Installment Sale of Land by Marian Property Holdings, Company, Inc. (Marian Property) to Far Eastern University-Nicanor Reyes Medical Foundation Not Subject to Value Added Tax Since it is Not a Sale of Property in the Regular Course of Trade or Business

April 1, 1997 BIR RULING NO. 033-97 103 (s)-000-00 033-97 Sycip, Salazar, Hernandez & Gatmaitan 105 Paseo de Roxas, Makati City Attention: Atty . Ernesto S . Taino, Jr . & Atty . Caroline V . Henson Gentlemen : This refers to your letter dated April 18, 1996 requesting for a confirmation of your opinion that the installment sale of land by your client, Marian Property Holdings, Company, Inc. (Marian Property) to Far Eastern University-Nicanor Reyes Medical Foundation (FEU-NRMF) is not subject to the value added tax (VAT) since it is not a sale of property in the regular course of trade or business. It is represented that on March 14, 1996, FEU-NRMF, a non-stock, non-profit foundation, and Marian Property, a corporation composed of FEU-NRMF Institute of Medicine alumni, faculty members and friends, entered into a Memorandum of Agreement ("MOA") whereby Marian Property agreed to sell, and FEU-NRMF agreed to buy, on installment basis, 5,000 square meters of the former's property located at Fairview Park, Quezon City, for the price of P5,000.00 per square meter, or for a total consideration of P25,000,000.00; that the subject property is the only real estate owned by Marian Property; that the sale and purchase transaction involved in this case is an isolated one; and that Marian Property only consented to the sale because of its shared commitment with FEU-NRMF towards the success of FEU-NRMF Relocation Project at Fairview Park, Quezon city and not because its business consists of buying and selling real estate. In reply, please be informed that pursuant to Section 100 of the Tax Code, as amended by Republic Act No. 7716, sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller is subject to VAT. (Sec. 4.100-1, Revenue Regulations No. 7-95) While under Section 103(s) of the Tax Code, as amended, the sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business of the seller is exempt from VAT. (Sec. 4.103-1(B) (s) supra) Accordingly, since Marian Property Holdings Company, Inc. is not engaged in the business of selling real properties in the regular conduct of its trade or business and that the subject property is the only real estate owned by it, the installment sale of said land by Marian Property to FEU-NRMF is not subject to VAT. 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 considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue