BIR Ruling [DA-720-06]

December 15, 2006 BIR RULING [DA-720-06] 109; DA-481-2005 PTR Properties, Inc . No. 21, San Rafael Street Capitolyo, Pasig City Attention: Mr. Peter Y. Ty President Gentlemen : This refers to your letter dated October 16, 2006 requesting for a ruling relative to the VAT status of the sales of PTR Properties, Inc. (PTR). It is represented that PTR is primarily engaged in real estate selling valued at a minimum selling price per unit of Five Hundred Thousand Pesos (P500,000.00), that it is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. 200409568 on June 23, 2004 and with the Bureau of Internal Revenue with Taxpayers Identification No. 232-150-664-000; and that the primary purpose for which PTR is incorporated is "to engage, operate, hold or manage real estate business and to acquire by purchase, lease, develop and hold for investment or otherwise, real estate of all kinds, whether improved, managed, or otherwise deal in or dispose of buildings, houses, apartments, townhouses, condominiums, and other structures or whatever kind together with the appurtenances or other improvements found thereon." 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: SEACTH 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 PTR is primarily engaged in real estate selling, the unit 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, does 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service