SC Ruling on First E-Bank (Part 2)

 Q: I already mentioned this to property management FOPM when the ruling was news when it came and asked if this applies automatically across the board.  They said that each condo corp shall apply for the tax exemption.  Is this true?

No — not in the way FOPM stated it, at least not if they meant that every condominium corporation must first obtain an individual BIR “tax exemption” before it can rely on First E-Bank.

I checked the actual Supreme Court decision, and this distinction is important.

What the Supreme Court actually decided

The Court did not grant First E-Bank a tax exemption.

It declared BIR RMC No. 65-2012 invalid insofar as it treated condominium association dues, membership fees and other assessments as taxable income, VATable receipts, and subject to withholding tax. The Court's reasoning was that these collections are not income from trade or business; they are assessments collected to administer, maintain and preserve the condominium for the owners.

In other words:

FOPM's characterization:

"Each condominium corporation must apply for tax exemption."

What First E-Bank actually says:

The BIR cannot impose those taxes on qualifying condominium association dues merely through RMC 65-2012 because the underlying law does not make those assessments taxable income.

Those are very different concepts.

The key distinction: "tax exemption" vs. "not taxable in the first place"

This is the point I think was missed in the advice you received in 2020.

There are two completely different situations:

    

A. Tax exemption

The law says:

This is normally taxable, but this particular taxpayer is exempt.

That commonly involves an exemption application/certificate and compliance with particular requirements.

B. Not a taxable receipt

The law says:

This particular receipt is not within the taxable income/transaction being imposed.

In that situation, you don't "apply for an exemption" from that tax.

And First E-Bank is fundamentally about B, not A.

The Supreme Court specifically said that Section 32 of the Tax Code does not include condominium association dues, membership fees and assessments as sources of gross income, and that RMC 65-2012 improperly expanded the taxable items beyond what the law provided.

The Court went even further and said:

"RMC No. 65-2012 is invalid"

for declaring those condominium collections subject to VAT, income tax and withholding tax.

So was FOPM completely wrong?

I'd phrase it more carefully:

If they meant "TEL3 needs a BIR certificate declaring it exempt before First E-Bank applies" — that appears incorrect.

First E-Bank is a Supreme Court ruling interpreting the Tax Code and RA 4726. It isn't an exemption certificate issued specifically to First E-Bank.

The decision is based on the legal nature of condominium corporations and their assessments, not on First E-Bank having successfully obtained some special exemption status.

The Court expressly discussed condominium corporations generally and held that their ordinary association dues and assessments are not taxable income, VATable receipts or subject to withholding tax merely because the corporation collects them from members and tenants.

But there's an important caveat

This does not mean that TEL3 can simply tell BIR:

"We're a condominium corporation, therefore everything we receive is tax-free."

That's not what the ruling says.

The protection concerns the nature of the receipt.

For example:

Ordinary condominium assessment

Unit owners → association dues → TEL3 → common-area administration/maintenance

This is squarely within the reasoning of First E-Bank.

But if TEL3 operates an actual revenue-generating activity, the analysis can change.

For example:

TEL3 → rents out commercial space → receives rental income

or potentially:

TEL3 → charges for a commercial service → receives payment

That is not automatically transformed into a non-taxable condominium assessment merely because TEL3 is a condominium corporation.

And this makes your 2020 conversation with FOPM particularly interesting

You asked them essentially the right question:

"Does this apply automatically across the board?"

Their response — "each condo corporation shall apply for the tax exemption" — suggests they may have been treating First E-Bank as though it were an individual tax-exemption ruling.

But the Supreme Court wasn't saying:

"First E-Bank Condominium Corporation is hereby granted an exemption."

It was saying that RMC 65-2012 itself was invalid because the BIR's interpretation conflicted with the Tax Code and the legal nature of condominium corporations.

That's a major distinction.

For TEL3, I'd now ask FOPM a very specific question

Rather than asking them generally whether TEL3 is "tax-exempt," I'd ask:

"What specific law, BIR regulation, revenue memorandum circular, or Supreme Court decision requires a condominium corporation to obtain an individual BIR tax-exemption certificate before it may apply the ruling in First E-Bank Tower Condominium Corp. v. BIR, G.R. Nos. 215801 & 218924, January 15, 2020?"

And then ask them to provide the BIR issuance supporting that position.

That's much harder to answer with a general statement like "that's the procedure."

Because the burden of the question changes:

You're no longer asking:

"Are we exempt?"

You're asking:

"What legal requirement says we must apply for an exemption?"

Those are two very different questions.

One thing I would investigate next

There is a potentially important post-2020 BIR development that we should check before drawing a final conclusion for TEL3 in 2026: whether the BIR subsequently issued a regulation, revenue memorandum circular, revenue memorandum order, or other administrative guidance requiring condominium corporations to secure a certificate/registration specifically to implement First E-Bank.

If no such post-2020 requirement exists, then FOPM's 2020 advice becomes considerably more questionable.

If you'd like, I can 

trace the BIR's post-First E-Bank treatment from 2020 through 2026 and determine exactly what TEL3 would have needed to do, if anything.

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