RIZAL BOARD OF REALTORS® - REVENUE REGULATIONS NO. 16-2005

REVENUE REGULATIONS NO. 16-2005

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IMPLEMENTING RULES AND REGULATIONS OF THE NEW VAT LAW

Consolidated Value-Added Tax Regulations of 2005

Revenue Regulations (RR) No. 16-2005, otherwise known as the “Consolidated Value-Added Tax Regulations of 2005,” implements Title IV of the Tax Code as amended by Republic Act (RA) No. 9337 as well as other provisions of the Tax Code pertaining to the Value-Added Tax (VAT). It consolidates all revenue regulations and other revenue issuances previously issued on VAT, and supersedes RR No. 14-2005 dated June 22, 2005.

RR No. 16-2005 was signed on October 19, 2005 and will take effect on November 1, 2005.

Below is a summary of the amendments to the old rules as well as new rules found in RR No.16-2005.

VAT on Sale and Importation of Goods and Properties Sale of Real Properties [Section 4.106-3]

The threshold for VAT-exemption on sale of real properties has been increased as follows:

Residential lot – up to P1.5 million

Residential house and lot or other residential dwellings – up to P2.5 million

The increased thresholds shall apply where the instrument of sale (whether denominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed on after July 1, 2005.

Under RA No. 8424 and RR No. 6-97, the threshold for VAT-exemption on sale of “house and lot and other residential dwellings” was up to P1 million. However, RR No. 01-2005 amended RR No. 6-97 by increasing the threshold level for the VAT-exemption on sale of “house and lot and other residential dwellings” to P1.5 million, effective January 1, 2005.

The installment sale of residential house and lot or other residential dwellings exceeding P1million, where the instrument of sale was executed prior to July 1, 2005, shall be subject to VAT.

Under RR No. 6-97 and RR No. 01-2005, mentioned above, the threshold for VAT-exemption is the same for cash sales or installment sales of residential house and lot or other residential dwellings, which is up to P1.5 million. Apparently, the new Regulations failed to consider that prior to RA No. 9337, the exemption threshold has been increased from P1 million to P1.5 million.

The transmission of property to a trustee shall not be subject to VAT if the property is to be merely held in trust for the trustor and/or beneficiary. However, if the property transferred is one for sale, lease or use in the ordinary course of trade or business and where the transfer constitutes a completed gift, then the transfer is subject to VAT as a deemed sale transaction. The transfer is a completed gift if the transferor divests himself absolutely of control over the property, i.e., through an irrevocable transfer of corpus and/or an irrevocable designation of beneficiary.

Zero-rated Sales of Goods and Properties [Section 4.106-5]