VAT Ruling No. 062-97

October 14, 1997 VAT RULING NO. 062-97 Sec. 103 (w); 000; 062-97 Multi-Addweal Corporation 148 Amorsolo Street 6th Floor Pilar Building, Legaspi Village, Makati City Attention: Mr . Allan B . Dy Finance & Administrative Manager Gentlemen : This refers to your letter dated February 17, 1997, requesting clarification of Section 103 (w) of the Tax Code, as amended by R.A. 7716, as further amended by R.A. 8241, concerning the exemption from VAT on real estate transactions where the value of the property sold id P1,000,000.00 and below. More particularly, you are requesting for a ruling on the following: cdtech "1. On those real estate transactions entered into 1995 (and prior years) where the Selling Price were One Million Pesos (P1,000,000.00) and below and total payments made up to December 31, 1995 did not exceed 25% of the Selling Price, hence, considered sale on the "installment basis"; and "2. Those real estate transactions entered into in 1996 where the Selling Price were One Million Pesos (P1,000,000.00) and below, regardless of amount paid." In reply, please be informed that pursuant to Section 4.100-1 of Revenue Regulations No. 7-95 implementing R.A. No. 7716, in case of sale of real properties on installment plan, the real estate dealer shall be subject to VAT on the installment payments, including interest and penalties, actually received and/or constructively received on or after January 1, 1996. Accordingly, the sale of real property held primarily for sale to customers whose "initial payments" in the year of sale (1995) did not exceed 25% of the total contract price (P1,000,000.00) is still covered by R.A. 7716. Therefore, subsequent payments made after January 1, 1996 shall be subject to VAT. The reason for this is that R.A. 8241, which amended R.A. 7716 and other pertinent provisions of the Tax Code, took effect only on January 1, 1997; hence, the provisions exempting sales of real property where the selling price is valued at P1,000,000.00 and below can not be made to apply to past transactions. For the same reason, the sale, barter or exchange of real property held primarily for sale to customers or for lease in the ordinary course of trade or business made in 1996 shall be subject to VAT even if the selling price is P1,000,000.00 and below. LLjur Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue