REVENUE REGULATIONS NO.

1-2013 issued on January 23, 2013 further expands the coverage of taxpayers required to file tax returns and pay taxes through the Electronic Filing and Payment System (eFPS) to include National Government Agencies (NGAs) mandatorily required to use the Electronic Tax Remittance Advice (eTRA). Currently, the following taxpayers are already mandated to make use of the eFPS: a. Large Taxpayers duly notified by the Bureau of Internal Revenue (BIR); b. Top 20,000 Private Corporations duly notified by the BIR; c. Top 5,000 Individual Taxpayers duly notified by the BIR; d. Taxpayers who wishes to enter into contract with government offices; e. Corporations with paid-up capital stock of Ten Million Pesos; f. PEZA-registered entities and those located within Special Economic Zones; and g. Government Offices, in so far as remittance of withheld VAT and business tax is concerned. Now that eTRA System, a sub-system of the eFPS, has been developed, the base of taxpayers mandated to use eFPS is expanded to include all NGAs since the latter make use of the TRA in settlement of their withholding tax liabilities arising from the use of funds being released by the Department of Budget and Management (DBM). Through the eTRA System, the NGAs can access the eFPS, file their tax return electronically and accomplish the eTRA on-line, provided the prescribed enrollment to the eFPS has already been complied with. The BIR shall issue a Notification Letter to all NGAs, including their branches and extension offices located nationwide which have their own disbursement functions, to inform them that they are mandated to use the eFPS in filing the required returns and in paying the taxes due thereon. The Head Office of the concerned NGA shall be responsible in providing the BIR with the list of all its branches/field or extension offices located nationwide which have their

own disbursement functions, with information as to their respective business addresses, agency codes and Taxpayer Identification Numbers (TINs). All NGAs notified thru the Notification Letter shall enroll in the eTRA System by enrolling first with the BIRs eFPS facility. As part of the enrollment procedures, NGAs shall be required to submit to the Revenue District Office (RDO) where they are registered the names of two (2) authorized officers designated to file the required tax returns pursuant to Section 52 (A) of the Tax Code. In addition, NGA shall also enroll with any Authorized Agent Bank (AAB) where it intends to pay through the bank debit system, in cases of remittance of withheld taxes on funds not coming from the DBM or the payment of internal revenue taxes thru cash and not thru TRA. NGAs mandated to file electronically thru the issuance of the Notification Letter shall file their tax returns enumerated under Section 2.12 of this Regulations, via the eFPS, whether or not payment shall make use of eTRA. The staggered filing of returns allowed for withholding agents/taxpayers enrolled in the BIR eFPS facility shall not apply in the case of the NGAs. All tax returns must be electronically filed (e-filed) following the due dates prescribed in the table under Section 7 of this Regulations. Payment of the tax due must also be made on the same day the return is e-filed by accomplishing on-line the TRA. The use of eTRA as payment is limited only to the NGAs tax liabilities arising from the use of funds coming from the DBM. NGAs tax liabilities arising from the use of funds other than those coming from DBM based on the NGAs Annual Budget, as approved under the General Appropriation Act (GAA) must be paid using cash through the bank debit system of the

AAB where the NGA shall enrol for this purpose. A separate tax return must be accomplished for these tax liabilities since a particular fund is required to have a separate branch code. In the absence of a separate branch code of the fund, the NGA shall secure the same from the concerned RDO following existing procedures in registration. The concerned RDO shall conduct the mandatory briefing to the concerned NGAs on the eTRA System. Notified NGAs are required to attend the said briefing on eTRA, which is a prerequisite to enrollment in the eFPS. The BIR, through its Information Systems Group, shall generate report of NGAs remitted withheld taxes using TRA based on cut-off dates to be defined under a separate revenue issuance. The report generated shall be submitted by the BIRs Revenue Accounting Division to the Bureau of Treasury and shall be used by the latter in recording and crediting the same as BIRs tax collections. For the pilot roll-out of the eTRA, the Withholding Tax Division shall conduct the eTRA briefing with the selected NGAs. All NGAs which will not be given Notification Letter shall continue to file their tax returns manually by accomplishing the appropriate tax returns and attaching thereto the corresponding TRAs before having these documents received by the RDOs where the NGAs are registered. RDOs shall process these tax returns and report the collections thru TRAs following existing procedures.

