BIR Ruling No. 285-14

July 9, 2014 BIR RULING NO. 285-14 Sec. 15 RA No. 9513; RR 16-2005 LYF Homes Development Corporation Unit M Gold Commercial Complex Anabu, Imus, Cavite Attention: Oliver Go Chua President Gentlemen : This is in reply to your letter dated July 29, 2013 requesting for a ruling exempting the sale by LYF HOMES DEVELOPMENT CORPORATION of 251 low-cost housing units in the project PRIME HOMES in Brgy. Bayan, Luma, Imus, Cavite from value-added tax (VAT), pursuant to Republic Act No. 7279 or, in the alternative, Section 109 (1) (P) of the National Internal Revenue Code of 1997, as amended (Tax Code), as reiterated in Revenue Regulations (RR) No. 16-2005 as amended by RR No. 16-2011 and RR No. 13-2012. Documents submitted show that LYF HOMES DEVELOPMENT CORPORATION, a real estate corporation registered with the Securities and Exchange Commission (SEC) under Registration No. CS201107370, with Taxpayers Identification Number 008-036-394 and duly registered with the Housing and Land Use Regulatory Board under Registration No. 23649, was issued by the latter License to Sell No. 25318 covering Two Hundred and Fifty-One (251) saleable lots/units in its project PRIME HOMES in Brgy. Bayan, Luma, Imus, Cavite. The maximum selling price of the house and lot is One Million Two Hundred Fifty Thousand Pesos (P1,250,000.00). Please be informed that Section 4.109.1 of RR No. 16-2005, which considered pertinent laws such as Republic Act No. 7279 otherwise known as the "Urban Development and Housing Act of 1992", Republic Act No. 7835 otherwise known as the "Comprehensive and Integrated Shelter Financing Act of 1994", and Republic Act No. 8763 otherwise known as the "Home Guaranty Corporation Act of 2000" among others, defines low-cost and socialized housing as follows: HaIESC SEC. 4.109-1. VAT-Exempt Transactions. . . . (B) Exempt transactions. xxx xxx xxx (p) The following sales of real properties are exempt from VAT, namely: xxx xxx xxx (2) Sale of real properties utilized for low-cost housing as defined by RA No. 7279, otherwise known as the "Urban Development and Housing Act of 1992" and other related laws, such as RA No. 7835 and RA No. 8763. "Low-cost housing" refers to housing projects intended for homeless low-income family beneficiaries, undertaken by the Government or private developers, which may either be a subdivision or a condominium registered and licensed by the Housing and Land Use Regulatory Board/Housing (HLURB) under BP Blg. 220, PD No. 957 or any other similar law, wherein the unit selling price is within the selling price ceiling per unit of P750,000.00 under RA No. 7279, otherwise known as the "Urban Development and Housing Act of 1992" and other laws, such as RA No. 7835 and RA No. 8763. (3) Sale of real properties utilized for socialized housing as defined under RA No. 7279, and other related laws, such as RA No. 7835 and RA No. 8763, wherein the price ceiling per unit is P225,000.00 or as may from time to time be determined by the HUDCC and the NEDA and other related laws. "Socialized housing" refers to housing programs and projects covering houses and lots or home lots only undertaken by the Government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long-term financing, liberated terms on interest payments, and such other benefits in accordance with the provisions of RA No. 7279, otherwise known as the "Urban Development and Housing Act of 1992" and RA No. 7835 and RA No. 8763. "Socialized housing" shall also refer to projects intended for the underprivileged and homeless wherein the housing package selling price is within the lowest interest rates under the Unified Home Lending Program (UHLP) or any equivalent housing program of the Government, the private sector or non-government organizations. cTIESa On the other hand, Section 109 (P) of the Tax Code, as clarified by the same provision in RR No. 16-2005 and further amended by RR No. 16-2011, exempts from VAT the sale of properties held primarily for sale to customers with a selling price not exceeding the thresholds of P1,919,500.00 on sale of residential lots, and P3,199,200.00 for sale of house and lot and other residential dwellings. While the selling price of the 251 housing units is pegged at P1,250,000.00 1 which does qualify under the classification of a low-cost housing, the selling price still meets the VAT-exempt thresholds of P3,199,200.00 for sale of house and lot and other residential dwellings under Section 109 (P) of the Tax Code. Thus, the sale of LYF HOMES DEVELOPMENT CORPORATION of the housing units at the PRIME HOMES Project, is exempt from VAT. Please note that under RR No. 16-2005 otherwise known as the "Consolidated VAT Regulations of 2005", as amended by RR No. 13-2012, the exemption under Section 109 (P) of the Tax Code is subject to certain conditions. Section 4.109-1 (B) (1) (p) of RR No. 16-2005 now provides: "SEC. 4.109-1. VAT-Exempt Transactions. (A) In general. "VAT-exempt transactions" refer to the sale of goods or properties and/or services and the use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any tax credit of VAT (input tax) on purchases. The person making the exempt sale of goods, properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT. (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: cISAHT (4) xxx xxx xxx If two or more adjacent residential lots, house and lots or other residential dwellings are sold or disposed in favor of one buyer from the same seller , for the purpose of utilizing the lots, house and lots or other residential dwellings as one residential area , the sale shall be exempt from VAT only if the aggregate value of the said properties do not exceed P1,919,500.00 for residential lots, and P3,199,200.00 for residential house and lots or other residential dwellings. Adjacent residential lots, house and lots or other residential dwellings 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/s of Conveyance, shall be presumed as a sale of one residential lot, house and lot or residential dwelling. This however, does not include the sale of parking lot which may or may not be included in the sale of condominium units. The sale of parking lots in a condominium is a separate and distinct transaction and is not covered by the rules on threshold amount not being a residential lot, house & lot or a residential dwelling, thus, should be subject to VAT regardless of amount of selling price. xxx xxx xxx" This ruling is 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. HIaSDc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. HLURB License to Sell No. 25318.