VAT Ruling No. 111-99

December 2, 1999 VAT RULING NO. 111-99 Sec. 105; 106-111-99 Ms. Marina Novenario-Cruz 10 Valerio Kalaw St. Tierra Bella Subdivision Culiat, Quezon City Dear Ms. Cruz : This refers to your letter dated November 10, 1999, requesting for clarification on whether or not you should pay VAT on the purchase of a subdivision lot of 116 square meters priced at P4,150 per square meter. It is represented that you bought a subdivision lot with an area of 116 square meters in 1997 from the Active Realty & Development Corporation for P4,150/square meters; that inasmuch as the total price is only P481,400.00, it is still below the VAT taxable mark of P500,000 set by the BIR; that the price per square meter became P4,565 only because 10 percent VAT amounting to P415 was added to the base price of P4,150.00 In reply, please be informed that under Sec. 4.103-1(B)(w)(3) of Revenue Regulations No. 7-95, as amended by Revenue Regulations No. 6-97, implementing Sec. 109(w) of the National Internal Revenue Code, as amended by R.A. 8241, sale of a residential lot may qualify for exemption from the ten percent (10%) VAT subject to the following conditions: "(3) Sale of real properties utilized for socialized housing as defined under R.A. No. 7279, wherein the price ceiling per unit is P150,000 or as may from time to time be determined by the HLURB and other related laws. "Socialized housing" refers to housing programs and projects covering houses and lots or homelots only undertaken by the Government or the private sector for the underprivileged and homeless citizens which shall include sites and services development, long-term financing, liberalized terms on interest payments, and such other benefits in accordance with the provisions of R.A. No. 7279, otherwise known as the "Urban Development and Housing Act of 1992." "Socialized housing" shall also refer to projects intended for the underprivileged and homeless wherein the housing package selling price is within the lowest interest rates under the Unified Home Lending Program (UHLP) or any equivalent housing program of the Government, the private sector or non-government organization." It appearing that the selling price of the aforementioned subdivision lot amounted to P481,400.00, hence, outside of the P150,000.00 threshold, it follows that the seller (Active Realty & Development Corporation) is subject to the 10% VAT pursuant to Secs. 105 and 106 of the said Code. Accordingly, the seller shall pass on to you the 10% VAT pursuant to Sec. 105 of the said Code. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group