REVENUE REGULATIONS NO. 3-2013 issued on February 14, 2013 prescribes the use of electronic Official Register Books (eORB) System by manufacturers of cigarettes, cigars and cigarette papers, including traders/dealers of whole leaf tobacco and partially manufactured leaf tobacco. For purposes of enrollment in the eORB System, all manufacturers of cigarettes, cigars

and cigarette papers, including traders/dealers of whole leaf tobacco and partially manufactured leaf tobacco (i.e., L-3, L3R, L and L6), shall initially file with the Chief, Excise Large Taxpayers Field Operations Division a written request for access to the system, together with a duly notarized Board Resolution, in case the taxpayer is a juridical entity, or an affidavit, in case of a sole proprietor, stating, among others, the names of its representatives authorized to register and maintain a user account, either as an encoder or as an authorized officer, in the system. For this purpose, an encoder authorized by the taxpayer to finalize an encoded transaction shall be required to be enrolled in the system, which can be accessed thru the eORB icon in the BIR website (www.bir.gov.ph). After completion of the enrollment process, the taxpayers authorized officer and/or encoder shall receive an email notification validating the email account provided. In the initial use of the eORB System, the synchronization process of data shall be undertaken by the authorized officer and encoder in order that all the functionalities of the system can be utilized. Thereafter, this process shall be initiated regularly in order to have an updated reference values in the database of the taxpayers installed system. In order to gain access into the system, the authorized officer shall create encoder user accounts and authorized officer user account using the User Management module of the system under which assessment numbers assigned to the designated encoders and authorized officer of the excise taxpayer shall be subject to approval by the BIR. The authorized officer shall be responsible for the activation and deactivation of user accounts, including the finalization of each encoded transaction, as well as the generation and submission of the eORB Forms. The encoders shall not be allowed to create other user accounts nor submit the ORB Forms. For expediency on the part of the excise taxpayer, encoding of transactions of the

taxpayer operations can be made off-line, without the need of connecting to the eORB System: Provided, however, That, for purposes of initially generating the eORB Forms, whether by the taxpayer or by the BIR, there is a need to finalize the encoded transactions and, therefore, the proper connection with the eORB System shall be made. All excise taxpayers who are covered by the eORB System shall transmit automatically the duly accomplished eORB Forms within five (5) calendar days immediately after the end of the month of operation. Any amendment in the entries of the ORBs that have been submitted by the authorized officer of the excise taxpayer shall be made anytime within the year of the taxpayers operations but not later than January 31 of the immediately succeeding year of the taxpayers operations: Provided, however, That amendments shall be made only once for each reference document: Provided, finally, That every amendment shall be subject to the approval of the Chief, Excise LT Field Operations Division through an email notification. In cases where a taxpayers own computerized accounting system has the capability to automatically generate and print the ORBs, the taxpayer shall coordinate with the BIR for purposes of determining the manner on how the taxpayer can submit the ORB electronically through the eORB System. The submission of ORB to the BIR through external storage facilities such as, but not limited to, magnetic disks, memory sticks or cards, external hard drives, etc. shall not be allowed. The BIR shall be immediately notified in writing, for purposes of re-evaluation and approval, prior to any change or enhancement of the computerized accounting system that will affect any transaction covered by the eORB System.The preparation of manual ORBs and submission of transcripts thereof to the BIR shall be terminated upon effectivity of the Regulations: Provided, however, that all transactions engaged by all concerned excise taxpayers beginning February 1, 2013 shall already be encoded into the eORB System with the duly accomplished eORB Form for the month of February, 2013

transmitted, through the eORB homepage thereof, on or before March 5, 2013: Provided, further, That, for purposes of expediency, the eORB System shall be initially implemented for use by the major tobacco industry players identified by the BIR and a proper prior notice shall be issued for the implementation thereof to the other tobacco industry players.

