VAT Ruling No. 051-02

September 12, 2002 VAT RULING NO. 051-02 109 (W) 053-2001 E.S. Pasamba & Co. 4/F COC Building 1195 Ma. Orosa Street Ermita, Manila Attention: Atty. Eladio S. Pasamba Gentlemen : This refers to your letter dated December 20, 2001 requesting on behalf of your client, Progressive Homes, Inc. (Progressive), for a ruling as to whether or not the sale of its subdivision lots utilized for low-cost and socialized housing shall be exempt from value-added tax pursuant to Section 109(w) of the Tax Code of 1997. It is represented that Progressive is a domestic corporation duly registered with the Securities and Exchange Commission (SEC); that it is a Non-VAT registered entity bearing Registration No. NV-4Bs-36-003056; that it is the absolute and registered owner of Progressive Village which is located in Barangay Tagapo, Sta. Rosa, Laguna; that Progressive is registered and authorized by virtue of a License to Sell duly issued by the Housing and Land Use Regulatory Board (HLURB) to engage in the sale of realty; and that in support of your request, you have submitted the following documents: (a) License to Sell duly issued by the HLURB; (b) Non-VAT Registration; (c) Sketch plan; (d) Permit issued by the Office of the Mayor; (e) Certificate of Registration from the Department of Trade and Industry (DTI); (f) SEC Registration; (g) Articles of Incorporation; and (h) Contract to Sell. In reply thereto, please be informed that Section 109(w) of the Tax Code of 1997 provides that sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and Housing Act of 1992, and other related laws, house and lot and other residential dwellings valued at One Million pesos (P1,000,000.00) and below: . . . , shall be exempt from value-added tax. Corollarily, Section 20(d)(3) of RA No. 7279, as implemented by Revenue Regulations No. 9-93, as amended by Revenue Regulations No. 11-97, one of the incentives extended to the private sector participating in socialized housing is exemption from the payment of value-added tax for the project contractor concerned. This has been further clarified in Revenue Memorandum Circular No. 42-2001 that project contractor/developer/seller or owner of socialized housing project shall likewise be exempt from value-added tax. (II(B)(3), RMC No. 42-2001) A careful scrutiny of the above-cited sections disclosed that the sale of properties to be utilized for low-cost or socialized housing under RA No. 7279 shall be exempt from value-added tax. Since the properties to be sold by Progressive are indeed for socialized housing as certified to by the HLURB, this Office holds that the sale of the said properties are exempt from value-added tax under Section 109(w) of the Tax Code of 1997. (BIR VAT Ruling No. 053-2001 dated August 07, 2001) 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, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group