BIR Ruling [DA-188-05]

April 21, 2005 BIR RULING [DA-188-05] Section 109 (w) BIR Ruling No. 5-99 & DA-351-04 Mulawin Real Estate Corporation 1221 A. Mabini St. Ermita, Manila Attention: Mr. Manuel Luis H. Lopez President Gentlemen : This refers to your letter dated April 11, 2005 requesting for a ruling that the sale by Mulawin Real Estate Corporation of a piece of agricultural land to the City of Saya, Negros Occidental, for the purpose of developing and constructing housing units for the City's employees pursuant to R.A. No. 7279, otherwise known as the Urban Development and Housing Act of 1992, is not subject to the 10% value-added tax (VAT). 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)" (cited in BIR Ruling No. DA-351-04 dated June 25, 2004). Such being the case, the sale of real properties 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 is exempt from VAT pursuant to Section 109(w) of the Tax Code of 1997. Since the sale by Mulawin Real Estate Corporation of a piece of agricultural land to the City of Saya, Negros Occidental will be utilized for low-cost and socialized housing pursuant to Republic Act No. 7279, for the City's employees, the aforesaid sale of real property is exempt from VAT. SHaIDE Accordingly, you are authorized to issue VAT-exempt official receipt for the above transaction. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group