REVENUE REGULATIONS NO. 5-2013 issued on April 22, 2013 prescribes the tax treatment of sale of jewelry, gold and other metallic minerals to a non-resident alien individual not engaged in trade or business within the Philippines or to a non-resident foreign corporation. The following taxes are imposed: a. On the sale of gold and other metallic minerals as prescribed under Revenue Regulations (RR) No. 6-2012. i. Excise Tax Two Percent (2%) Excise Tax rate based on either the actual market value of the gross output at the time of removal, in the case of those locally extracted or produced; or the value used by the Bureau of Customs (BOC) in computing tariff and duties, in the case of importations. Possessors of gold and other metallic minerals must show proof that the Excise Tax has been paid thereon; otherwise, they shall be assessed and be held liable for the payment thereof. Gold and other metallic minerals discovered in the possession of the persons who cannot show proof of payment of Excise Taxes thereon are presumed to have been removed on the day of discovery. Accordingly, possessors of gold and other metallic minerals, whether imported or local, must be able to show certified true copy of the following: 1) Authority to Release Imported Goods and Import Entry and Internal Revenue Declaration and Official Receipt issued by the

BOC, for imported goods; and 2) Excise Tax Return (BIR Form No. 2200M) and machine validated deposit slip of the bank where the payment and filing has been made, for locally bought gold and other metallic minerals. Absent the said proof, possessors of gold and other metallic minerals shall be held liable for the Excise Taxes due thereon. ii. Value-Added Tax/Percentage Tax - Sales of gold and other metallic minerals to persons and entities, except sale of gold to the Bangko Sentral ng Pilipinas, is subject to 12% VAT if the gross selling price thereof exceeds the threshold set by the Tax Code and existing issuances, currently in the amount of P 1,919,500 pursuant to RR No. 3-2012. Otherwise, it shall be subject to 3% Percentage Tax. iii. Income Tax- Sellers are subject to Income Tax at the rate prescribed under Sections 24 and 25, in case of individual taxpayers, and under Sections 27 and 28 of the Tax Code, in case of corporations. Further, sellers of said gold and other metallic minerals are required to pay the Income Tax in advance (creditable) to the government. b. On the sale of jewelry i. Value-Added Tax/Percentage Tax- Sales of jewelry to persons and entities is subject to 12% VAT if the gross selling price thereof exceeds the threshold set by the Tax Code and existing issuances, currently in the amount of P 1,919,500 pursuant to RR No. 3-2012. Otherwise, it shall be subject to 3% Percentage Tax. ii. Income Tax- Sellers are subject to Income Tax at the rate prescribed under Sections 24 and 25, in case of individual taxpayers, and under Sections 27 and 28 of the Tax Code, in case of corporations. Further, sellers of said jewelry are required to pay the Income Tax in advance (creditable) to the government. Sellers of jewelry, gold, and other metallic minerals are hereby required to pay business

tax (VAT or Percentage Tax), Income Tax and Excise Tax, if applicable, in advance through the assigned Revenue Collection Officers (RCO) of the Revenue District Office (RDO) having jurisdiction over the place where the subject transaction occurs regardless of whether or not said sellers are duly registered with the BIR.a. Advance payment of VAT at the rate of 12% on gross selling price or Percentage Tax at the rate of 3% on gross sales, as the case may be. b. Advance payment of Income Tax at the rate of 5% on gross payment. c. Actual payment of Excise Tax at the rate of 2% based on either the actual market value of the gross output at the time of removal, in the case of those locally extracted or produced; or the value used by the BOC in computing tariff and duties, in the case of importations. For purposes of these Regulations, the actual market value shall refer to the actual consideration paid by the buyer to the seller. Existing issuances to the contrary notwithstanding, RCOs are authorized to receive advance payments of business (VAT or Percentage Tax) and Income Taxes and actual payment of Excise Tax due from subject sellers and to issue the corresponding Revenue Official Receipt (ROR), regardless of whether or not the sellers are registered with their respective RDOs. The advance payments shall be credited against the actual business tax (VAT or Percentage Tax, as the case may be) and Income Tax due from such persons for the taxable period for which such advance payments were remitted to the BIR. If the seller of jewelry, gold and other metallic minerals is a non-VAT taxpayer whose gross sales/receipts does not exceed the threshold amount of P 1,919,500 in any 12-month period and therefore, liable to the 3% Percentage Tax imposed under Section 116 of the Tax Code, such advance business tax paid shall be credited against the Percentage Tax due from such seller for the month for which such advance payment was collected. If the seller of jewelry, gold and other

