BIR Ruling [DA-188-04]

April 6, 2004 BIR RULING [DA-188-04] Section 109 (w) BIR Ruling No. 5-99 CGE South Hills Ventures, Inc. 12/F, Equitable Bank Tower 8751 Paseo de Roxas Makati City Attention: Ms. Arlene C. Keh President Gentlemen : This refers to your letter dated March 3, 2004 requesting for a confirmation of your opinion that the sale of housing units by CGE South Hills Ventures, Inc. valued at one million pesos (PhP1,000,000.00) and below is not subject to the 10% value-added tax (VAT). It is represented that CGE South Hills Ventures, Inc. (CGE) is a corporation existing and organized under the laws of the Republic of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200401180 issued on January 27, 2004; that its principal office is situated at Lot 39, Block 3, St. Jude Subdivision, Bacoor, Cavite; that the primary purpose for which it was organized is to acquire by purchase, lease, donation, or otherwise and to own, use, improve, develop, subdivide, sell, mortgage, exchange, lease, develop and hold for investment or otherwise, real estate of all kinds, whether improve, manage or otherwise, dispose of buildings, houses, apartments, and other structures or whatever kind, together with their appurtenances; that as its initial venture in real estate development business, CGE will produce and sell built-up housing units to the lot owners in St. Jude Subdivision, Bacoor, Cavite at a price of below one million pesos (PhP1,000,000.00); that the aforesaid housing units will come in various models and specification and will be assembled by CGE on buyer's site, and sold as built-up units; and that in no case will the component parts of the housing units be sold by piece to the would be buyer/customer. In reply, please be informed that Section 109(w) of the Tax Code of 1997 provides, viz : "SEC. 109. Exempt Transactions . The following shall be exempt from the value-added tax: xxx xxx xxx (w) Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, house and lot and other residential dwellings valued at One million pesos (P1,000,000) and below: Provided, That not later than January 31st of the calendar year subsequent to the effectivity of this Act and each calendar year thereafter, the amount of One million pesos (P1,000,000) shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO)" In view of the foregoing, the sale of housing units by CGE South Hills Ventures, Inc. valued at one million pesos (PhP1,000,000.00) and below and which falls under the term "other residential dwellings" is exempt from VAT. 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 as null and void. DCIAST Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group