and if subjected only on percentage tax…how will the payments be reflected in the receipt(which i assumed that non vat receipts are to be issued or mali ako?)?…some kinda confused 🙂

      • Hi Cai,

        Yes, of course, those that are exempt po from VAT are subject to 3% percentage tax po, except cooperatives. Heto po yung provision ng RR 16-2005:

        Sale or lease of goods or properties or the performance of services other than the
        transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do
        not exceed the amount of One Million Five Hundred Thousand Pesos (P1,500,000.00).

        There are other considerations po, but primarily, if you qualify this exemption, you can be subjected to percentage tax of 3% and syempre, tama po kayo, NON-VAT and receipt na gagamitin and is not to required to present separately yung % tax.

  • Thess dela Roca

    Thank you very much for this information. I have 3 clients that are homeowners’ association. I am sure madami po mag file for exemption. My questions are:
    1. who is the LGU referred to in the RMC, is it at Barangay or City level?
    2. when the LGU issues the certificate of exemption, is there still a need to file a TRU with BIR? or just continue with the operations as usual.

    • Hi Ms. Thess, thank you for dropping by.

      Even the R.A. 9904 and its implementing rules didn’t specify which level in the LGU that needs to issue required certification. I haven’t personally experienced this kind of case. Maybe it would be better to inquire with your RDO to be sure.

  • chris

    RA 9904 speaks only of subdivision associations and not condominium corporations since condo corps are registered with the SEC alone and not with HLURB hence it will never pass the first requirement for exemption.

    that is why i am confused why condo corps are included in discussions re this, or maybe i interpreted it wrong.. kindly enlighten me please

    • Very nice observation Sir Chris.

      If you try to look closely in the 3rd paragraph above, which starts with “Recall that RMC No. 65-2012…. condominium corporations from its tenants and members….”, you would realize that such paragraph is independent of the RMC No. 9-2013 as it pertains to RMC No. 65-2012.

      In other words, we just mentioned that condominium corporations are covered by RMC No. 65-2012 while homeowners’ association are covered by RMC No. 9-2013. Thus, aside from the 3rd paragraph which just reminded the release of RMC No. 65-2012 in 2012, all the discussions pertain to associations, which, you are right, the subject of RA No. 9904.

      Hope this clarifies your concern.

  • Dj


    I would like to ask when the bir says “other assessments and charges” does is it mean that Building insurance, Real property tax and utilitiies are included?(We pay our utilities at the Admin office because our condos are on a sub meter).

  • Hi DJ,

    Yes, those pertain to other charges which were not already included in the association dues and membership fees.