VAT Ruling No. 059-97

September 22, 1997 VAT RULING NO. 059-97 Sec. 33-UNdtd. 6.6.78-UN dtd 11.17.72-059-97 Acebes, Del Carmen, Cordova & Aguilar Law Offices 3rd Floor 110 Legaspi Street Legaspi Village 1229 Makati City Attention: Atty . Ebenezer D . Cordova Gentlemen : This refers to your request for confirmation of your opinion that the sale of your client, TRINA MANAGEMENT AND DEVELOPMENT CORPORATION , of a parcel of land which is a capital asset is not subject to value-added tax but only to corporate tax. cdtech Records show that Trina Management & Development Corporation is engaged in the business of acting as managers or managing agents of persons, firms, associations, corporations, partnerships and other entities; that it is not engaged in the buy and sell of real property or registered with any government office or entity which regulates and supervises natural or juridical persons engaged in the buy and sell of real property; that if owns a parcel of land covered by TCT No. 61141 registered with the Registry of Deeds for Quezon City; that the property was acquired in 1990 as a raw land and from the time of its acquisition, no improvement was introduced, the same being partially occupied by squatters, and no income was derived therefrom; that the realty is purely a raw land as shown by its 1996 Tax Declaration. In reply, please be informed that the term "capital assets" as negatively defined in Section 33 of the Tax Code, as amended, means properly held by the taxpayer (whether or not connected with his trade or business), but does not include (1) stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or (2) property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or (3) property used in the trade or business, of a character which is subject to the allowance for depreciation provided in subsection (1) of Section 29, or (4) real property used in the trade or business of the taxpayer. Such being the case, the aforementioned parcel of land of your client is a capital asset because the property does not fall under any of the exceptions stated in Section 33 of the Tax Code as amended. Furthermore, it has been held that a property consisting of land and improvements which the owner had abandoned with no foreseeable use thereof is treated as capital asset. [(34 Am. Jur. 2d, p. 118, Stewart Title Guarantee Co., 20 TC 630; Providence Coal Mining Co. vs. Glenn, 39 AFTR, 219) (BIR Ruling dated November 17, 1972 and June 6, 1978)] Accordingly, we confirm your opinion that upon its sale, said property is not subject to VAT but shall be subject to 7.5 % creditable withholding tax pursuant to Revenue Regulations No. 12-94 amending Revenue Regulations No. 6-85. 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, SIXTO S. ESQUIVIAS IV OIC, Asst. Commissioner Legal Service