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Last August 2, I made a post entitled "The Basis for VAT." Here's an update regarding that matter. A follower pointed me to a BIR Revenue Regulation (RR) issued 16 years ago: BIR RR 4-2007.
This memo states that if the VAT-exclusive selling price of a real property is lower than the zonal value, then the zonal value will be the basis for VAT. The text explicitly reads:
"...The term ‘fair market value’ shall mean whichever is higher of: 1) the fair market value as determined by the Commissioner /zonal value, or 2) the fair market value as shown in the schedule of values of the Provincial and City Assessors (real property tax declaration)...the zonal or market value shall be deemed exclusive of VAT. Thus, the zonal value/market value, net of the output VAT, should still be higher than the consideration in the document of sale, exclusive of the VAT."
For example, if a property were sold for Php5 Mn (VAT-exclusive), and the zonal value was Php10 Mn, then the VAT will be (= 10 Mn x 12%), Php1.2 Mn.
As penance, I vow to go through all RRs involving real properties. LOL.
I've attached the relevant RR below.
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