VAT Ruling No. 030-96

October 30, 1996 VAT RULING NO. 030-96 Sec. 102-000-030 Ms. Ernestina Bernabe-Carbajal 563 Protacio Street Pasay City M a d a m : This has reference to your letter dated May 2, 1996 requesting for a clarification on whether your rental income is subject to the Value Added Tax (VAT). LLjur It is represented that you are a VAT-registered real estate lessor operating under the business name, Rosalind's Apartments; that your lease contracts stipulate that any VAT should be shouldered by your tenants; that despite this, your tenants refuse to pay an additional 10% based on their assertions that you are not subject to the VAT since your rental rate per month is only between P5,000.00 to P10,000.00; and that, there is a new law exempting rentals below P10,000.00 a month from the VAT. In connection therewith, please be informed that pursuant to Republic Act No. 7716 and Revenue Regulations No. 7-95, leasing of real property in the ordinary course of trade or business, whether for commercial or residential use, when the gross annual receipts exceed P500,000.00 and provided that, in the case of residential use, the monthly rental exceeds P3,950.00/unit (as adjusted under Republic Act No. 7644, otherwise known as the Rent Control Law), is subject to VAT starting January 1, 1996. Moreover, let it be known that at even date, no new law has been passed amending R.A. No. 7716, more particularly exempting rentals below P10,000.00 a month from the coverage of the VAT. Based on the aforementioned provision, and your being registered as a VAT taxpayer, your rental income is subject to the 10% value added tax. cdlex Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue