VAT Ruling No. 019-00

March 30, 2000 VAT RULING NO. 019-00 108 (B) (3) 019-97 L'hirondelle Holdings, Inc. 14 Arayat Street Mandaluyong City Attention: Mr . Ferdinand P . Austria Controller Gentlemen : This refers to your letter dated September 25, 1998 requesting for a ruling as to whether or not the lease of residential condominium unit to the Embassy of the Republic of Singapore is effectively zero-rated for VAT purposes. It is represented that L'Hirondelle Holdings, Inc. is the owner of a condominium unit designated as Unit 901-B of the Ritz Towers Condominium located at Ayala Avenue, Makati City; that on March 31, 1998, a Contract of Lease was entered into by and between L'Hirondelle Holdings, Inc. and the Embassy of the Republic of Singapore represented by its Second Secretary, Tan Siok Chye for a period of nine (9) months which commenced on April 1, 1998 until December 31, 1998 renewable for another period of nine (9) months; that the monthly rental of the leased premises shall be P132,000.00; and that L'Hirondelle Holdings, Inc. is a VAT-registered taxpayer with Certificate of Registration No. 96-041-006680. In reply, please be informed that in BIR VAT Ruling No. 019-97 dated March 5, 1997, this Office ruled that "xxx xxx xxx "In addition, the lease of residential properties by foreign embassies or their diplomatic personnel here in the Philippines may be effectively zero-rated provided that the lessor, who must be a VAT-registered person, applies and secures prior approval for effective zero-rating on their sale of rental services to the foreign diplomatic mission or its personnel whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero rate. In other words, although the said sale of rental services is a taxable transaction for VAT purposes, the same shall not result in any output tax on the part of the lessor and the input tax on his purchases of goods, properties or services related to such effectively zero-rated sale of services shall be available as tax credit or refund." (BIR Ruling No. 14-96 dated February 20, 1996) Such being the case, the lease of the above-mentioned residential condominium unit to the Embassy of the Republic of Singapore is effectively subject to zero-rate pursuant to Section 108(B)(3) of the Tax Code of 1997. Provided that L'Hirondelle Holdings, Inc. shall apply with the Revenue District Officer concerned having jurisdiction over its principal place of business for the effective zero-rating of its leased property pursuant to Revenue Regulations No. 7-95. Without an approved application for zero-rating, the transactions otherwise entitled to zero-rating shall be considered exempt. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group