BIR Ruling [DA-148-06]

March 17, 2006 BIR RULING [DA-148-06] 109; S-20-003-2003; DA-481-2005 dtd 11/25/05 Northwoods Realty & Development Corporation Coral na Bato, San Rafael, Bulacan Attention: Engr. Gerardo V. Pancho President Gentlemen : This refers to your undated letter requesting a confirmatory ruling on the VAT-Exempt status of your sale of subdivision lots and house and lot, which have contract price that conforms to the economic threshold set in Revenue Regulations 16-2005, otherwise known as the consolidated value-added tax of 2005. It is represented that NORTHWOODS REALTY AND DEVELOPMENT CORP. (Northwoods for short) is primarily engaged in real estate business; that it is currently selling residential subdivision lots and residential house and lots, the selling prices of which conform to the threshold of One Million Five Hundred Thousand Pesos (P1,500,000.00) and Two Million Five Hundred Thousand. Pesos (P2,500,000.00), respectively, in pursuance of Revenue Regulations No. 16-2005; that you need this confirmatory ruling on the VAT-exempt status of your current sale of the above lots and house and lots and as well as future projects involving similar status as provided for under Section 4.109-1 (B) (p) (4) of Revenue Regulations No. 16-2005. In reply, please be informed that Section 4.109-1 (B) (p) (4) of Revenue Regulations No. 16-2005 provides, viz : "Sec. 4.109-1 VAT-Exempt Transactions. xxx xxx xxx (B) Exempt transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from VAT: xxx xxx xxx (p) The following sales of real properties are exempt from VAT, namely: xxx xxx xxx (4) Sale of residential lot valued at One Million Five Hundred Thousand Pesos (P1,500,000.00) and below, or house & lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos (P2,500,000.00) and below where the instrument of sale/transfer/disposition was executed on or after July 1, 2005; Provided, That not later than January 31, 2009 and every three (3) years thereafter, the amounts stated herein shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued nor later than March 31 of each year; If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value of the lots do not exceed P1,500,000.00. Adjacent residential lots, although covered by separate titles and/or separate tax declarations, when sold or disposed to one and the same buyer, whether covered by one or separate Deed of Conveyance, shall be presumed as a sale of one residential lot." Inasmuch as Northwoods is primarily engaged in real estate selling, majority of the contract price of which is below P1,500,000.00, the same falls within the VAT-exempt transactions provided for under Section 4.109-1 of RR 16-2005, implementing Section 109(w) of the Tax Code of 1997, as amended by RA 9337, provided that the sale of the residential lot is valued at One Million Five Hundred Thousand (P1,500,00.00) and below, and the sale of the house and lot and other residential dwellings is valued at Two Million Five Hundred Thousand (P2,500,000.00) and below, provided further that the sale of two or more adjacent residential lots, sold or disposed in favor of one buyer, do not exceed P1,500,000.00. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) PABLO M. BASTES, JR. OIC-Head Revenue Executive Assistant Legal Service