6. RMC No. 35-2012 on taxability of clubs operated exclusively for pleasure, recreation and other non-profit purposes.

Income Tax
Clubs which are organized and operated exclusively for pleasure, recreation, and other non-profit purposes are subject to income tax
under the National Internal Revenue Code of 1997, as amended. According to the doctrine of casus omissus pro omisso habendus est, a person
object or thing omitted from an enumeration must be held to have been omitted intentionally. The provision in the National Internal Revenue
Code of 1977 which granted income tax exemption to such recreational clubs was omitted in the current list of tax exempt corporations under
National Internal Revenue Code of 1997, as amended. Hence, the income of recreational clubs from whatever source, including but not limited to
membership fees, assessment dues, rental income, and service fees are subject to income tax.

THE BUREAU of Internal Revenue (BIR) has clarified in separate circulars issued
earlier this month that recreational clubs and construction receipts are not
exempted from taxes.
"Clubs organized and operated exclusively for pleasure, recreation and other non-profit purposes" are
subject to income and value-added taxes (VAT), read Revenue Memorandum Circular No. 35-2012,
dated Aug. 6.

While recreational clubs were exempted from taxes under the 1977 National Internal Revenue Code
(NIRC), this provision was deleted in the 1997 version, the circular explained. "…[A] person or thing
omitted from an enumeration must be held to have been omitted intentionally. The provision in the
NIRC of 1977…was omitted in the current list of tax-exempt corporations under the NIRC of 1997, as
amended," it said.

Thus, income of recreational clubs from membership fees, assessment dues, rental income, service
fees and the like are subject to income tax, the circular said.

They are likewise subject to VAT for the sale of goods and services, even as a non-stock, non-profit
organization. The BIR cited the NIRC of 1997, which states that the VAT is imposed on all transactions
"in the course of trade or business." This, the bureau said, refers to the "regular conduct or pursuit of
a commercial or an economic activity…by an person, regardless of whether or not the person
engaged therein is a nonstock, non-profit private organization."

The VAT is also imposed regardless of whether the goods and services are rendered exclusively to
affiliates on a "reimbursement-on-cost basis only," it added, noting a Supreme Court decision penned
in March 2000. "As long as the entity provides service for a fee, renumeration or consideration, then
the service rendered is subject to VAT," the decision read.

BIR Commissioner Kim S. Jacinto-Henares said in an interview that all rulings contrary to RMC 35-
2012 "should no longer be followed." "We are just aligning ourselves with the letter of the law."

Meanwhile, RMC 36-2012, issued last Aug. 3, clarified that construction receipts are subject to
documentary stamp tax (DST).

"Only instruments, documents and papers of transactions expressly enumerated in [the NIRC of 1997]
are exempt from the DST. Consequently, certificates and other necessary documents issued by the
Construction Industry Authority of the Philippines… are not among those mentioned…" the circular
read, citing certificates of registration and renewal or registration of overseas contractors;
contractor’s license; certificate of whether a contractor is licensed; certified true copies of license
certificates; certified true copies of documents; certificate of accreditation of arbitrators; and case
documents.