02/12/2020
HERE'S A TIP IF YOU PLAN TO BUY A PROPERTY: BUY IT BEFORE 2020 ENDS!
Starting January 01, 2021, the tax threshold for VAT exemption is lowered now to Php2M from previously Php2.5M. This means that sale of real properties beyond 2M will now be TAXABLE, and that's a heaping 12% on top of the total contract price that you need to pay. IT IS A HUGE AMOUNT: that's 240K in savings if you buy it before this year ends.
Based on RA 10963 or the Tax Reform for Acceleration and Inclusion or TRAIN Law which was enacted 3 years ago (2017), Section 34 (P) states:
"Sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business or real property utilized for low-cost and socialized housing as defined by RA 7279 (UDHA of 1992) and other related laws, residential lot valued at Php1.5M and below, house and lot and other residential dwellings valued at Php2.5M and below; provided that beginning January 01, 2021, the VAT exemptions shall only apply to sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business, sale of real property utilized for socialized housing as defined by RA 7279, sale of house and lot and other residential dwellings with selling price of not more than Php2.0M; Provided further, that every three (3) years thereafter, the amount herein stated shall be adjusted to its present value using the Consumer Price Index as published by the Philippine Statistics Authority (PSA)."
Unless this certain provision of RA 10963 will be suspended by the national government to aid everyone during pandemic, this impending increase will surely affect the housing industry as the country is still facing the ballooning housing backlog. As per statistics, the housing need from 2017-2022 is about 6.5 million and if nothing is done, by 2040, it will hit about 22 million (Business Mirror, June 12, 2020).
Please note that "other residential dwellings" include CONDOMINIUMS. It is also good to note that "RESIDENTIAL LOT" was no longer mentioned on the succeeding sections that will be affected come 2021, so it is safe to assume that sale of residential lots (not primarily held for sale in the ordinary course of business or trade) is already taxable starting January 01, 2021.
Whether or not the government will act on this (it's inevitable anyway), it is better to plan your acquisition this year, or be ready to shell out an amount to cover the value added tax.
Resources:
TRAIN LAW:https://www.officialgazette.gov.ph/downloads/2017/12dec/20171219-RA-10963-RRD.pdf
Read More: https://www.primabode.com/buying-tips-planning-to-buy-a-property-do-it-before-2020-ends/
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