Higher VAT-Exemption Thresholds Open New Opportunities for Real Estate
MANILA, Philippines - Starting Jan. 1 this year, real estate buyers can already enjoy added relief from value-added taxes (VAT) with the passage of BIR Revenue Regulation No. 16-2011, which effectively increases the threshold amounts for VAT-exempt transactions, as follows: (1) From P1.5 million to P1,915,500 for residential lots; and (2) From P2.5 million to P3,199,200 for house and lot packages or other residential dwellings.
Adjacent lots, even if covered by separate titles and tax declarations, can be counted together when sold to a singular buyer. This means that multiple lots sold or disposed in favor of one buyer for the purpose of utilizing them as one residential lot will be VAT-exempt for as long as the aggregate value of the sale does not exceed the P1,919,500 limit.
The lease of residential units for a monthly rent of P12,800 and below shall likewise be VAT-free. Residential units leased over P12,800 monthly is also exempt if the aggregate rental for the year does not exceed P1,919,500.
In Jan. 5, 2011, the Chamber of Real Estate & Builders Associations, Inc. (CREBA) submitted an appeal 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 the 12 percent VAT.
The proposal was subsequently endorsed by the Housing Czar Vice President Jejomar C. Binay to BIR Commissioner Kim S. Jacinto-Henares.
Pursuant to Section 4.109-1(B)(p)(4) of BIR Revenue Regulation 16-2005, the present values could be adjusted every three years using inflation or the prevailing Consumer Price Index (CPI) published by the National Statistics Office (NSO) as basis.
Between 2004 and 2010, the housing sector has significantly suffered the brunt of spiraling costs of construction materials, more specifically cement and steel. Developers have no other choice but to pass this cost on to the buyers, hence, the upsurge in the price of housing packages.
During the same period, NSO and Bangko Sentral ng Pilipinas (BSP) data indicate that CPI for all items increased by as much as 50 percent, while housing and power CPI increased by 36 percent.
CREBA is grateful for the passage of this landmark issuance which opens up new and bigger opportunities for Filipino families to own a home which, in effect, will push the property industry to develop more units thereby setting the economic multiplier effects of housing as a powerful catalyst for national growth and development. …