BIR raises taxable real estate thresholds

MANILA, Philippines - Property owners and real estate developers can now enjoy added relief from value-added taxes (VAT) with the issuance by the Bureau of Internal Revenue (BIR) of Revenue Regulation 16-2011, which increases the threshold amounts for VAT-exempt transactions, as follows: (1) From P1.5 million to P1,915,500 for lots only; and (2) From P2.5 million to P3,199,200 for houses and lots.

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 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 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 the 12 percent VAT.

The proposal was subsequently endorsed by HUDCC chairman Vice President Jejomar C. Binay in a letter addressed to Bureau of Internal Revenue (BIR) Commissioner Kim S. Jacinto-Henares.

Pursuant to Section 4.109-1(B)(p)(4) of BIR Revenue Regulation 16-2005, the present value could be adjusted every three 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 percent, while housing and power CPI increased by 36 percent.

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 favorable 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 Jan. 1, 2012.