Are Condominium Association Dues Subject to BIR Income Tax? What the Supreme Court Actually Ruled
Condominium association dues collected from unit owners for building maintenance are not subject to BIR income tax, VAT, or withholding tax — but that wasn’t always the BIR’s position, and getting the history wrong is common. Revenue Memorandum Circular (RMC) No. 65-2012 declared these dues taxable income to the condominium corporation. The Supreme Court struck that position down in a January 15, 2020 decision. A condominium corporation, unit owner, or property manager still following the pre-2020 rule is over-withholding or over-remitting on money that was never taxable income to begin with.
Simplify the Rest of Your Association's BIR Filings FREE →What RMC No. 65-2012 originally declared #
In 2012, the BIR issued RMC No. 65-2012, reversing its own long-standing prior rulings and declaring that association dues, membership fees, and other assessments or charges collected by a condominium corporation from its members constitute income payments or compensation for beneficial services. In substance, the circular treated the condominium corporation as if it were selling maintenance and building-management services to its own unit owners — making the dues subject to income tax and VAT, and imposing withholding tax obligations on payments the corporation made using that money. RMC No. 9-2013 extended a comparable position to homeowners’ associations shortly after.
The Supreme Court’s 2020 ruling #
On January 15, 2020, the Supreme Court decided Bureau of Internal Revenue v. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924, consolidated), invalidating RMC No. 65-2012. Secondary summaries of the ruling describe its core reasoning:
“Association dues, membership fees, and other assessments/charges collected by a condominium corporation are not subject to income tax, VAT, and withholding tax.”
This site relied on secondary case-digest summaries of the decision for this passage, as the Supreme Court E-Library’s full text could not be reached directly to re-verify the Court’s exact wording — confirm the precise holding against the official decision before relying on it for a formal filing position. The reasoning secondary sources attribute to the Court centers on the fact that a condominium corporation collecting dues for building upkeep is not engaged in trade or business for profit: the money is held for the unit owners’ common benefit — security, elevator maintenance, common-area utilities — not generated from an income-producing economic activity, so it does not meet the definition of gross income or a sale of services under the NIRC.
Before and after, side by side #
| Under RMC No. 65-2012 (2012–2020) | Under the Supreme Court ruling (from January 15, 2020) | |
|---|---|---|
| Income tax on association dues | Treated as taxable income to the condo corporation | Not subject to income tax |
| VAT on association dues | Treated as VATable service income | Not subject to VAT |
| Withholding tax obligations tied to dues income | Imposed | Not required on this basis |
| Legal basis | RMC No. 65-2012 (BIR interpretation) | G.R. Nos. 215801 & 218924, Supreme Court decision, Jan. 15, 2020 |
Why some condominium corporations still get this wrong #
Circulars and internal accounting templates written or copied during the 2012–2020 window sometimes never got updated once the ruling came down, and general online tax guides that predate 2020 can still describe RMC No. 65-2012 as current law. A condominium corporation’s finance committee or external accountant relying on an older compliance checklist is the most common source of the error today — not a live BIR position, since the circular the checklist is based on no longer reflects a valid rule.
What this doesn’t cover #
The Supreme Court’s ruling addresses dues and assessments collected for the condominium’s own maintenance and operations. A condominium corporation that also runs genuinely separate income-generating activities — leasing out common-area retail space to third parties, for example — still owes tax on that unrelated income in the ordinary way; the exemption follows the character of the dues themselves, not blanket immunity for every peso passing through the corporation’s books.
Related reading #
This income tax question is separate from — but closely related to — the VAT-specific treatment of association dues. See HOA and Condo Dues: VAT Exemption Explained for the VAT side in more detail, and VAT-Exempt Transactions Under NIRC Section 109 for the general exemption framework these dues fit within.
Frequently Asked Questions #
Are condominium association dues subject to BIR income tax? #
No, under the current rule. The Supreme Court’s January 15, 2020 decision in Bureau of Internal Revenue v. First E-Bank Tower Condominium Corp. (G.R. Nos. 215801 and 218924) invalidated Revenue Memorandum Circular No. 65-2012, which had treated association dues, membership fees, and other assessments collected by a condominium corporation as taxable income.
What did RMC No. 65-2012 originally say? #
RMC No. 65-2012 declared that association dues, membership fees, and other assessments or charges collected by a condominium corporation from its members constitute income payments or compensation for beneficial services the corporation provides, making them subject to income tax, value-added tax, and withholding tax — reversing the BIR’s own prior rulings, which had treated such dues as exempt.
Why did the Supreme Court invalidate RMC No. 65-2012? #
Secondary case summaries describe the Court’s reasoning as centered on the fact that a condominium corporation is not engaged in trade or business when it collects dues for building maintenance and operations — the payments are held and used for the unit owners’ common benefit rather than generated from an income-producing economic activity, so they do not constitute gross income or a sale of services under the NIRC.
Does the same rule apply to homeowners’ association dues? #
RMC No. 9-2013 extended a similar taxable treatment to homeowners’ associations, and the reasoning in the Supreme Court’s condominium corporation ruling is generally understood to apply with equal force to homeowners’ associations collecting dues for the same maintenance and common-area purpose, though the 2020 decision itself concerned a condominium corporation specifically.
Should a condominium corporation still withhold tax on association dues collected from unit owners? #
Based on the Supreme Court’s ruling, dues collected purely for maintenance, security, and other common expenses of the condominium — not compensation for a separate taxable service — should not require the income tax, VAT, or withholding tax treatment RMC No. 65-2012 had imposed. A condominium corporation with unusual fee structures or mixed revenue sources should confirm its specific situation with a tax professional rather than assume blanket non-taxability for every peso it collects.
Summary #
RMC No. 65-2012 tried to tax condominium association dues as corporate income; the Supreme Court invalidated that position on January 15, 2020, holding that dues collected for maintenance are not gross income or VATable service revenue to the condominium corporation. A condominium corporation or property manager still applying the pre-2020 circular is following a rule the Court has already struck down.