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VAT
In general, all forms of lease of properties held primarily for lease to customers in
the ordinary course of trade or business, whether personal or real, shall be
subject to 12% Value Added Tax (VAT), except or unless the gross annual
receipts of the lessor do not exceed P1,919,500 and is non-vat registered shall
be subject to 3% percentage tax under Section 116 of the Tax Code
Gross receipts from lease of commercial units are subject to 12% VAT if the
property leased is located in the Philippines regardless of the place where the
contract of lease or licensing agreement was executed.
In a lease contract, advance payment by the lessee may be: a loan to the lessor
from the lessee, an option money for the property, and a security deposit to
insure the faithful performance of certain obligations of the lessee to the lessor
are not be subject to VAT. But a security deposit that is applied to rental is
subject to VAT at the time of application. A prepaid rental is subject to VAT to the
lessor in the month when received, regardless of the accounting method applied
by the lessor.
While, the gross receipts from lease of "residential units" are subject to the
following rules: If the monthly rental is not more than P12,800 per unit, per
month, regardless of the aggregate annual rentals and if the monthly rental is
more than P12,800 per unit, per month but the aggregate annual rentals do not
exceed P1,919,500 are VAT exempt subject to 3% percentage tax under Section
116 of the Tax Code. However, if the monthly rental exceed P12,800 per unit, per
month and the aggregate annual rentals exceed P1,919,500 shall be subject to
12% Value Added Tax (VAT). Provided, every 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 adjustment shall be published
through revenue regulations to be issued not later than March 31 of each year.
(v) Sale or lease of goods or properties or the performance of services other than
the transactions mentioned in the preceding paragraphs, the gross annual sales
and/or receipts do not exceed the amount of One Million Nine Hundred Nineteen
Thousand Five Hundred Pesos (P1,919,500.00); 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 adjustment
shall be published through revenue regulations to be issued not later than March
31 of each year;
For purposes of the threshold of P1,919,500.00, the husband and the wife shall
be considered separate taxpayers. However, the aggregation rule for each
taxpayer shall apply. For instance, if a professional, aside from the practice of his
profession, also derives revenue from other lines of business which are
otherwise subject to VAT, the same shall be combined for purposes of
determining whether the threshold has been exceeded. Thus, the VAT-exempt
sales shall not be included in determining the threshold.
Failure to pay the real property tax on time will subject owners to late payment
interest rate of 2% to 72% on the unpaid amount depending on the months of
delay. Maximum is up to 36 months.
LGC requires all business entities to renew their business permits and pay their
local business taxes on or 20 January of each year
The LGC provides that the local business tax payable would depend on the
amount of gross sales or gross receipts of the previous taxable year which a
business has to declare. For example, the local business tax that is payable for
the year 2010 would be based on the gross sales or gross receipts in the year
2009.
BUSINESS PERMIT
Gross Sales or Receipts include the total amount of money or its equivalent
representing the contract price, compensation or service fee, including the
amount charged or materials supplied with the services and deposits or advance
payments actually or constructively received during the taxable quarter for the
services performed or to be performed for another person excluding discounts if
determinable at the time of sales, sales returns, excise tax, and value added
taxes (Book II, Section 130 (n) Local Government Code).