Income tax and VAT on membership fees of homeowners’ associations

The association dues, membership fees, and other assessments/charges collected by homeowners’ associations from its homeowner-members and other entities form part of their gross income, which is subject to income tax and Value-Added Tax (VAT). The amounts paid in dues or fees by homeowner-members constitute income payments or compensation for beneficial services homeowners’ associations provide to their members and tenants, which are subject to income tax and VAT. Moreover, since homeowners’ associations are subject to income tax, they are subject to applicable withholding taxes under existing regulations.

This notwithstanding, the association dues and income of the homeowners’ associations may be exempted from income tax, VAT and percentage tax if it satisfies the following conditions:

1. It must be a duly constituted “Association” as defined under Sec. 3(b) of Republic Act No. (RA) 9904.

2. The local government unit (LGU) must issue a certification identifying the basic community services and facilities being rendered by the homeowners’ association and therein stating its lack of resources to render such services.

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.

(Revenue Memorandum Circular No. 9-2013, January 30, 2013)

Tax Brief – February 2013

Punongbayan and Araullo