metallic minerals, on the other hand, is a VAT registered taxpayer, in addition to the input tax credits allowed by the Tax Code, the amount of advance VAT paid shall be allowed as credit against the VAT liability or payable by the sellers. The amount of advance Income Tax paid shall be credited against the Income Tax due from the seller when he files his quarterly and annual Income Tax Return. The advance payment of business tax and Income Tax shall be evidenced by duly validated copy of BIR Form No. 0605 and ROR issued by the RCOs, which shall constitute as the proof for credit of the advance payment of taxes. Without such proof attached to the tax returns, any claim on account thereof shall be disallowed and the assessment of taxes shall correspondingly be made. The implementing guidelines relative to the conduct of tax enforcement as well as the duties and obligations of non-resident alien individual not engaged in trade or business within the Philippines or non-resident foreign corporation; and of owners and operators of hotels, inns, or establishments where the alien individuals or foreign corporation buyers conduct the subject transaction are specified in the Regulations.

REVENUE REGULATIONS NO. 6-2013 issued on April 22, 2013 amends certain provision of Revenue Regulations No. 6-2008 entitled Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter, Exchange or Other Disposition of Shares of Stock Held as Capital Assets. Section 7 of RR No. 6-2008 is hereby amended to read as follows "SEC. 7. Sale, Barter or Exchange of Shares of Stock Not Traded Through a Local Stock Exchange Pursuant to Secs. 24 (C), 25 (A)(3), 25 (B), 27 (D) (2), 28 (A) (7) (C), 28 (B) (5) (C) of The Tax Code, as Amended. xxx xxx xxx (c.2) Definition of "fair market value" of the Shares of Stock. For purposes

of this Section, "fair market value" of the shares of stock sold shall be: (c.2.1) x x x (c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the value of the shares of stock at the time of sale shall be the fair market value. In determining the value of the shares, the Adjusted Net Asset Method shall be used whereby all assets and liabilities are adjusted to fair market values. The net of adjusted asset minus the liability values is the indicated value of the equity. For purposes of this section, the appraised value of real property at the time of sale shall be the higher of (1) The fair market value as determined by the Commissioner, or (2) The fair market value as shown in the schedule of valued fixed by the Provincial and City Assessors, or (3) The fair market value as determined by Independent Appraiser.

REVENUE REGULATIONS NO. 7-2013 issued on April 29, 2013 prescribes the policies and guidelines for the abatement of surcharges, interests and compromise penalties in relation to the filing of 2012 tax returns of Philippine nationals and alien individuals employed by foreign governments/embassies/diplomatic missions and international organizations situated in the Philippines. The foreign governments/embassies/diplomatic missions and international organizations, as employers of the concerned individuals, shall submit to the Office of the Commissioner of Internal Revenue (OCIR) a Summary List of Employees as of December 31, 2012 (using the prescribed format) on or before May 10, 2013. Only those employees who are included in the said list may avail of abatement of surcharges, interests and compromise penalties under the

Regulations. International organizations whose non-Filipino employees enjoy immunity from taxation in accordance with the provisions of related international agreements or domestic laws need not submit information on their non-Filipino employees. Employees-taxpayers covered by Revenue Memorandum Circular No. 31-2013 who failed to file their returns and/or declare the correct amount of income on his/her original returns covering taxable year 2012 may file their original or amended returns, as the case may be, and pay the tax due thereon on or before May 15, 2013. No surcharges and interests, as mandated under Sections 248 and 249 of the Tax Code, shall be imposed. Further, no compromise penalty prescribed under Revenue Memorandum Order No. 19-2007 shall be assessed upon filing thereof. The abatement of surcharges, interests and compromise penalties are subject to the following conditions: a. The taxpayer must have duly registered with the BIR under the procedures prescribed in pertinent issuances; b. The taxpayer is included in the Summary List of Employees as of December 31, 2012 submitted by Foreign Governments/Embassies/Diplomatic Missions and International Organizations; c. The return must be filed and the basic tax due thereon must be fully paid not later than May 15, 2013. In lieu of full payment, the taxpayer has the option to pay the tax due on installment basis under Section 56 (A)(2) of Tax Code. d. On or before May 15, 2013, the taxpayer shall file a Declaration of Availment of Abatement (in triplicate copies) under these Regulations with the following attachments: i. Photocopy of the return filed together with attachments required under pertinent

