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Tuesday, September 05, 2006
5Tax notes: VAT on assignment of properties
Machineries and equipment utilized for the construction of water facilities assigned by a company engaged in real estate business as payment for their liabilities are not subject to value-added tax (VAT). (Bureau of Internal Revenue Ruling DA-231-2006 dated April 11, 2006)
Real properties are subject to VAT only when these are held primarily for sale to customers or held for lease in the course of trade or business. Since the machineries and equipment are not held primarily for sale or lease, their assignment shall not be subject to VAT. (Source: Punongbayan & Araullo)
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