VAT Ruling No 065-97

October 30, 1997 VAT RULING NO. 065-97 Sec. 100; 000; 065-97 Carosal Development Corporation 1818 M. del Pilar St., Malate, Manila Attention: Ms . Tellie B . Mallari Gentlemen : This refers to your letter dated April 11, 1997 requesting for a ruling as to whether or not the lease of residential and business units located in Metro Manila by enterprises registered with the Philippine Export Zone Authority (PEZA) and Subic Bay Freeport Zone is entitled to VAT zero-rating. cdta In reply, please be informed that according to Section 100(2)(c) of the National Internal Revenue Code (NIRC), as amended, sales by a VAT-registered person shall be subject to zero-rating in cases of sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero-rate. In the case at bar, the special laws concerned are Republic Act Nos. 7916 and 7227 covering the Philippine Export Zone Authority (PEZA) and the Subic Bay Metropolitan Authority (SBMA), respectively, wherein enterprises duly registered therein are entitled to the preferential tax rate of five per cent to the exclusion of all other national or local taxes. In the instant case, the real property under lease is located outside of the PEZA and SBMA Zones. Accordingly, the aforementioned laws granting preferential tax treatment find no application. In view of the foregoing, your request for VAT zero-rating on the lease by PEZA and SBMA registered enterprises with respect to real estate properties outside the above mentioned Zones is hereby denied for lack of legal basis. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue