Vicente I. Dela Cruz, Jr.

August 1, 2008 BIR RULING [DA-(VAT-016) 103-08] R.A. 9337, 57 (B); RR 2-98; 196, E.O. 226; BIR Ruling Nos. DA-481-2005; DA-090-08; VAT Ruling No. 051-2002 Vicente I. Dela Cruz, Jr. Certified Public Accountant 308 SEDCCO Bldg., Rada Cor. Legaspi Sts. Legaspi Village, Makati City S i r : This refers to your undated letter requesting on behalf of your client, Lynville Realty and Development Corporation (Lynville for brevity) for a ruling on the value-added tax (VAT) exemption, as well as the tax consequence of its Income Tax Holiday (ITH) under Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987". cCEAHT Documents submitted show that Lynville is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200508265. It is also registered with the Board of Investments (BOI) as a "New Developer of Mass Housing Project" on a non-pioneer status under Certificate of Registration No. 2007-116 dated July 5, 2007. It is the developer of two hundred fifty three (253) housing units known as "Lynville Homes" located in Sta. Cruz, Laguna and is registered with the Housing and Land Use Regulatory Board. (HLURB) under Certificate of Registration No. 16030 (R4A-06-11) issued on November 21, 2006. Pursuant to the Specific Terms and Conditions of its Certificate of Registration with BOI, Lynville is entitled to an ITH for a period of four (4) years from July 2007 or from the actual start of commercial operation/selling, whichever is earlier but in no case earlier than its date of registration. In reply thereto, please be informed that Sec. 109 (w), now 109 (P) of the Tax Code of 1997, as amended by Republic Act (R.A.) No. 9337, and as implemented by Sec. 2 (w) of Revenue Regulations (RR) No. 1-2005, now Section 4.109-1 (B) (p) of RR 16-2005, provides that 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 properties utilized for low-cost and socialized housing as defined by R.A. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, wherein the price ceiling per unit is P225,000 or as may from time to time determined by the Housing and Urban Development Coordinating Council (HUDCC) and now pursuant to HUDCC Memorandum Circular No. 03, Series of 2005 in the amount of P300,000 and below shall be exempt from VAT. Likewise, the sale of residential lots valued at One Million Five Hundred Thousand Pesos (P1,500,000) and below, or house and lot and other residential dwellings valued at Two Million Five Hundred Thousand Pesos (P2,500,000) and below, where the instrument of sale or disposition was executed on or after November 1, 2005 are not subject to VAT. A careful scrutiny of the above-cited sections disclosed that the sale of properties to be utilized for low-cost or socialized housing under R.A. 7279 and sale of residential lots valued at P1,500,000 and below, or house and lot and other residential dwellings in the amount of P2,500,000 shall be exempt from VAT. Since the properties to be sold by Lynville are indeed for socialized housing as certified to by the HLURB, and in the amount below P2,500,000, this Office opines that the sale of the said properties is exempt from VAT under Sec. 109 (w), now 109 (P), of the Tax Code of 1997, as amended by R.A. 9337 and as implemented by Sec. 2 (w) of RR 1-2005, now Sec. 4.109-1 (B) (p) of RR 16-2005. Corollary thereto, under Sec. 2.57.5 (B) (2) of RR No. 2-98, as amended, implementing Section 57 (B) of the Tax Code of 1997, as amended, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by R.A. 7916 and the Omnibus Investments Code of 1987. (BIR Ruling No. DA-072-98 dated March 11, 1998) SaTAED Accordingly, since Lynville is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of 4 years reckoned from July 2007 or actual start of commercial operations or selling, whichever is earlier, but in no case earlier than the date of registration, this Office is of the opinion as it hereby holds, that Lynville is exempt from the payment of the creditable withholding tax imposed under RR No. 2-98, as amended, on income payments received by it from its registered project (Lynville Homes Sta. Cruz, Laguna) during the afore-mentioned period with respect to its registered activity, subject however to the condition that both the BOI General and Specific Terms and Conditions for the Grant of ITH are met during the said period. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service