G.R. No. 222548 - FRITZ BRYN ANTHONY M. DELOS SANTOS, VS. COMMISSIONER OF INTERNAL REVENUE.DECISION - Supreme Court E-Library

Ruling

Accordingly, the gross receipts of condominium corporations including association dues, membership fees, and other assessments/charges are subject to VAT, income tax and income payments made to it are subject to applicable withholding taxes under existing regulations. [4] On November 26, 2015, Classica informed its unit owners and tenants that its Board of Trustees had decided that it will no longer shoulder the Value-Added Tax on association dues starting on January 3, 2016. [5] On January 4, 2016, Classica sent Delos Santos a billing statement for his association dues that included the additional Value-Added Tax imposed by the Circular. He then paid his association dues on January 21, 2016. [6] Subsequently, he filed a Petition before this Court. Petitioner Delos Santos alleges that he has legal standing to challenge the Circular's constitutionality. He claims that his payment of Value-Added Tax for his association dues to Classica resulted in his direct injury. The Circular's direct adverse monetary effect satisfies the actual case or controversy requirement of judicial review. Moreover, petitioner assails the Circular's constitutionality for violating substantive due process because there is no legal or judicial basis for its issuance. Since the President has failed to correct public respondent Commissioner of Internal Revenue's issuance of the Circular, there has been a continued breach of the President's constitutional duty to ensure the faithful execution of laws. [7] Petitioner argues that the issue is capable of repetition but evading review since there is nothing that prevents the Bureau of Internal Revenue from issuing a similar regulation. The doctrine of hierarchy of courts should be waived considering the exceptionally compelling and important issue raised in the Petition. [8] Petitioner contends that Section 105 of the National Internal Revenue Code of 1997 [9] does not apply to condominium owners' or tenants' payment of association dues. In paying their association dues, they do not buy, transfer, or lease any good, property, or services from the condominium corporation. The association dues are contributions to defray the condominium's maintenance costs. The condominium corporation does not acquire ownership over the association dues, but only holds the same in a fiduciary capacity for payment of periodic maintenance costs of the project. [10] Moreover, the condominium corporation earns no income from the association dues. These monies are not intended for their benefit and cannot be considered as taxable revenue for purposes of income tax. Those who receive income are the employees of the condominium corporation, the sellers of the maintenance services and commodities, all of whom are separate from the condominium corporation. [11] Thus, petitioner concludes that the Circular is an invalid subordinate legislation for modifying Sections 105 and 108 [12] of the National Internal Revenue Code. Value-Added Tax is a tax on consumptio