BIR Ruling [DA-507-05]

December 16, 2005 BIR RULING [DA-507-05] 109; DA-481-2005 Excelsisland Incorporated 6/F First Life Center 174 Salcedo Street Legaspi Village, Makati City Attention: Ms. Ma. Charina S. Garcia EVP/COO and Mr. Jose P. Dalida Finance Officer Gentlemen : This refers to your letter dated November 16, 2005 requesting for a ruling relative to the VAT status of the sales of Excelsisland Incorporated (Excelsisland) It is represented that Excelsisland is primarily engaged in real estate selling; that Excelsisland is registered with the Securities and Exchange Commission under Registration No. OCN9R0000163641 dated September 20, 2005 and with Tax Identification No. 241-131-145-000; that Excelsisland business transactions involve sale of real properties valued at a minimum selling price per unit of Five Hundred Thousand Pesos (P500,000.00); and that the primary purpose for which Excelsisland is incorporated is "to own, use, improve, develop, subdivide, sell, exchange, lease and hold for investment or otherwise, real estate of all kinds, including buildings, houses, apartments and other structures, and to provide real estate related consulting, management, and marketing services to third party clients and to pursue other real estate and property investments." In reply, please be informed that Section 4.109-1(B)(p)(4) of Revenue Regulations No. 16-2005 provides, viz: AIHTEa "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 not 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 Excelsisland is primarily engaged in real estate selling, majority of the contract price of which is at minimum of P500,000.00, 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. (BIR Ruling No. DA-481-2005 dated November 25, 2005) aDcETC 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service