MANILA, Philippines – Tightening its grip on homeowners associations, the Bureau of Internal Revenues stressed that all gifts, donations and other contributions received by these non-profit corporations are subject to the payment of donor’s tax as required under the Tax Code.
The BIR issued Memorandum Circular 53-2013 to clarify the taxability of donations to associations of subdivisions and villages amid reports these organizations are receiving contributions from members and non-members in exchange for goods, services or use of properties.
BIR commissioner Kim Henares pointed out that association dues, membership fees and other assessments/charges collected from the members as well as the donations from non-members are subject to income tax and value added tax (VAT) or percentage tax as the case may be.
“Endowments or gifts received by such associations are not exempt from donor’s tax considering that the gifts to associations are not qualified for exemption under Sec. 101 of the Tax Code,” Henares said.
An appropriate tax will be levied, assessed and collected upon the transfer by any person, resident or non-resident of the property by gift.
The tax shall apply whether the transfer is in trust or otherwise and whether the property is real or personal, tangible or intangible, she said.
Henares said all donations to associations must be covered by Donor’s Tax Return (BIR Form 1800), which shall be filed in triplicate within 30 days after the donation was made.
Article 749 of the New Civil Code states that in order for a donation to be valid it must made in a public document specifying the property donated and the value of the charges which the donee must satisfy.
According to Henares, contributions to association in exchange for goods, services and use of properties constitute as other assessments/charges. As such, these fees are income on the part of the associations that are subject to income tax.
Considering that these fees are received in the conduct or pursuit of commercial or economic activity, these fees are also subject to value-added tax, Henares said.
However, those exempt from the payment of VAT are liable to pay a percentage tax which shall be equivalent to three percent of the gross quarterly sales or receipts. –Zinnia B. Dela Peña (The Philippine Star)
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