Atty. Marilyn O. Ngo

July 26, 2007 BIR RULING [DA-412-07] DA 144-06 Atty. Marilyn O. Ngo 1654 A. Maceda Street Sampaloc, Manila M a d a m : This refers to your letter dated June 26, 2007 stating that your client, Loreto Properties, Inc., is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A200111500 dated August 8, 2001; that it is primarily engaged in the business of owning, using, improving, developing, subdividing, selling, exchanging, leasing and holding for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures; that it is a VAT-registered entity with Tax Identification No. (TIN) 213-050-156-000; and that the company is leasing residential apartment units with a monthly rent ranging from P8,500.00 to P9,500.00 only depending on the area involved. Based on the foregoing representations, you now request for an opinion that your lease of residential apartments with monthly rental ranging from P8,500.00 to P9,500.00 is exempt from value-added tax (VAT) pursuant to Section 4.109-1 (B) (1) (q) of Revenue Regulations No. 16-2005, implementing Republic Act (R.A.) No. 9337. In reply thereto, please be informed that Section 4.109-1 (B) (1) (q) of Revenue Regulations No. 16-2005 provides that "(q) Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of the aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO." shall be exempt from VAT. In stressing the rationale of the above-cited provision, this Office has elucidated the matter in BIR Ruling No. DA473-03 dated December 10, 2003 , as follows: ". . . you are exempt from VAT on your lease of residential units with monthly rental of P8,000.00 pursuant to Section 109(x) of the Tax Code of 1979 . . . ." Later in BIR Ruling No. DA144-06 dated March 17, 2006 , this Office likewise ruled that ". . . it can be gleaned that DBI's gross receipts from its rentals not exceeding P10,000.00 per month per unit shall be exempt from VAT regardless of its aggregate annual gross receipts. Its income derived from its dormitory operations exceeding P10,000.00 per month per unit but not exceeding P1,500,000.00 during the year shall be exempt from VAT but subject to the 3% percentage tax." SUCH BEING THE CASE, this Office holds that your client's lease of residential apartments with monthly rentals ranging from P8,500.00 to P9,500.00 shall be exempt from VAT pursuant to Section 4.109 (1) (B) (1) (q) of Revenue Regulations No. 16-2005, implementing R.A. No. 9337. 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. aATCDI Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service