Whether Commissions Earned by Individual Agents on their Sale of Low-Cost Housing Projects are Subject to VAT

June 9, 1995 BIR RULING NO. 084-95 50 (b) 000-00 084-95 Mr. Johnny M. Miclat 16 A-3 Ma. Hogo St., Project 8 1109 Quezon City S i r : This refers to your letter dated November 9, 1994 in effect, requesting for a ruling on whether commissions earned by individual agents on their sale of low-cost housing projects are subject to VAT. Gleaned from your letter, you are an agent of a company engaged in the sale of real property; and that the commissions which you receive on your sale of lots are being subjected to the withholding of 10% creditable value-added tax by the realty company. In reply, please be informed that commissions on the sale of real property earned by individual agents who are not employees of a real estates company are subject to the value-added tax imposed under Section 102 of the Tax Code, as amended by E.O. No. 273, if such commissions exceed P299,000.00 during any twelve month period. On the other hand, commissions received by real estate agents not exceeding P200,000.00 are subject to the 2% tax prescribed in Section 112 of the same Code. (VAT Ruling No. 020-91, dated May 22, 1991) Please be informed also that the Expanded Withholding Tax Law under P.D. No. 1351, as implemented by Revenue Regulations No. 13-70, as amended by Revenue Regulations No. 6-05 and as further amended by Revenue Regulations No. 12-94, does not allow us withholding of VAT since said law covers only the withholding of tax by certain persons upon certain classes of income payments listed therein. Under Section 1(g) of said Revenue Regulations No. 6-85, as amended, it is clear that real estate agents are subject to 5% creditable expanded withholding tax on the gross amount or commissions received by them. However, they are not subject to the withholding of the 10% value-added tax on the commission from sales of realty like condominium units. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue