What is the tax base of the VAT on sale of service and use or lease of

properties?
- The 12% is based on the gross receipts derived from the sale or
exchange of services, including the use or lease of properties.

"The term ‘gross receipts’ means the total amount of money or its
equivalent representing the contract price, compensation, service fee,
rental or royalty, including the amount charged for materials supplied with
the services and deposits and advanced payments actually or
constructively received during the taxable quarter for the services
performed or to be performed for another person, excluding value-
added tax.

The time of payment will depend on whether a sale is an Installment Sale or a

Installment > or = 25% of
Deferred Payment Sale. A sale is on installment if the initial payments in the year GSP
of sale do not exceed 25% of the gross selling price. A sale is considered as cash
or deferred payment if the initial payments in the year of sale exceed 25% of the Cash/ Defered payment <
gross selling price. [7] 25% of GSP

Initial payments means payment or payments which the seller receives before or
upon execution of the instrument of sale and payments which he expects or is
scheduled to receive in cash or property (other than evidence of indebtedness of
the purchaser) during the taxable year when the sale or disposition of the real
property was made. It covers any downpayment made and includes all payments
actually or constructively received during the year of sale, the aggregate of which
determines the limit set by the law.

In other words, add the downpayment plus all amortization payments (principal
portion only) during the year and compute if the total exceeds 25% of the gross
selling price.

A. Deferred payment/Cash basis

• The transaction shall be treated as a cash sale which makes the entire
selling price subject to VAT in the month of sale.

B. Installment basis

• Each installment payment actually and/or constructively received by

the seller is subject to VAT.

Computation for Installment Basis:

Fair Market Value

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business
 Scenario:
A real estate dealer showed the following details during the year:

Contract price, FMV or Zonal

Value which ever is higher

The monthly VAT return should be filed on or before the 20th day of the month
following the close of the 1st two months of the quarter (February 20, March 20,
May 20, June 20, August 20, September 20, November 20, December 20) while the
quarterly VAT return should be filed on or before the 25th day of the month MONTHLY: When to File: The
monthly VAT returns should be
following the last month of the quarter (April 25, July 25, October 25, January 25). filed on or before the 20th day
of the month following the end
of the first two months of each
quarter.
What are the transactions EXEMPT from the payment of VAT? QUARTERLY : on or before
the 25th day of the month
i. Sale of real properties following the last month of the
Beginning January 01, 2021: quarter. = 25th

a. Not primarily held for sale to customers or held for lease in

the ordinary course of trade or business;
b. Utilized for socialized housing
Threshold
2M - ??? c. House and lot/other dwellings (condominium) valued at less
More than 2.5 M House and lot - 2019
3,119,200 RR No . 8-2021 than Php2,000,000.00.
3,600,000 - RR No. 1-2024

*** VAT threshold for a sale of residential

condominium units in 2018
Hence, beginning January 01, 2021, the VAT threshold for sale of real
properties (meaning there is VAT for these real properties when sold):

House and lot/other dwellings More than Php2,000,000.00

Lot only Vatable regardless of amount
IMPORTANT: RR No. 8-2021- House and lot/other dwellings: More than
PHP3,199,200.00

Provided, further, that every three years thereafter, the amount

P3,199,200.00, applicable beginning 01 herein stated shall be adjusted to its present value using the
January 2021
Consumer Price Index as published by the Philippine Statistics
Authority.

Note: The next adjustment based on the then prevailing CPI is

expected to apply starting on Jan. 1, 2024.

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business
 ii. Services
- those services rendered by individuals pursuant to an
employer-employee relationship

iii. Lease of residential units

Beginning January 01, 2021:
a. Lease of each residential unit wherein the monthly rent is less
than Php15,000.00.
b. In case where the lessor has several residential units for
lease where some are leased out for a monthly rental fee per
unit not exceeding Php15,000.00 while others are for more
than Php15,000.00 per unit, the tax liability will be as follows:
i. The gross receipts from rentals not exceeding
Multiple Units with Mixed Rent Values: Php15,000.00 per unit shall be exempt from VAT
If some units are leased for less than PHP
15,000.00 and others for more, VAT regardless of the aggregate annual gross receipts. It is
implications are based on total gross
receipts: also exempt from the 3% percentage tax.
Exempt from VAT and Percentage Tax :
ii. The gross receipts from rentals exceeding
PHP 15,000 and below for rental per
month.
Php15,000.00 per month per unit shall be subject to
VAT if the aggregate annual gross receipts from said
Subject to 3% Percentage Tax: If gross
receipts exceed PHP 3,000,000.00 and units only exceeds Php3,000,000.00. Otherwise, the
each unit's rent is below PHP 15,000.00.
gross receipts will be subject to 3% percentage tax.
Subject to VAT: If any unit's rent exceeds
PHP 15,000.00 and total receipts from iv. Condominium dues and association dues
such units surpass PHP 3,000,000.00.
v. Sale or lease of goods or properties or the performance of
services with an annual gross sales and/or receipts of less than
Php3,000,000.00.

SCENARIO:

#GameChangers Realty, Inc., a VAT-registered corporation engaged as a dealer

of condominium units which has its principal office in Makati City, recently sold its
50 sqm-unit at Shell Residences in Pasay City. The said condominium unit was sold
to Nexus Realty, Inc., a corporation based in Mandaluyong for a total contract
price of Php16,000,000.00. The zonal value of the said property is Php 300,000.00
per sqm. Applying the Assessor’s valuation, said property is valued at Php
3,000,000. Compute for the VAT (inclusive of the price or value) of the aforesaid
transaction.

ANSWER? Php 1,714,285.71429

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business
 II. PERCENTAGE TAX
- is a business tax imposed on persons or entities who sell or lease goods,
Anything below 3M no VAT
properties or services in the course of trade or business whose gross
Any amount = or less
ANYTHING than 3M3M
BELOW is annual sales or receipts do not exceed Php3,000,000.00.
is not
subject to VAT but subject to
non VAT
percenatge tax

Do not
Who are required to pay?
1. Persons, who are not VAT-registered, who sell or lease goods,
properties or services in the course of trade or business whose gross
annual sales or receipts do not exceed Php3,000,000.00 and are
exempt from VAT
2. Persons who lease residential units:

In case where the lessor has several residential units for lease
Multiple Units with Mixed Rent Values:
If some units are leased for less than PHP where some are leased out for a monthly rental fee per unit
15,000.00 and others for more, VAT
implications are based on total gross
not exceeding Php15,000.00 while others are for more than
receipts: Php15,000.00 per unit, the tax liability will be as follows:
Exempt from VAT: If gross receipts from i. The gross receipts from rentals not exceeding
rentals not exceeding PHP 15,000.00 per
unit are below PHP 3,000,000.00 annually. Php15,000.00 per unit shall be exempt from VAT
Subject to 3% Percentage Tax: If gross regardless of the aggregate annual gross receipts. It is
receipts exceed PHP 3,000,000.00 and
each unit's rent is below PHP 15,000.00. also exempt from the 3% percentage tax.
Subject to VAT: If any unit's rent exceeds
ii. The gross receipts from rentals exceeding
PHP 15,000.00 and total receipts from
such units surpass PHP 3,000,000.00.
Php15,000.00 per month per unit shall be subject to
VAT if the aggregate annual gross receipts from said
units only exceeds Php3,000,000.00. Otherwise, the
gross receipts will be subject to 3% percentage tax.

It is paid by quarter by filing BIR Form 2551Q

read BIR
form When to file/pay?
- It is filed and paid within 25 days after the end of each taxable
quarter.

What is the tax base and rate?

- It is based on the gross sales or receipts with 3% rate.

CREATE Law and Percentage Tax

RA 11534
What is the CREATE Law?

The CREATE or Comprehensive Recovery and Tax Incentives for Enterprises is a law
that seeks to assist businesses as a response to the pandemic with retroactive
provisions and lower tax rates. Applicable only till June 30, 2023 for 1%
NOW back to 3%

How can I take advantage of the CREATE Law with my Percentage Tax filing?

One of the taxes that benefit from CREATE is the Percentage Tax submitted through
Form 2551Q. From the usual 3% tax rate, taxpayers can now use the new 1% rate for
their taxes. This tax rate is also retroactive, meaning this can be applied to your
EFFECTIVE : JULY 1, previously filed taxes from July 2020.
2020
UNTIL : JUNE 30,
2023 However, this tax rate is only effective until June 30, 2023. After this period, the
percentage tax will default back to 3%.

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business
How to Calculate Quarterly Percentage Tax?

Your quarterly percentage tax is calculated by multiplying 1% to your quarterly gross

sales or receipts. Gross sales and receipts pertain to all the earnings or revenues you
receive from your client/business.

Here’s how the formula would look like:

Quarterly Percentage Tax Due = Gross Receipts x 1%

Sample computation of Percentage Tax Due and Payable

Let’s say you’re running a consultancy business, earning less than 3M annually, and
receive a quarterly income of P180,000. In that case, if you’ve opted for the quarterly
percentage tax option (as reflected in your COR), then the calculation would be
something like this:

Percentage Tax Due = ₱180,000 x 1%

Percentage Tax Due = ₱1,800

Hence, P1,800 would be your total quarterly percentage tax payable.

How to Compute Excess Percentage Tax

We’ve mentioned earlier that the new 1% tax rate is retroactive and can be applied
to your 2020 Q3 and Q4 filings. This means that the excess amounts you’ve paid to
the BIR can be used as tax credits to pay for your future percentage tax payments.

To compute, check your 2551Q filings for 2020 Q3 (due on October 2020) and 2020
Q4 (due on January 2021). Refer to the latest amendment if you’ve made
amendments.

Look for the values tagged against the Alphanumeric Tax Code PT010 on Page 2 of
the form.

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business
Multiply the amounts tagged as PT010 in your forms and multiply it by 1%. This is
the amount you should have paid as per the retroactive rules of CREATE.

After this, deduct this amount (1%) from the Total Tax Dues tagged against PT010 in
your forms.

Sample Computation

Say for example you have a total of ₱100,000 as your amount tagged as PT010 in
your Q3 and Q4 filings. This is how you’ll calculate how much you should pay as per
the CREATE Law.

Excess Percentage Tax = 3% Amount - 1% Amount

Excess Percentage Tax = ₱3,000 - ₱1,000

Excess Percentage Tax - ₱2,000

This means that you have ₱2,000 you can use as credits to pay for your future 2551Q
payments.

When and Where Can You File?

You can file your BIR Form No. 2551Q with any Authorized Agent Banks (AAB) of the
Revenue District Office (RDO) where you are registered or are conducting business.
In case there are no AABs, then this form shall be filed with the Revenue Collection
Officer (RCO) of your RDO.

If you’re the franchise owner, you can file a separate return for your head office and
for each branch. You can also file a consolidated return for the head office and
included branches.

You can also pay and submit your taxes online. Tax compliance apps, like Taxumo,
simplifies the tax filing and submission process for you.

The Deadlines for Filing Form 2551Q in 2021

Period Deadline

1st Quarter: January to March On or before April 25

2nd Quarter: April to June On or before July 25

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business
 3rd Quarter: July to September On or before October 25

4th Quarter: October to December On or before January 25

How Can Payment Be Made?

Payment can be made manually or electronically. If you’re opting for manual

payment, you can do what was mentioned above. Head to the AAB located in your
area that is within the jurisdiction of the RDO or file your return with the RCO.

Online payment, on the other hand, can be accomplished using GCash Mobile
Payment, Landbank’s Linkbiz Portal or DBP’s Tax Online. Note that you would still
have to manually calculate your corresponding tax dues, as these channels require
you to already enter said tax due amount.

What Penalties Will Be Imposed Upon Failure of Filing?

The taxpayer will incur interest of 25% plus surcharge plus compromise fee in cases
where he/she:

o Failed to file and pay their quarterly percentage tax return on or before
the deadline
o Filed a return with the wrong person or officer

o Failed to pay the full or part of the amount of tax due; or

o Failed to pay the deficiency tax
The taxpayer will incur a surcharge of 25% plus surcharge plus compromise fee in
cases where he/she:

o Willfully neglected to file the quarterly percentage tax within the prescribed
period; or
o Willfully made a false and fraudulent return

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ATTY. ROLANDO B. PAGTOLON-AN, REB, REA, REC
iACADEMY School of Business