Taxation of condominium corporations
By: Atty. Keshia Daniell L. Valencia on July 2, 2026
WITH high demand for condominium units, especially by employees working in cities, these residential spaces remain a promising investment in the Philippines. This article discusses compliance with issuances of the Bureau of Internal Revenue (BIR) and the corresponding tax implications and consequences of condominium corporations.
The creation of a condominium corporation is sanctioned by Republic Act (RA) 4726, also known as The Condominium Act. Under this law, a condominium is an interest in real property consisting of separate interest in a unit in a residential, industrial or commercial building, and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building.
To enable the orderly administration of the common areas which the unit owners jointly own, the law permits the creation of a “condominium corporation” for the purpose of holding title to the common areas. The unit owners shall, in proportion to the interests of their respective units, automatically become members or shareholders of the condominium corporation to the exclusion of others.
Section 10 of RA 4726 provides that the corporate purposes of a condominium corporation are limited to holding the common areas, either in ownership or any other interest in real property recognized by law, to the management of the project and to such other purposes as may be necessary, incidental or convenient to the accomplishment of said purposes. Additionally, it prohibits the articles of incorporation or by-laws of the condominium corporation from containing any provision contrary to the provisions of RA 4726, among others.
Section 9 of RA 4726 allows a condominium corporation to collect association dues, membership fees and other assessment or charges to effectively oversee, maintain or improve the common areas of the condominium.
The taxability of association dues or fees collected by condominium corporations from its members became an issue when the BIR issued Revenue Memorandum Circular (RMC) 65-2012 in 2012, subjecting such collections to income tax, value-added tax (VAT) and withholding tax.
However, in a decision rendered in 2020, the Supreme Court declared RMC 65-2012 as void for expanding or altering the National Internal Revenue Code, as amended (Tax Code), rather than merely interpreting the same.
VAT exempt
The Supreme Court held that a condominium corporation is not considered as engaged in trade or business, and the amounts they collected are not intended for the incurrence of profit, but rather to only shoulder the necessary expenses that arise from the maintenance of the condominium. Thus, the Supreme Court held that such collections are not subject to income tax or VAT.
Subsequently, RA 10963, or the Train Law, amended the Tax Code in 2018, by adding, among others, an express provision (Section 109(Y)) that association dues, membership fees and other assessments and charges collected by homeowners’ associations and condominium corporations are VAT exempt.
Therefore, it is now a settled rule that receipt of association dues or fees should not be subjected to income tax, VAT and withholding tax based on the following, as discussed by the Court.
First, the receipt of payment of association dues or fees should not be subjected to income tax because they do not constitute profit or gain. They are collected purely for the benefit of condominium owners and represent funds “held in trust” to defray the operating and general costs which thus only constitute infusion of capital.
It must be emphasized that capital is different from income. Capital is a fund or property existing at one distinct point in time while income denotes flow of wealth during a definite period of time. Further, for income to be taxable, the following requisites must be present, namely: (1) there must be a gain; (2) the gain must be realized or received; and (3) the gain must not be excluded by law or treaty from taxation.
Because of the nature of the association dues or fees collected which are inherently dedicated for the maintenance, preservation, and upkeep of operations and facilities, nothing is supposed to be gained from said collection.
Second, the receipt of payment of association dues or fees should not also be subjected to VAT because the collection does not arise from transactions involving the sale, barter, or exchange of goods or services in the ordinary course of trade of business.
VAT is due when one sells, barters, exchanges, leases goods or properties, or renders service in the course of trade or business. Condominium corporations cannot be said to be engaged in trade or business since its main purpose is to manage, maintain and preserve the common areas of the building for the benefit of the condominium owners.
Lastly, the payment for association dues or fees should not be subjected to withholding tax. If there is no income tax to speak of, withholding tax cannot be collected.
Keshia Daniell L. Valencia is an Associate of Mata-Perez, Tamayo & Francisco (MTF Counsel). This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.
The article was published at the More to Follow Column at The Manila Times on July 2, 2026. Please see this link.
https://www.manilatimes.net/2026/07/02/business/taxation-of-condominium-corporations/2376912