Threshold for VAT exemptions to be increased effective January 1, 2012

Last Updated on March 7, 2017 by Atty. Cherry Vi Saldua Castillo | Filed under: - 58 Comments

The BIR has released Revenue Regulations (RR) No. 16-2011 (posted at the BIR Website) dated October 27, 2011 which increased the threshold amounts for VAT.

This affects residential lots and house and lots and the lease of residential units, as well as the threshold amount for the sale of goods and services subject to VAT.

The effectivity of the increased threshold amounts is on January 1, 2012. This adjustment is pursuant to the changes in the Consumer Price Index (CPI) released by the National Statistics Office (NSO).

Below is the summary of the changes:

Section in the Tax CodeType of incomeUpdated threshold for VAT exemption effective January 1, 2012Old threshold for VAT exemptionDifferenceAffected price ranges
109 (P)Sale of residential lot1,919,5001,500,000419,5001,500,000.01-1,919,500.00
109 (P)Sale of residential house and lot3,199,2002,500,000699,2002,500,000.01-3,199,200.00
109 (Q)Lease of residential units12,80010,0002,80010,000.01-12,800.00
109 (V)Gross annual receipts/sales on the sale or lease of goods or properties or performance of services other than those mentioned in Sec. 1091,919,5001,500,000419,5001,500,000.01-1,919,500

Thus, effective January 1, 2012, the sale of a residential lot which is PHP1,919,500.00 and below, and the sale of a residential house and lot which is PHP3,199,200.00 and below are exempt from VAT.

The lease of a residential units which is PHP12,800 and below shall also be exempt from VAT effective January 1, 2012.

If a person’s gross annual receipts/sales on the sale or lease of goods or properties or performance of services other than those mentioned in Sec. 109 of the Tax Code does not exceed PHP1,919,500.00, he shall be subject to 3% percentage tax instead of the 12% VAT.

What does this mean to the ordinary person?

Effectively, with the thresholds for VAT-exempt sales now being higher, people can purchase real estate at a price lower by 12% for the affected price ranges.

For example, a residential house and lot which is sold for PHP2,600,000.00 now will have a 12% VAT of PHP312,000.00. But when the same property is sold for the same price, PHP2,600,000.00 on January 1, 2012, it will not be subject to the 12% VAT, so the effective savings is PHP312,000.00.

I think though that this may have the effect of pushing sales to January 1, 2012 onwards for those properties within the affected price ranges.  For the sellers, their selling prices will be effectively lower, thus their products will become more affordable for buyers.

I would like to thank my good friend, Atty. Bobby Lock, Partner of Santiago & Vidad Law Office, who gave me the heads up on this new development. For your real estate-related legal needs, you may reach him at 0917-891-9125 or e-mail him at bishopblue(at)gmail(dot)com.


To our success and financial freedom!

Cherry Vi M. Saldua-Castillo

Real Estate Broker, Lawyer, and CPA
PRC Real Estate Broker License No. 3187
PRC CPA License No. 0102054
Roll of Attorneys No. 55239

Text by Jay Castillo and Cherry Castillo. Copyright © 2011 All rights reserved.

Full disclosure: Nothing to disclose.

Photo Credit: Tax cuts by upside of inertia, on Flickr


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