BIR amends tax in sale, lease of real properties

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Friday, November 4, 2011


“THE sale of real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business of the seller shall be subject to the value-added tax (VAT).”

Section 2 of Bureau of Internal Revenue (BIR) Revenue Regulations (RR) 16-2011, which further amended RR 16-2005 or the Consolidated VAT Regulations of 2005, states that “the sale of residential lot with gross selling price exceeding P1,919,500 and residential house and lot or other residential dwellings with gross selling price exceeding P3,199,200, where the instrument of sale (deed of absolute sale, deed of conditional sale or otherwise) is executed on or after November 1, 2005, shall be subject to a 10 percent output VAT, and starting February 1, 2006, to 12 percent output VAT.”

If two or more adjacent residential lots are sold or disposed in favor of one buyer to use the lots as one residential lot, the sale shall be exempt from VAT “only if the aggregate value of the lots do not exceed P1,919,500,” the BIR ruled.

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It explained that adjacent residential lots, although covered by separate titles and/or separate tax declarations, when sold or disposed to one and the same buyer, whether covered by one or separate deed of conveyance, shall be presumed as a sale of one residential lot.

Meanwhile, lease of residential units where the monthly rental per unit exceeds P12,800 but the aggregate of such rentals of the lessor during the year do not exceed P1,919,500 shall be exempt from VAT but shall be subjected to the 3 percentage tax, the new policy stressed.

In cases where a lessor has several residential units for lease, with some not exceeding P12,800 while others are leased out for more than P12,800 per unit, “the gross receipts from rentals not exceeding P12,800 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts.”

But the gross receipts from rentals exceeding P12,800 per month per unit shall be subject to VAT “if the aggregate annual gross receipts from said units only (not including the gross receipts from units leased for not more than P12,800) exceeds P1,919,500.00. Otherwise, the gross receipts will be subject to the 3 percent tax imposed under Section 116 of the Tax Code.”

BIR said the term 'residential units' shall refer to apartments and houses and lots used for residential purposes, and buildings or parts or units thereof used solely as dwelling places like dormitories, rooms and bed spaces except motels, motel rooms, hotels, hotel rooms, lodging houses, inns and pension houses.

The term 'unit' shall mean an apartment unit in the case of apartments, house in the case of residential houses; per person in the case of dormitories, boarding houses and bed spaces; and per room in case of rooms for rent.

RR 16-2011, which increases the threshold amounts for sale of residential lot, sale of house and lot, lease of residential unit and sale or lease of goods or properties or performance of services as per Section 109 of the Tax Code of 1997, as amended, shall take effect starting January 1, 2012. (CGC)

Published in the Sun.Star Bacolod newspaper on November 04, 2011.

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