VAT Ruling No. 041-02

July 22, 2002 VAT RULING NO. 041-02 Sec. 103 Sec. 4.103-1 (B) (w) (3) & (4) RR 6-97 Harmony Homes, Inc. Unit 24 El Rico Suites 1048 Metropolitan Avenue Makati City Attention: Mr. Rene K. Limcaoco, Corporate Secretary Gentlemen : This refers to your letter dated October 11, 2001 stating that "We are a registered Land Developer with "HOUSING AND LAND USE REGULATORY BOARD, and as such, we sell both house and lot and/or lot packages. xxx xxx xxx Based on the foregoing, you are inquiring "1. Whether house and lot packages sold below One Million (P1,000,000.00) are subject to VAT; or "2. Whether lot only packages below One Million (P1,000,000.00) are subject to VAT." In reply, please be informed that Section 103 (w), old National Internal Revenue Code, as amended by R.A. No. 7716, and as further amended by R.A. 8241 (now Section 109 (w), NIRC, as renumbered by R.A. No. 8424, and as implemented by Section 4.103-1 (B), Revenue Regulations No. 7-95, as amended by Revenue Regulations No. 6-97, provides: "(2) Sale of real properties utilized for low-cost housing under BP Blg. 220, PD No. 957 or RA No. 7279, otherwise known as the `Urban and Development Housing Act of 1992' and other related laws, wherein the price ceiling per unit is P375,000.00, or as may from time to time be determined by the Housing and Land Use Regulatory Board (HLURB) and other related laws; " `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 and Urban Development Coordinating Council (HLURB/HUDCC) 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 under RA No. 7279, otherwise known as the `Urban Development and Housing Act of 1992' or as determined from time to time by the HLURB/HUDCC. "(3) Sale of real properties utilized for socialized housing as defined under RA No. 7279, wherein the price ceiling per unit is P150,000 or as may from time to time be determined by the HLURB and other related laws. " `Socialized housing' refers to housing programs and projects covering houses and lots or homelots 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.' " `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. "(4) Sale by real estate dealers and/or lessors of house and lot and other residential dwellings valued at One Million Pesos (P1,000,000.00) and below . Provided, That not later than January 31, 1998 and each calendar year thereafter, the amount of One Million Pesos (P1,000,000.00) shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO);" Apparently, you are concerned with the above quoted provisions of Section 4.103-1 (B) (w) (4), Revenue Regulations No. 6-97, which, however, only covers "house and lot and other residential dwellings valued at One Million Pesos (P1,000,000.00) and below . . ." Accordingly, your sales of "lot only packages" are not embraced under this Sub-section of the said Regulations. However, if your sales of "lot only packages" are utilized for "socialized housing," the same shall be exempt from the VAT, pursuant to Section 4.103-1 (B) (w) (3) of the aforesaid Regulations, because this covers "houses and lots or home lots only." Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner