May VAT be imposed upon condominium association dues?

Value Added Tax (VAT) is NOT imposed on condominium association dues in the Philippines. Association dues, membership fees, and other assessments collected by condominium corporations are explicitly exempt from VAT under Philippine law.

Legal Basis for Exemption

Supreme Court Ruling

The definitive legal authority is the Supreme Court decision in G.R. No. 215801 (First E-Bank Tower Condominium Corp. v. Bureau of Internal Revenue, January 15, 2020). The Court held that:​

• Association dues, membership fees, and assessments collected by condominium corporations are not subject to income tax, VAT, and withholding tax

• A condominium corporation is not engaged in trade or business

• Dues are collected purely for the benefit of condominium owners and constitute contributions for maintenance, not income

• The dues do not arise from the sale of goods or services

This Supreme Court ruling specifically invalidated Revenue Memorandum Circular No. 65-2012 (RMC 65-2012), which had attempted to impose 12% VAT on condominium dues in 2012.manilatimes+1​

Tax Code Provisions

The exemption is codified in the National Internal Revenue Code (NIRC) through two provisions:

Section 109(Y) - VAT Exemptions: Following the Tax Reform for Acceleration and Inclusion (TRAIN) Law (RA 10963, 2018), this section explicitly lists "association dues, membership fees, and other assessments and charges collected by homeowners' associations and condominium corporations" as VAT-exempt transactions

Section 30(C) - Mutual Benefit Associations: Condominium corporations qualify as "beneficiary societies" or associations operating exclusively for the benefit of their members. No part of net income or assets may inure to any member individually.​

Conditions for the Exemption

The VAT exemption applies only if the condominium corporation meets specific requirements:

Requirement	Details
Legal Structure	Non-stock, non-profit corporation
Primary Purpose	Organized exclusively to manage and maintain common areas for members' benefit
Use of Funds	Association dues must be budgeted and spent solely for common area maintenance, utilities, security, administrative expenses, and governance
Income Activities	No substantial income-generating activities directed at non-members (e.g., commercial leasing)
BIR Certification	Must obtain and maintain a valid Certificate of Tax Exemption (CTE)
CTE Validity	Valid for three years; must be renewed periodically (RMO 38-2019)

Obtaining Tax Exemption Status

To qualify for and maintain the exemption, associations must:

1. File BIR Form 1945 with the Bureau of Internal Revenue, including:

   • Certified copies of Articles of Incorporation and By-Laws

   • Latest General Information Sheet

   • Audited financial statements

   • Detailed list of actual activities

   • Board resolution authorizing the application

2. Pay the certification fee (₱100)

3. Undergo BIR evaluation, which may include field inspection and document verification

4. Receive and maintain the Certificate of Tax Exemption, valid for three years

5. File annual returns (BIR Form 1702-EX for exempt entities) demonstrating continued compliance​

What Is Taxable vs. Exempt

Understanding the distinction is critical for proper compliance:

VAT-Exempt Receipts

• Member association dues and CUSA (common-usage-service-area) charges

• Special assessments for common area improvements

• Penalties and interest on late payment of dues (part of enforcing collection)

• Rental of function rooms to members (mutual benefit activity)

Taxable Receipts (Subject to Income Tax and VAT)

• Lease income from commercial tenants (telco antennas, retail kiosks)

• Interest income on bank deposits (subject to 20% final withholding tax)

• Unrelated commercial operations

• Services rendered to non-members for consideration​

Important Compliance Consideration

Failure to maintain the Certificate of Tax Exemption is critical. If a condominium corporation's CTE lapses due to non-renewal, the exemption is automatically lost. This means all association dues collected become taxable income retroactively, creating significant tax liabilities and penalties.​

Evolution of the Law

The current exemption status represents a reversal of the BIR's 2012 position:

Year	Action	Outcome
2012	BIR issued RMC 65-2012 imposing 12% VAT and 32% income tax	Created significant burden on condo owners
2018	TRAIN Law amended the Tax Code to expressly exempt condominium dues	Provided statutory protection
2020	Supreme Court invalidated RMC 65-2012	Confirmed exemption is constitutionally and legislatively sound
2025-2026	Current BIR position and jurisprudence confirm exemption	Stable legal framework in place

Conclusion

Condominium association dues cannot lawfully be subject to VAT in the Philippines. This protection is established through:

1. Supreme Court precedent (G.R. No. 215801)

2. Tax Code statutory exemption (Section 109(Y) and Section 30(C))

3. Legislative intent embodied in the TRAIN Law and prior homeowners association statutes

4. Underlying principle that condominium corporations are not engaged in trade or business

Unit owners and condominium boards should ensure their associations maintain valid Certificates of Tax Exemption from the Bureau of Internal Revenue to protect this exemption and demonstrate compliance to local government units and regulatory authorities.

Source: Ziggurat Real Estate

Rent Increases in the Philippines

What Tenants Should Expect at the Start of the Year

The beginning of the year often comes with a familiar message for tenants: “We are increasing the rent.”

But not all rent increases are legal.

In the Philippines, rent adjustments—especially for residential units—are regulated by law. Knowing what landlords can and cannot do empowers tenants to protect their rights and budget accordingly.

This article explains legally allowed rent increases, the applicable law, and what tenants should watch out for.

1. The Governing Law: The Rent Control Act

Rent increases for certain residential units are governed by Republic Act No. 9653, also known as the Rent Control Act of 2009, as extended by subsequent laws.

The Rent Control Act applies to:

• Residential units (apartments, houses, dormitories, boarding houses)

• Units leased on a monthly basis

• Units with rent not exceeding the threshold set by law

⚠️ The law does not apply to commercial spaces or luxury residential units above the rent ceiling.

