Property owners and developers can now enjoy added relief from value-added taxes (VAT) as the Bureau of Internal Revenue (BIR) issues Revenue Regulation No. 16-2011, which increases the amount of threshold amounts for sale of residential houses and/or lots, lease of residential units and performance of services, thereby amending certain provisions of the consolidated VAT regulations of 2005.
According to the issuance, a residential lot sold for Php1,1915,500 and below and a residential house and lot sold for Php3,199,200 and below shall be exempt from the 12% VAT.
Adjacent lots, even if covered by separate titles and tax declarations, can be counted together when sold to a singular buyer. Lots will be VAT-exempt as long as the aggregate value does not exceed the Php1,919,500 limit.
The lease of residential units – apartments, dormitories and the like – for a monthly rent of Php12,800 and below shall likewise be VAT-free. Residential units leased over Php12,800 monthly is also exempt, so long as the aggregate rental for the year does not exceed Php1,919,500.
Earlier this year, the Chamber of Real Estate & Builders’ Associations, Inc. (CREBA) submitted a recommendation to the Housing and Urban Development Coordinating Council (HUDCC) for the adjustment of price ceilings on real estate transactions that are exempted from the payment of VAT from Php1.5 Million to Php2.5 Million for lot only packages, and from Php2.5 to Php3.5 Million for house and lot packages.
Pursuant to Section 4.109-1(B)(p)(4) of BIR Revenue Regulation 16-2005, the present value could be adjusted every three (3) years using inflation or the Consumer Price Index (CPI) as basis.
According to CREBA, inflationary pressures and the continued price increases of construction materials, more specifically cement and steel, for the last six years since 2004 has been a huge burden to the real estate and housing industry. NSO and BSP data indicate that for the same period CPI for all items increased by as much as 50%, while housing and power CPI increased by 36%.
The proposal was subsequently endorsed by HUDCC chairman Vice President Jejomar C. Binay in a letter addressed to the Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares.
According to national president Charlie A. V. Gorayeb, the issuance presents a huge opportunity for more Filipino families to own a home and for the property industry to develop more units which will unleash the widely-recognized economic multiplier effects of housing as a catalyst for national growth and development.
“By creating an environment favourable and conducive to real estate business and investments, developers shall be able to build more units to address the nation’s growing housing requirements, generate more jobs for our people, and spur economic activities that will transcend at least 68 allied industries whose products and services are inevitably required for each house that is built. Add to this the enormous benefits to government and the people through revenues generated from taxes,” Gorayeb concluded.
The new regulations will take effect starting January 1, 2012. #