revenue issuances; ii. Proof of full payment of taxes or, in the case of payment by installment, proof of partial payment of taxes; and iii. Notarized certificate issued by taxpayers employer and duly confirmed by the employee containing the monthly breakdown of salaries, emoluments and monetary benefits received by the taxpayer during the 2012 calendar year. e. No Letter of Authority, Tax Verification Notice, Audit Notice, Letter Notice, or discrepancy notices of whatever nature has/have been served on the taxpayer concerned covering the 2012 calendar year pursuant to Section 6(A) of the Tax Code; and f. The taxpayer is not the subject of any pending criminal case for tax evasion and other criminal offenses under the Tax Code covering the 2012 calendar year, whether filed in court or in the Department of Justice or subject of final and executory judgment by court.The filing of original returns or amended returns, as the case may be, and the payment of deficiency taxes made pursuant to the Regulations presupposes full and accurate disclosure by the concerned employees. It shall not preclude the BIR from investigating the correctness of such returns or sufficiency of the attachments, and/or availing the remedies provided for under the Tax Code. The Commissioner shall constitute a Technical Working Committee (TWC) for the review of all Declaration of Availment of Abatement filed by availing taxpayers. The TWC shall send a notification to the concerned taxpayer that the availment of abatement under the Regulations was approved/disapproved by the Commissioner. In case of approval or disapproval, the TWC shall issue a certification of the acceptance and approval or a notice of disapproval thereof. REVENUE REGULATIONS NO. 8-2013 issued on May 10, 2013 amends certain provisions

of Revenue Regulations No. 7-2013, which provides for the policies and guidelines for the abatement of surcharges, interests and compromise penalties in relation to the filing of the 2012 tax returns of Philippine nationals and alien individuals employed by foreign governments/embassies/diplomatic missions and international organizations situated in the Philippines. Section 2 of RR 7-2013 was amended to read as follows: Section 2. Mandatory Requirement- The employee-taxpayer covered by RMC 31-2013 shall secure from his/her employer (Foreign Governments/ Embassies/Diplomatic Missions and International Organizations), a Summary List of Employees as of December 31, 2012 in the format prescribed in ANNEX A hereto. International organizations whose non-Filipino employees enjoy immunity from taxation in accordance with the provisions of related international agreements or domestic laws need to provide information on their non-Filipino employees In lieu of the Summary List of Employees, the employee-taxpayer may obtain a Certificate of Employment from his/her employer disclosing information on his/her position or rank, period of employment for 2012, and monthly salaries, emoluments and monetary benefits. The Summary List of Employees or the Certificate of Employment shall be attached to the Declaration of Availment of Abatement (Annex B) which is prescribed from to be used in applying for abatement under these Regulations. Section 3 (ii) of RR 7-2013 was amended to read as follows: ii. In case a Summary List of Employees is submitted by the taxpayer, he or she must be included in the list as one of the employees, diplomatic agents, staff members or officials of the Foreign Government/Embassy/Diplomatic

Mission and International Organization. If a Certificate of Employment was submitted, such certificate must clearly state the taxpayers position or rank, period of employment for 2012, and monthly salaries, emoluments and monetary benefits.

REVENUE REGULATIONS NO. 9-2013 issued on May 10, 2013 amends certain provisions of Revenue Regulations No. 30-2002 relative to the payment of the amount offered as compromise settlement pursuant to Section 204 of the Tax Code, as amended. Section 6 of Revenue Regulations No. 30-2002 shall now read as follows: SEC. 6. APPROVAL OF OFFER OF COMPROMISE. - Except for offers of compromise where the approval is delegated to the REB pursuant to the succeeding paragraph, all compromise settlements within the jurisdiction of the National Office (NO) shall be approved by a majority of all the members of the NEB composed of the Commissioner and the four (4) Deputy Commissioners. All decisions of the NEB, granting the request of the taxpayer or favorable to the taxpayer, shall have the concurrence of the Commissioner. xxx xxx xxx The compromise offer shall be paid by the taxpayer upon filing of the application for compromise settlement. No application for compromise settlement shall be processed without the full settlement of the offered amount. In case of disapproval of the application for compromise settlement, the amount paid upon filing of the aforesaid application shall be deducted from the total outstanding tax liabilities. xxx xxx xxx

