VAT Ruling No. 036-98

November 17, 1998 VAT RULING NO. 036-98 Sec. 106-000-00-036-98 Ms. Estrella A. Severino 21 Vicente Avenue, North Susana Old Balara, Diliman Quezon City M a d a m : This refers to your letters received last August 10 and 28, 1998 requesting for a clarification on the application of the expanded value-added tax on the amortization payments on your lot purchased in 1993. It is represented that you purchased a 160-square meter lot located in Dasmarias, Cavite from the FAMA Realty Inc. on August, 1993; that the contract price was P272,000.00 with monthly amortizations of P5,591.78; that by the end of 1993 the total amounts paid (inclusive of downpayment, applied commission, 7% discount upon full downpayments, and three months amortizations) amounted to P71,272.65 or 26.20% of the said contract price of P272,000.00. You now request for a ruling confirming your opinion that your subsequent amortization payments for the said lot are not subject to the value-added tax. dctai In reply, please be informed that Revenue Regulations No. 7-95, particularly Section 4.100-1, which implements Section 106 of the Tax Code, as amended by Republic Act No. 8424, provides that in the case of sale of real properties on a deferred payment basis, not on installment plan before January 1, 1996, the subsequent payments of the balance of the gross selling price on or after January 1, 1996 shall no longer be subject to VAT considering that the transaction is treated as cash. Sale of real property by a real estate dealer on a deferred payment basis, not on installment plan, means sale of real property, the initial payments of which in the year of the sale exceed twenty-five percent (25%) of the gross selling price. Since it has been satisfactorily proven through your payment records with FAMA Realty Inc. that your initial payments in 1993 amounted to P71,272.65 or 26.20% of the contract price of P272,000.00, the transaction is treated as being on a cash basis and thus the subsequent amortizations are not subject to value-added tax. LLjur In view of the foregoing, your opinion that the subsequent amortizations on your lot is not subject to value-added tax is hereby confirmed. This ruling is based on the facts as represented. If it is subsequently discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group