Gross Receipts From Rentals of Residential Units Not Exceeding The Threshold Amount Per Month Per Unit Shall Be Exempt From VAT Regardless Of The Aggregate Annual Gross Receipts

Section 3 VAT EXEMPT TRANSACTIONS (q) of  Revenue Regulations (RR) No. 16-2011 stated that Lease of residential units with a monthly rental per unit not exceeding Twelve Thousand Eight Thousand Eight Hundred Pesos (P12,800.00), regardless of the amount of aggregate rentals received by the lessor during the year; Provided, every three (3) years thereafter, the amount shall be adjusted to its present value using the Consumer Price Index, as published by the NSO; Provided, further, that such as adjustment shall be published through revenue regulations to be issued not later than March 31 of each year;

The foregoing notwithstanding, lease of residential units where the monthly rental per unit exceeds Twelve Thousand Eight Hundred Pesos (P12,800.00) but the aggregate of such rentals of the lessor during the year do not exceed One Million Nine Hundred Nineteen Thousand Five Hundred Pesos (P1,919,500.00) shall likewise be exempt from VAT, however, the same shall be subjected to three percent (3%) percentage tax.

In cases where a lessor has several residential units for lease, some are leased out for a monthly rental unit per unit of not exceeding P12,800.00 while other are leased out for more than P12,800.00 per unit, his tax liability will be as follows:

1. The gross receipts from rental not exceeding P12,800.00 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts.

2. The gross receipts from rentals exceeding P12,800.00 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 from not more than P12,800.00) exceeds P1,919,500.00. Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code.

The term 'residential units' shall refer to apartments and houses & lots used for residential purposes, and buildings or parts or units thereof used solely as dwelling places (e.q., 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, houses 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.

The regulations was took effect dated January 1, 2012.

Hence, Gross receipts from Rentals of Residential Units are subject to Income Tax as well.

Lease of Residential Units Exempt From VAT

Under SEC. 4.109-1 VAT-Exempt Transaction (B) Exempt Transactions - (q) Lease of residential units with a monthly rental per unit not exceeding Ten Thousand Pesos (P10,000.00), regardless of the amount of aggregate rentals received by the lessor during the year; Provided, that not later than January 31, 2009 and every three (3) years thereafter, the amount of P10,000.00 shall be adjusted to its present value using the Consumer Price Index, as published by the NSO;

The foregoing notwithstanding, lease of residential units where the monthly rental per unit exceeds Ten Thousand Pesos (P10,000.00) but the aggregate of such rentals of the lessor during the year do not exceed One Million Five hundred Pesos (P1,500,000.00) shall likewise be exempt from from VAT, however, the same shall be subjected to three percent (3%) percentage tax.

In cases where a lessor has several residential units for lease, some are leased out for a monthly rental per unit not exceeding P10,000.00 while others are leased out for more than P10,000.00 per unit, his tax liability will be as follows:

1. The gross receipts from rental not exceeding P10,000.00 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts.

2. The gross receipts from rental exceeding P10,000.00 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 unit leased for not more than P10,000.00) exceeds P1,500,000.00. Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code.

The term 'residential units' shall refer to apartments and house & lots used for residential purposes, and building or parts or units thereof used solely as dwelling places (e. g., dormitories, rooms and bed spaces) except hotels, motel rooms, hotels and hotel rooms.

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.

However, the bureau has issued the Revenue Regulations No. 3-2012 of the Effectivity of Threshold Amounts for Sales of Residential Lot, Sales of House and Lot, Lease of Residential Unit and Sales or Lease of Goods or Properties or Performance of Services covered by Section 109 (P), (Q) and (V) of the Tax Code of 1997, as amended.

The threshold amounts has been adjusted as follows:

1. Section 109 (P) - from P1,500,000.00 to P1,919,500.00

2. Section 109 (P) - from P2,500,000.00 to P3,199,200.00

3. Section 109 (Q - Lease of Residential Units) - from P10,000.00 to P12,800.00

4. Section 109 (V) - from P1,500,000.00 to P1,919,500.00

The new threshold amount was made effective for instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed and notarized on or after January 1, 2012.