REVENUE REGULATIONS NO. 10-2013 issued on June 6, 2013 amends further pertinent provisions of Revenue Regulations (RR) No. 2-98, as last amended by RR No. 30-2003, which provides for the inclusion of real estate service practitioners (i. e. real estate consultant, appraiser and broker) who passed the licensure examination given by the Real Estate Service under the Professional Regulations Commission (as defined in Republic Act No. 9646, The Real Estate Service Act of the Philippines) as among those professionals falling under Section 2.57.2(A)(1) of RR No. 2-98, as amended, and RR No. 14-2002 as regards income payments to certain brokers and agents. Section 2.57.2(A)(1) of RR No. 2-98, as last amended by RR No. 30-2003, is hereby further amended to read as follows: Section 2.57.2. Income payments subject to creditable withholding tax and rates prescribed thereon. - xxx xxx (A)Professional fees, talent fees, etc., for services rendered by individuals. On the gross professional, promotional and talent fees or any other form of remuneration for the services of the following individuals Fifteen percent (15%), if the gross income for the current year exceeds P 720,000; and Ten percent (10%), if otherwise: (1) Those individually engaged in the practice of profession or callings: xxx designers, real estate service practitioners (RESPs), (i. e. real estate consultants, real estate appraisers and real estate brokers) requiring government licensure examination given by the Real Estate Service pursuant to Republic Act No. 9646 and all other profession requiring government licensure examination regulated by the Professional Regulations Commission, Supreme Court, etc. xxx Section 2.57.2(G) of RR No. 2-98, as last amended by RR No. 14-2002, is hereby further

amended to read as follows: Section 2.57.2. Income payments subject to creditable withholding tax and rates prescribed thereon. - xxx xxx xxx xxx xxx (G) Income payments to certain brokers and agents. - On gross commissions of customs, insurance, stock, immigration and commercial brokers, fees of agents of professional entertainers and real estate service practitioners (RESPs), (i. e. real estate consultants, real estate appraisers and real estate brokers) who failed or did not take up the licensure examination given by and not registered with the Real Estate Service under the Professional Regulations Commission. Ten percent (10%). xxx xxx xxx The Regulations shall take effect June 1, 2013 and shall cover income payments to be paid or payable starting June 1, 2013, which are required to be remitted within the month of July, 2013. REVENUE REGULATIONS NO. 12-2013 issued on July 12, 2013 further amends Section 2.58.5 of Revenue Regulations (RR) No. 2-98, as amended, to read as follows: Section 2.58.5 Requirements for Deductibility. Any income payment which is otherwise deductible under the Code shall be allowed as a deduction from the payors gross income only if it shown that the income tax required to be withheld has been paid to the Bureau in accordance with Secs. 57 and 58 of the Code. No deduction will also be allowed notwithstanding payments of withholding tax at the time of the audit investigation or reinvestigation/reconsideration in cases where no withholding of tax was made in accordance with Secs. 57 and 58 of the Code. REVENUE REGULATIONS NO. 16-2011 issued on October 28, 2011 increases the amount of

threshold amounts for sale of residential lot, sale of house and lot, lease of residential unit and sale 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, thereby amending certain provisions of Revenue Regulations No. 16-2005, as amended, otherwise known as the Consolidated Value-Added Tax (VAT) Regulations of 2005. The adjusted threshold amounts, rounded off to the nearest hundred, are as follows: Section Amount in Pesos (2005) Adjusted threshold amounts Section 109 (P) 1,500,000 1,919,500.00 Section 109 (P) 2,500,000 3,199,200.00 Section 109 (Q) 10,000 12,800.00 Section 109 (V) 1,500,000 1,919,500.00 Sale of residential lot with gross selling price exceeding P 1,919,500.00, residential house and lot or other residential dwellings with gross selling price exceeding P 3,199,200.00, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed on or after November 1, 2005, shall be subject to 10% output VAT, and starting February 1, 2006, to 12% output VAT. Sale or lease of goods or properties or the performance of services of non-VAT-registered persons, other than the transactions mentioned in paragraphs (A) to (U) of Sec. 109(1) of the Tax Code, the gross annual sales and/or receipts of which does not exceed the amount of P 1,919,500.00, is subject to Percentage Tax.

