Tax notes: VAT on sale of nearby residential properties and parking lots

Monday, November 12, 2012
THE Bureau of Internal Revenue (BIR) has noticed that some sellers of real properties are documenting the sale to one buyer of adjacent residential lots, house and lots or other residential dwellings like condominium units, as sale of separate units in order to avoid payment of the value-added tax (VAT) by keeping them below the VAT threshold amount, even though such amounts are actually being combined and utilized as one residential unit.
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To deal with such practice, the BIR recently issued Revenue Regulations (RR ) No. 13-2012 which states that the sale, transfer or disposal within 12-month period of two or more adjacent residential lots, house and lots or other residential dwellings to one buyer, whether from the same or from different sellers shall be considered as one single transaction. Hence, the sale of the adjacent lots shall be subject to VAT if the aggregate value exceeds the exemption threshold of P1,919,500 for residential lots and P3,199,200 for residential house and lots or residential dwellings, notwithstanding that the value of individual properties do not exceed the VAT exemption thresholds.
In relation to the sale of condominium units, the sale/purchase of parking lots is not considered a sale of residential unit and therefore not covered by the rules on VAT exemption thresholds. Consequently, it is subject to VAT regardless of the amount of selling price.
The regulations was published on Oct. 17, 2012 and took effect on Nov. 1, 2012, which is 15 days after its publication.