BIR Ruling

April 1, 1970 Bengzon, Villegas & Zarraga Attorneys & Counsellors at Law 10th Floor, Building 1010 Mabini St., Ermita Manila Attention: Mr . Potenciano Villegas , Jr . Gentlemen : This refers to your letter dated March 11, 1970 requesting information as to whether your client, the San Carlos Management Corporation is a hotel operator or a real estate dealer under the following facts: "Our client actually operates its building as an apartment, the operating features of which follow: "1. Upon checking in, the tenant is required to sign a contract of lease (sample attached). He is charged on a monthly basis. The minimum lease period is one (1) month. Tenants occupy the apartment on a long term basis. "2. An additional amount of 10% of the monthly rental is charged whenever the tenant requests for extra services such as: a) janitorial services; b) maintenance services; c) messengerial services; d) food catering services; e) switchboard services; f) laundry service. The corresponding 3%, percentage tax on the said service charge has been paid for by the taxpayer corporation. "3. Complete furnishings such as kitchenette, kitchen utensils, furniture and home appliances are part of the accommodations given to the tenant in accordance with the custom of other apartment establishments. Aforesaid furnishings are likewise intended to encourage prospective tenants to lease the three types of rooms, namely, the family, couple and bachelor type with a monthly rental of P1,000.00, P850.00 and P700.00, respectively." In reply, I have the honor to inform you that under the foregoing circumstances and considering the terms and conditions of the contract of lease submitted, it is the opinion of this Office as it hereby holds that your client is a real estate dealer. As such real estate dealer, it is subject to the real estate dealer's graduated fixed annual tax imposed in Section 182(A)(3)(aa) of the Tax Code, as amended by Republic Act No. 6110. Moreover, the receipts issued by your client for rental payments is not subject to the documentary stamp tax. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue