Bureau of Internal Revenue (BIR) Deputy Commissioner Atty. LARRY M. BARCELO highlighted the key features of recent tax laws concerning the real estate sector, even as industry leaders pushed for amendments of Revenue Memorandum Circular (RMC) 31-2025 dealing with taxability of various fees relating to property transactions.
Speaking before CREBA’s 4th general membership meeting, Barcelo detailed the changes introduced by the Ease of Paying Taxes (EOPT) Law or RA 11976, the CREATE MORE Act or RA 12066, and the Real Property Valuation and Assessment Reform Act (RPVARA) or RA 12001.
Barcelo explained the new bases for taxation and the invoicing and filing requirements under EOPT, as well as the use of the schedule of market values (SMV) in computing internal revenue taxes.
He also stressed that under the CREATE MORE Act, real estate dealers with registered activity with an investment promotion agency (IPA) such as the Board of Investments (BOI) are entitled to the reduced income tax of 20% on their registered activity if they are under the Enhanced Deduction Regime (EDR).
Earlier, in a Joint Industry Position, CREBA, the Subdivision and Housing Developers Association (SHDA) and National Real Estate Association (NREA) called on the BIR to amend or clarify provisions RMC 31-2025 wherein:
• Transfer fees, processing fees, miscellaneous fees, registration fees, and the like billed by the taxpayer habitually engaged in the real estate business shall be subject to income tax and likewise be subject to a twelve percent (12%) output VAT.
• If the buyer of the real estate opts to settle the remaining balance by applying for or availing of a loan from a financing institution (i.e., Banks, PAG-IBIG, HDMF, etc.) and the financing institution approves and guarantees the release of loan/cash to the seller, the receipt of money by the seller from the financing institution shall be subject to twelve percent (12%) output VAT.
The industry leaders said that various fees entrusted by the buyers to the developer are merely held in trust and do not redound to the benefit of the developer. As such, they do not constitute income or gross sales, and are therefore not subject to income tax and VAT.
With respect to transactions financed by loans from a financing institution, the provision should be clarified to specifically exclude from VAT those sales that are within the exemption thresholds under Section 109(P) of the NIRC as amended.
They said that the use of financing should not be construed as a separate transaction subject to VAT, as the loan proceeds are merely a mode of payment for the original sale of the property.