2. How Much Can Rent Be Increased?

Maximum Allowable Increase

For covered residential units:

• Maximum increase: 5% per year

• Applies only to:

  • The same tenant

  • After the expiration of the lease term

💡 This means a landlord cannot impose multiple increases within the same year, nor exceed the 5% cap while the tenant remains in possession.

3. Units Covered by Rent Control

As a general rule, rent control applies to residential units with monthly rent within the statutory ceiling (which varies depending on location and current extensions of the law).

If your unit falls within the rent ceiling, the landlord must comply with the 5% cap.

If your unit is above the ceiling, rent control does not apply—but other legal rules still do, such as contract law and basic principles of fairness.

4. Can the Landlord Increase Rent During the Lease Term?

No.

If you have a fixed-term lease contract, the rent:

• Cannot be increased mid-contract

• Must remain the same until the lease expires

Any rent increase:

• Must be imposed only upon renewal

• Must comply with the Rent Control Act (if applicable)

A clause allowing automatic increases during the lease term may be void or unenforceable if it violates the law.

5. Can the Landlord Evict You for Refusing an Illegal Increase?

No—refusing an illegal rent increase is not a valid ground for eviction.

Under the Rent Control Act:

• Tenants cannot be ejected for asserting their rights

• Retaliatory eviction is prohibited

Illegal eviction or harassment may expose the landlord to:

• Civil liability

• Administrative penalties

• Criminal sanctions in extreme cases

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6. Common Landlord Tactics Tenants Should Watch Out For

Tenants should be cautious of:

• Sudden “reclassification” of the unit to evade rent control

• Forced contract termination without legal grounds

• Rent increases disguised as “new charges” or “fees”

• Pressure to vacate to install a new tenant at a higher rate

📌 The law looks at substance over form—renaming a rent increase does not make it legal.

7. What Should Tenants Do If Faced With an Illegal Increase?

Tenants may:

1. Request the legal basis for the increase in writing

2. Check if the unit is covered by rent control

3. Refuse to pay illegal increases

4. Seek assistance from:

   • The Barangay

   • Local housing or rent control offices

   • A lawyer or legal aid group

Rising costs do not give landlords a free pass to disregard the law. Understanding rent control rules helps tenants stand their ground—calmly, legally, and confidently.

If you’re unsure whether a rent increase is lawful, ask questions before paying. Silence can be mistaken for consent.

Source: Ziggurat Real Estate

How to Terminate an Implied Lease in the Philippines: A Clear Guide for Landlords and Tenants

When people talk about “implied lease” in the Philippines, it usually refers to a situation where someone continues renting a property without a new written contract, yet the landlord keeps accepting rent. Many Filipinos don’t realize that this is a valid lease under the Civil Code—even if no paperwork exists.

But what happens when either the landlord or the tenant wants to end this arrangement?

Here’s a simple, practical guide.

What Is an Implied Lease?

Under Article 1670 of the Civil Code, an implied lease happens when:

• A written lease expires, or

• There was never a written lease, but the tenant continues occupying the property with the landlord’s consent, and the landlord accepts rent.

This creates a month-to-month lease under Philippine law.

How Do You Terminate an Implied Lease?

1. Give a 30-Day Written Notice

The law is straightforward: an implied lease in the Philippines is monthly, so either party must give 30 days’ written notice before ending it.

You can deliver notice through:

• Personal delivery

• Email or Messenger (if that is your usual communication)

• Registered mail or courier

• Viber or SMS (as long as you keep screenshots)

Tip: Keep proof that the other party received the notice. This becomes important if an ejectment case is needed later.

2. State the Date the Lease Will End

Your notice must clearly say:

• When you are giving the notice

• The exact date the lease will end (at least 30 days later)

• That you are terminating the month-to-month arrangement

This avoids misunderstandings and protects you legally.

3. Allow the 30-Day Period to Run

During this period:

• The tenant can continue staying

• Rent must still be paid

• Both parties must respect the old terms of the lease

  
  

A notice does not require the tenant to leave immediately.

4. If the Tenant Does Not Leave After 30 Days

If the notice period ends and the tenant still refuses to vacate, the landlord may file an Unlawful Detainer case at the Municipal Trial Court (MTC).

To file the case, the landlord must show:

• Proof of the implied lease (messages, receipts, screenshots)

• Proof of the 30-day written notice

• Proof that the tenant refused to leave

The court then decides whether eviction is proper.

Important: Do Not Accept Rent After the Notice Ends

If a landlord accepts rent after the end date of the notice, the implied lease is considered renewed, and the 30-day countdown resets.

To avoid this problem:

• Do not accept rent after the termination date, or

• Issue a written statement saying the payment is “for use and occupancy only,” not a renewal of the lease.

Can a Tenant Also Terminate an Implied Lease?

Yes. A tenant may also end an implied lease with 30 days’ written notice to the landlord.

Why Many Implied Lease Disputes Become Court Cases

Most problems come from:

• No written notice

• Accepting rent even after termination

• Arguments over whether consent was given

• Renting only through verbal agreements

This is why documentation—screenshots, messages, Viber, receipts—is very important.

Conclusion

Ending an implied lease is simple in principle:

1. Give a written 30-day notice.

2. State the exact end date.

3. Keep evidence of delivery.

4. File an unlawful detainer case if the tenant refuses to vacate.

   
   

Whether you’re a landlord wanting to regain possession or a tenant planning to move out, following these steps ensures the process is legal, fair, and enforceable.

Source: Ziggurat Real Estate