Sale of residential lot valued at P 1,919,500.00 and below, or house and lot and other residential dwellings valued at P 3,199,200.00 and below, where the instrument of sale/transfer/disposition was executed on or after July 1, 2005 is exempt from VAT. Provided, That every 3 years thereafter, the aforesaid threshold amounts shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year; If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value of the lots do not exceed P 1,919,500.00. Adjacent residential lots, although covered by separate titles and/or separate tax declarations, when sold or disposed to one and the same buyer, whether covered by one or separate Deed of Conveyance, shall be presumed as a sale of one residential lot. Lease of residential units with a monthly rental per unit not exceeding P 12,800.00, regardless of the amount of aggregate rentals received by the lessor during the year is also exempt from 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. The foregoing notwithstanding, lease of residential units where the monthly rental per unit exceeds P 12,800.00 but the aggregate of such rentals of the lessor during the year do not exceed P 1,919,500.00 shall likewise be exempt from VAT, however, the same shall be subjected to 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 P12,800.00 while others are leased out for more than P 12,800.00 per unit, his tax liability will be as follows: a. The gross receipts from rentals not exceeding P 12,800.00 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts. b. The gross receipts from rentals exceeding P 12,800.00 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 for not more than P 12,800.00) exceeds P 1,919,500.00. Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code. 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 P 1,919,500.00 is exempt from 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; For purposes of the threshold of P 1,919,500.00, 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. These Regulations shall take effect starting January 1, 2012.

REVENUE REGULATIONS NO. 16-2011 issued on October 28, 2011 increases the amount of threshold amounts for sale of residential lot, sale of house and lot, lease of residential unit and sale 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, thereby amending certain provisions of Revenue Regulations No. 16-2005, as amended, otherwise known as the Consolidated Value-Added Tax (VAT) Regulations of 2005. The adjusted threshold amounts, rounded off to the nearest hundred, are as follows: Section Amount in Pesos (2005) Adjusted threshold amounts Section 109 (P) 1,500,000 1,919,500.00 Section 109 (P) 2,500,000 3,199,200.00 Section 109 (Q) 10,000 12,800.00 Section 109 (V) 1,500,000 1,919,500.00 Sale of residential lot with gross selling price exceeding P 1,919,500.00, residential house and lot or other residential dwellings with gross selling price exceeding P 3,199,200.00, where the instrument of sale (whether the instrument is nominated as a deed of absolute sale, deed of conditional sale or otherwise) is executed on or after November 1, 2005, shall be subject to 10% output VAT, and starting February 1, 2006, to 12% output VAT.

Sale or lease of goods or properties or the performance of services of non-VAT-registered persons, other than the transactions mentioned in paragraphs (A) to (U) of Sec. 109(1) of the Tax Code, the gross annual sales and/or receipts of which does not exceed the amount of P 1,919,500.00, is subject to Percentage Tax. Sale of residential lot valued at P 1,919,500.00 and below, or house and lot and other residential dwellings valued at P 3,199,200.00 and below, where the instrument of sale/transfer/disposition was executed on or after July 1, 2005 is exempt from VAT. Provided, That every 3 years thereafter, the aforesaid threshold amounts shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO); Provided, further, that such adjustment shall be published through revenue regulations to be issued not later than March 31 of each year; If two or more adjacent residential lots are sold or disposed in favor of one buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt from VAT only if the aggregate value of the lots do not exceed P 1,919,500.00. Adjacent residential lots, although covered by separate titles and/or separate tax declarations, when sold or disposed to one and the same buyer, whether covered by one or separate Deed of Conveyance, shall be presumed as a sale of one residential lot. Lease of residential units with a monthly rental per unit not exceeding P 12,800.00, regardless of the amount of aggregate rentals received by the lessor during the year is also exempt from 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. The foregoing notwithstanding, lease of residential units where the monthly rental per unit exceeds P 12,800.00 but the aggregate of such rentals of the lessor during the year do not exceed P 1,919,500.00 shall likewise be exempt from VAT, however, the same shall be subjected to 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 P12,800.00 while others are leased out for more than P 12,800.00 per unit, his tax liability will be as follows: a. The gross receipts from rentals not exceeding P 12,800.00 per month per unit shall be exempt from VAT regardless of the aggregate annual gross receipts. b. The gross receipts from rentals exceeding P 12,800.00 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 for not more than P 12,800.00) exceeds P 1,919,500.00. Otherwise, the gross receipts will be subject to the 3% tax imposed under Section 116 of the Tax Code. 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 P 1,919,500.00 is exempt from 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; For purposes of the threshold of P 1,919,500.00, 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. These Regulations shall take effect starting January 1, 2012.