Showing posts with label not primary held for sale. Show all posts
Showing posts with label not primary held for sale. Show all posts

Tuesday, December 10, 2013

Sale of Real Properties NOT Primary held for Sale to Customers shall NOT be Subject to VAT

Generally, sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business are VAT exempt transactions. If primary held for sale to customers or held for lease in the ordinary course of trade or business shall be subject to VAT.

With this, the real property sold is classified as Capital Asset  subject to 6% Capital Gains Tax based on the Gross Selling Price or Fair Market Value or Zonal Value of the Capital Asset sold whichever is higher. The Gross Selling Price is the total consideration or purchase price agreed and stipulated in the sale or exchange agreement. The Fair Market Value is computed and prepared by the local assessors and found at the Tax Declaration of the real property. The Zonal Value is prepared and established by the Bureau of Internal Revenue for each area or zone in the Philippines.

But, if such property is used in the trade or business of the seller, the sale of shall be subject to VAT as an incidental transaction to the seller's main business.

Reference: RR 16-2005 as amended; RR 4-2007; RR 17-2003 as amended