VAT Ruling No. 045-97

July 11, 1997 VAT RULING NO. 045-97 Sec. 50 (b)-000-045-97 F.G. Ampil & Co. P.O. Box 80617, Davao City Attention: Mr . Froilan G . Ampil Gentlemen : This refers to your letter dated March 22, 1996 requesting for clarification regarding the obligation of a withholding tax agent relative to the commission paid to its freelance sales agents; as to real estate lessors, whether the taxpayer can use the cost of the construction as part of the input tax and if so, how the same can be deducted; and if the real estate leasing is an old business, whether he can deduct the book value of the assets as part of the input tax. cdta In reply to the first query, please be informed that income payments made to freelance sales agents are subject to 1% expanded withholding tax as a "commercial broker" pursuant to paragraph 1 (g) of Revenue Regulations 6-85 as amended, implementing Section 50 (b) of the Tax Code, as amended. As to the second and third questions, provided that the real estate lessor is VAT registered, purchases of construction materials from VAT registered supplies properly invoiced in accordance with existing regulations shall generate input taxes to the extent of 1/11 of the invoice price, the same being creditable against output tax liabilities at the time they are incurred. Moreover, the presumptive input tax deductible against output tax in the amount of 8% of only the cost of goods, materials, and supplies as of December 31, 1995 is available to the real estate lessors, provided the inventory listing thereof has been submitted on or before January 31, 1996 to the Revenue District Office having jurisdiction over the taxpayer-claimant. cdti Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue