ASSOCIATION OF NON-PROFIT CLUBS, INC. (ANPC) v.

BIR
G.R. No. 228539, June 26, 2019
Perlas-Bernabe, J.

FACTS:
BIR issued RMC no. 35-2012 addressed to all revenue officials, employees, and others
concerned for their guidance regarding the income tax and VAT liability of recreational and
other non-profit clubs. Said RMC provides interpretation that since the old tax exemption
previously accorded under the NIRC Code of 1977 to recreational clubs was deleted in 1997
NIRC, then the income of recreational clubs from whatever source, including but not limited to
membership fees, assessment dues, rental income, and service fee, is subject to income tax.
Also, VAT component of the RMC provides that “the gross receipts of recreational clubs
including but not limited to membership fees, assessment dues, rental income, and service
fees are subject to VAT.

ANPC submitted a position paper, requesting the non-application of the RMC for income tax
and VAT on membership fees, association dues, and fees of similar nature collected by the
exclusive membership clubs from their members which are used to defray the expenses of the
said clubs. After the lapse of 2 years without action from the BIR, ANPC on behalf of its
members filed this petition for declaratory relief seeking to declare the RMC invalid.

ISSUE:
Whether membership fees, assessment dues and the like of recreational clubs are subject to
income tax and VAT.

RULING: No.

On Income Tax:
While the BIR is correct in its interpretation that the income that recreational clubs derive “from
whatever source” is now subject to income tax under the 1997 NIRC, it erroneously foisted a
sweeping interpretation that membership fees and assessment dues are sources of income of
recreational clubs from which income tax liability may accrue.

As correctly argued by ANPC, xxx. They represent funds “held in trust” by these clubs to
defray their operating and general costs and hence, only constitute infusion of capital.

Case law provides that in order to constitute “income,” there must be realized gain. Clearly,
because of the nature of membership fees and assessment dues as funds inherently
dedicated for the maintenance, preservation, and upkeep of the clubs’ general operations and
facilities, nothing is to be gained from their collection.

On VAT:
It is a basic principle that before a transaction is imposed VAT, a sale, barter or exchange of
good or properties, sale of a service is required.
As ANPC aptly pointed out, membership fees, assessment dues, and the like are not subject
to VAT because in collecting such fees, the club is not selling its services to the members.
Conversely, the members are not buying services from the club when dues are paid, hence,
there is no economic or commercial activity to speak of as these dues are devoted for the
operations/maintenance of the facilities of the organization. As such, there could be no “sale,
barter or exchange of goods or properties, or sale of service” to speak of, which would then be
subject to VAT under the 1997 NIRC.

MISNET, INC.,v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 210604, June 03, 2019
Reyes, J.

FACTS:
Misnet received an assessment for year 2003 tax deficiency on EWT and Final Withholding
VAT. It protested the PAN and FAN.

On March 28, 2011, petitioner received an Amended Assessment Notice reflecting an

amended deficiency EWT after reinvestigation. On the same date, petitioner received a Final
Decision on Disputed Assessment (FDDA) stating that after reinvestigation, there was still due
from petitioner the amount of P14.5 mio, representing deficiency taxes on EWT and Final
Withholding VAT.

Petitioner filed a letter protesting the Amended Assessment Notice on April 11, 2011 or within
the statutory period within which to appeal to the Regional Director of RDO No. 049. On May 9,
2011, the CIR sent a letter to the petitioner which states in part that the petitioner’s April 11
reply produced no legal effect since it should have appealed the final decision of the CIR to the
CTA within 30 days from date of receipt of the said Decision, otherwise, the assessment
became final, executory and demandable. On May 27, a Petition for Relief from Judgment was
filed with the CIR but petitioner later on received a Preliminary Collection Letter which deemed
a denial of the Petition for Relief.

Both CTA Division and CTA En Banc dismissed the petitioner’s Petition for Review on the
ground of lack of jurisdiction for the statutory period to appeal has already lapsed. Hence, this
petition.

ISSUE:
Whether the statutory period to appeal of 30 days from receipt of final decision of the CIR has
lapsed rendering the subject deficiency taxes final, executory and demandable.

RULING: No.

With petitioner’s pending protest dated April 8, 2011 with the Regional Director on the
amended EWT, then technically speaking, there was yet no final decision that was issued by
the CIR that is appealable to the CTA.

The amended assessment notice reflects the amended deficiency EWT of the petitioner after
reinvestigation while the FDDA reflects the Final Decision on: (a) deficiency EWT; (b) Final
Withholding of VAT; and (c) Compromise Penalty. Since the EWT is a mere component of the
aggregate tax due as reflected in the FDDA, then the FDDA cannot be considered as the final
decision of the CIR as one of its components – the amended deficiency EWT – is still under
protest.

Only when the CIR settled (deny/grant) the protest on the deficiency EWT could there be a
final decision on petitioner’s liabilities.

UNIVERSITY OF THE PHILIPPINES v. CITY TREASURER OF QUEZON CITY

G.R. No. 214044, June 19, 2019
Carpio, J.

FACTS:
In 2006, UP entered into a Contract of Lease with ALI over a parcel of land that UP owned.
The City Treasurer of QC assessed UP for delinquency real property tax from 2009-2013 and
the first 3 quarters of 2014. The City Treasurer based its assessment in Sections 205 and 234
of the LGC which provides among others that Real property owned by the Republic of the
Philippines or any of its political subdivisions are exempted from payment of real property tax
except when the beneficial use thereof has been granted, for consideration or otherwise, to a
taxable person.

ISSUE:
Whether the land leased by UP to ALI is subject to real property tax.

RULING: No.

RA No. 9500 or the UP Charter gave a specific tax exemption to UP which covers the land
subject of the present case. Its enactment and passage in 2008 superseded Sections 205(d)
and 234(a) of the LGC which took effect on January 1, 1992. Before the passage of the UP
Charter, there was a need to determine who had beneficial use of UP’s property before it may
be subjected to real property tax. After its passage, there is a need to determine whether UP’s
property is used for educational purpose or support thereof before the property may be
subjected to real property tax.

Section 22 of RA No. 9500 (the UP Charter) allows UP to lease and develop its land subject to
certain conditions. Section 25 (a) provides that all of UP’s “revenues and assets used for
educational purposes or in support thereof shall be exempt from all taxes and duties.”

The Contract of Lease between UP and ALI shows that there is intent to develop “a prestigious
and dynamic science and technology park, where research and technology-based
collaborative projects between technology and the academe thrive,….” The development of the
subject land is clearly for an educational purpose.