VAT on Sale of Real Property in the Philippines: When It Applies and the Current Threshold
A sale of real property in the Philippines is subject to 12% VAT only when the seller is habitually engaged in the real estate business and the price exceeds the current exemption threshold — currently ₱3,600,000 for a house and lot under Revenue Regulations (RR) No. 1-2024. A sale by someone outside the real estate business, or a qualifying low-value or socialized-housing sale, generally falls outside VAT altogether.
Filing RELIEF SLSP as a Real Estate Dealer? Do It FREE →Who is subject to VAT on a real property sale? #
VAT on real property applies only to a seller “engaged in the real estate business” — a dealer, developer, or lessor selling property held as inventory or for lease in the ordinary course of business. Under Section 109(P) of the National Internal Revenue Code (NIRC), as amended, a sale by someone who is not in the real estate business — for example, an individual selling a personal residence in an isolated transaction — is outside the scope of VAT. That kind of sale, if the property is a capital asset, is instead handled through the 6% capital gains tax; see Capital Gains Tax vs Real Property Tax for that distinction. A dealer’s ordinary-asset sale, by contrast, sits inside the VAT system and also carries a separate creditable withholding tax obligation — see BIR Form 1606: Withholding Tax on Sale of Real Property Classified as an Ordinary Asset.
The current VAT-exempt threshold: ₱3,600,000 #
Sale of a house and lot or other residential dwelling by a real estate dealer is VAT-exempt if the gross selling price does not exceed ₱3,600,000, effective January 1, 2024 under RR No. 1-2024. Section 109(P) requires the BIR to adjust this threshold every three years using the Consumer Price Index. The figure moved from ₱3,199,200 (set by RR No. 8-2021) to ₱3,600,000 under RR No. 1-2024, and no subsequent regulation has superseded that figure as of this writing. A sale priced above ₱3,600,000 is subject to 12% VAT on the full selling price; a sale at or below that threshold is exempt.
| Property type | VAT treatment |
|---|---|
| House and lot / residential dwelling, price ≤ ₱3,600,000 | VAT-exempt |
| House and lot / residential dwelling, price > ₱3,600,000 | Subject to 12% VAT |
| Residential lot sold on its own | Subject to 12% VAT regardless of price (see below) |
| Socialized housing under RA 7279 | VAT-exempt, no price ceiling |
| Property sold by a non-dealer (capital asset) | Outside VAT; 6% capital gains tax may apply instead |
Why a residential lot lost its own exemption #
A residential lot sold on its own no longer has a separate VAT exemption — the TRAIN Law removed it effective 2021, so a dealer selling a bare residential lot charges VAT regardless of price, unless the sale is socialized housing. Before the TRAIN Law (Republic Act No. 10963), residential lots carried their own lower exemption ceiling, distinct from the house-and-lot threshold. RR No. 4-2021, later adjusted by RR No. 8-2021, eliminated the standalone residential-lot exemption as part of implementing TRAIN’s real property VAT provisions. This is a common point of confusion — a developer that assumes an inexpensive lot is automatically exempt “because it’s cheap” can understate output VAT. Only house-and-lot and other residential-dwelling sales retain a price-based exemption today; a lot sold without a house does not.
Socialized housing stays exempt without a ceiling #
Real property sold or leased for socialized housing under Republic Act No. 7279 remains VAT-exempt regardless of selling price, separate from the adjustable house-and-lot threshold. This exemption is not indexed to CPI the way the general residential threshold is — it is tied instead to the property qualifying as socialized housing under RA 7279’s own price and beneficiary criteria, which developers should confirm with the relevant housing agency and the BIR before treating a project as automatically exempt.
Worked example: threshold in practice #
A developer sells two townhouse units in the same month — one at ₱3,400,000 and one at ₱4,200,000 — and must treat them differently for VAT.
| Unit | Price | VAT treatment | Output VAT |
|---|---|---|---|
| Unit A | ₱3,400,000 | Below ₱3.6M threshold — exempt | ₱0 |
| Unit B | ₱4,200,000 | Above ₱3.6M threshold — VAT-taxable | ₱504,000 (12%) |
Both sales still carry a separate creditable withholding tax obligation under BIR Form 1606, quite apart from the VAT result — VAT and CWT are not alternatives to each other, they apply on top of one another to the same ordinary-asset sale.
VAT return #
A VAT-registered real estate dealer reports output VAT from taxable property sales on the quarterly VAT return, BIR Form 2550Q, alongside its other VAT-taxable transactions. If the dealer’s total sales still fall under the standard VAT registration threshold rules, see VAT Registration Threshold in the Philippines for when VAT registration itself becomes mandatory.
Frequently asked questions #
Is every sale of real property in the Philippines subject to VAT? #
No. VAT applies only when the seller is habitually engaged in the real estate business (a dealer, developer, or lessor) and the property is an ordinary asset. A sale by someone not in the real estate business is generally not subject to VAT and may instead be subject to capital gains tax.
What is the current VAT-exempt threshold for a house and lot? #
As of this writing, sale of a house and lot or other residential dwelling is VAT-exempt if the gross selling price does not exceed ₱3,600,000, per Revenue Regulations No. 1-2024, effective January 1, 2024. Sales above that threshold are subject to 12% VAT.
Is selling a residential lot alone still VAT-exempt below a certain price? #
No. The TRAIN Law removed the separate VAT exemption for a residential lot sold on its own, effective 2021. A real estate dealer selling a residential lot by itself is VAT-taxable regardless of price, unless the sale qualifies as socialized housing.
Is socialized housing exempt from VAT regardless of price? #
Yes. Real property sold or leased for socialized housing under Republic Act No. 7279 remains VAT-exempt under Section 109(P) of the NIRC without a peso ceiling, distinct from the adjustable house-and-lot threshold.
Does VAT replace the withholding tax on an ordinary-asset real property sale? #
No. VAT and creditable withholding tax apply independently to the same ordinary-asset sale. The seller charges output VAT (or the sale is exempt below the threshold), while the buyer separately withholds creditable tax on the sale price via BIR Form 1606.
Summary #
VAT on real property turns on two questions: is the seller a real estate dealer, and does the price clear the current ₱3,600,000 house-and-lot threshold under RR No. 1-2024? A residential lot sold alone no longer gets its own lower exemption, socialized housing stays exempt without a ceiling, and VAT applies independently of the creditable withholding tax the buyer owes under BIR Form 1606. Confirm the current threshold on the BIR website before pricing a project, since it is subject to a mandatory three-year CPI adjustment.