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VAT exemption ceiling for housing raised to P3.6M

Bureau of Internal Revenue (BIR) Commissioner Romeo D. Lumagui, Jr. issued Revenue Regulation No. 1-2024 raising the Value-Added Tax (VAT) exemption threshold for the sale of house and lot and other residential dwellings, from PHP 3.199 to PHP 3.6 Million effective 01 January 2024.

The regulation served to allay fears from a statement made by Finance Secretary Benjamin Diokno before the House Committee on Appropriations last August 2023 that the VAT was under review to make it more effective and high-yielding.

According to Lumagui, the increase is in accordance with the mandate in Section 109 (P) of the National Internal Revenue Code to adjust the exempted amount to its present value using the Consumer Price Index (CPI) published by the Philippine Statistics Authority.

“This timely increase in VAT exemption shows the government’s commitment to a just and service-oriented taxation in the Philippines,” Lumagui said.

Background

In 2020, due to clamor and intensive lobbying by CREBA, the VAT exemption threshold for housing was raised by Congress to P4.2 Million under Republic Act No. 11354 or the CREATE Act.

However, then President Rodrigo Duterte line-vetoed the increase, claiming that “this results in a tax exemption that is highly distortive and exacts a heavy price on the taxpaying community.”

The veto created wide-spread confusion that the threshold would revert to only PHP 2 Million as pegged under the TRAIN Law (RA 10963) of 2018.

The industry heaved a sigh of collective relief when the BIR – under RR 8-2021 – clarified that since the threshold already in effect prior to the law was already at P3,199,200.00 due to adjustments made using the 2010 consumer price index (CPI), fairness and equity dictated that the same be maintained.

Currently, the PSA uses 2018 as the base year in computing the CPI.

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