Tax treatment of donations to homeowner’s associations

The BIR has issued the following clarifications on the donations received by homeowner’s associations.

Gratuitous donations

Gratuitous gifts, donations, and other contributions received by homeowner’s associations are not qualified for exemption from donor’s tax under Section 101 (A)(3) of the Tax Code.  Hence, any person – natural or juridical, resident or non-resident – who transfers or causes to transfer property by gratuitous gift to a homeowner’s association must file BIR Form 1800 (Donor’s Tax Return) within 30 days after the date the donation was made.

Onerous donations

In case of an onerous donation or donation in exchange for goods, services or use or lease of properties, this shall not be considered a donation subject to donor’s tax since donations of this kind are not given in the nature of an endowment or donation, but in the concept of a fee or price in exchange for the performance of a service, use of properties, or delivery of an object.

However, such contributions to associations in exchange for goods, services and use of properties constitute as other assessments/ charges from activity in exchange for the performance of a service, use of properties or delivery of an object. As such, they are subject to income tax and value-added tax (or percentage tax, as the case may be), unless they satisfy the conditions for exemption under Section 18 of Republic Act No. (RA) 9904, as implemented by RMC 09-2013.

(Revenue Memorandum Circular No. 53- 2013, August 16, 2013)

Tax Brief – September 2013

Punongbayan and Araullo