IT is now undisputed that association dues, membership fees, and other charges collected by a condominium corporation from members are not subject to income tax and value added tax. This was the clear ruling by the Supreme Court in thecase . In fact, it is now clear under the amended provisions of the Tax Code that association dues, membership fees, and other assessments and charges collected by homeowners associations and condominium corporations are exempt from VAT.
However, to date, some local government units still attempt to collect LBT from association dues collected by condominium corporations. From this definition, it is apparent that only receipts representing income from business activity may be subjected to LBT. Absent any business activity geared for profit, there is no basis for the imposition of LBT. The Bureau of Local Government Finance had in fact opined in one occasion that from the definition of gross sales or receipts in the LGC, passive income such as interest income from savings and time deposits are not subject to LBT.
Clearly then, association dues do not arise from performance of trade or business. When a condominium corporation manages, maintains, and preserves the common areas of the building, it only does so for the benefit of the condominium owners. It cannot be said to be engaged in trade or business.