BIR Ruling [DA-038-96]

January 24, 1996 BIR RULING [DA-038-96] Mrs. Lorina P. Manalon 2/F 108 Paseo de Roxas corner Legaspi St., Legaspi Village Makati City M a d a m : This refers to your letter dated October 20, 1995 requesting for a ruling on whether commissions earned by your husband as an agent of real estate are subject to value-added tax. It is represented that your husband is a part time sales agent of a real estate broker; and that the commissions which he received on his sale of lots were being subjected to the withholding of 10% creditable value-added tax by the real estate broker. In reply, please be informed that commissions on the sale of real property earned by your husband as a part time employee of a real estate broker are subject to the value-added tax imposed under Section 102 of the Tax Code, as amended by E.O. No. 273, if such commissions exceed P200,000.00 during any twelve-month period. On the other hand, commissions received by real estate agent not exceeding P200,000.00 are subject to the 2% tax prescribed in Section 112 of the same Code. (VAT Ruling No. 028-91 dated May 22, 1991) Please be informed also that the expanded withholding tax law under P.D. No. 1352, as implemented by Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-85 and as further amended by Revenue Regulations No. 12-94, does not allow the withholding of value-added tax since said law covers only the withholding of tax by certain persons upon certain classes of income payments listed therein. Under Section 1(g) of said Revenue Regulations No. 6-85, as amended, it is clear that real estate agents are subject to 5% creditable expanded withholding tax on the gross amount of commissions received by them. However, they are not subject to the withholding of the 10% value-added tax on the commission from sales of realty like condominium units. (BIR Ruling No. 084-95 dated June 9, 1995) aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)