RMC No. 09-2013: Clarifies the taxability of association dues, membership fees and other assessments/charges collected by homeowners’ associations

Key points

1. Dues are taxable income. Dues, fees and assessments paid by members are gross income of the association subject to Income Tax, as payment for the benefits it provides. The earlier view that dues are funds held in trust is abandoned.
2. Withholding and VAT. Income payments made to a homeowners’ association are subject to withholding taxes under existing regulations. The dues are subject to VAT, and those exempt from VAT under Section 109(V) of the NIRC pay Percentage Tax.
3. Exemption under RA No. 9904. Section 18 allows association dues and rental income to be exempt from Income Tax, VAT or Percentage Tax, subject to three conditions. The association must be a duly constituted Association under Section 3(b) of RA No. 9904.
4. LGU certification. The local government unit must certify the basic services the association renders and its own lack of resources to render them. The services must be “basic community services and facilities” under Section 3(d), such as security, street lights, street maintenance and cleaning, and garbage collection.
5. Proof of use of funds. The association must present proof, such as financial statements, that income and dues are used for cleanliness, safety, security and other basic services, including facility maintenance.

Who is affected

• Homeowners’ associations
• Homeowner-members and tenants who pay dues