REVENUE MEMORANDUM CIRCULAR NO. 53-2013 issued on August 14, 2013 clarifies the taxability of donations given to homeowners’ association of subdivisions and villages.

     Pursuant to Revenue Memorandum Circular (RMC) No. 9-2013, homeowners’ associations are subject to the corresponding internal revenue taxes imposed under the Tax Code of 1997 on their income of whatever kind and character. However, they may be exempted from Income Tax, Value-Added Tax (VAT) and Percentage Tax derived from the association dues and rentals of its properties subject to the conditions under Section 18 of Republic Act No. 9904, as implemented by RMC No. 9-2013.

     In this regard, 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, these fees are income on the part of the associations that are subject to Income Tax under Section 27 of the Tax Code, as amended.

     Further, considering that these fees are received in the conduct or pursuit of commercial or economic activity, these fees are also subject to VAT imposed in Sections 106 and 108 of the Tax Code. Those exempt from the payment of VAT under Section 109(v) (now(w)) are liable to pay Percentage Tax.