Krystal Homes

November 19, 2008 BIR RULING [DA-(VAT-041) 448-08] 109 (w); RR 16-2005; DA-481-2005; DA-066-2007 Krystal Homes Mac Arthur Hiway, Sindalan City of San Fernando, Pampanga Attention: Mr. Nelson Castro Gentlemen : This refers to your letter dated September 30, 2008, requesting in effect, for a ruling that the sale by Krystal Homes of houses and lots or lots only are exempt from value-added tax (VAT). It is represented that Krystal Homes is owned and operated by Neldys-Krys, a single proprietorship which is primarily engaged in the development and sale of residential houses and lots which are valued not exceeding P2,500,000.00 and residential lots priced below P1,500,000.00. In reply, please be informed that Section 4.109-1 (B) (p) (4) of Revenue Regulations (RR) No. 16-2005 provides, viz. : "SEC. 4.109-1. VAT Exempt Transactions. xxx xxx xxx (B) Exempt transactions. Subject to the provisions of Sec. 4.109-2 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 punished 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." In view of the fact that Krystal Homes is primarily engaged in the development and sale of real estate, the unit price of which does not exceed the amount of P2,500,000.00 for residential houses and lots and P1,500,000.00 for residential lots only, the same falls within the VAT-exempt transactions provided for under Sec. 4.109-1 of RR 16-2005, implementing Sec. 109 (w) of the Tax Code of 1997, as amended by Republic Act (R.A.) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service