More than a year after the onset of the Coronavirus Disease 2019 (COVID-19) pandemic, the government continues to ramp up its efforts to reduce financial distress brought by the public health crisis. As part of its response, the Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 8-2021 on June 12. RR 8-2021 seeks to amend RR 4-2021 which was initially issued to implement Value-Added Tax (VAT) and Percentage Taxes under Republic Act (RA) 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. 

The three salient features of the regulation are: (1) the reversion of the VAT-exempt threshold on the sale of dwellings back to P3,199,200; (2) the exemption of imports of certain goods needed to contain COVID-19 from the Authority to Release Imported Goods (ATRIG) requirement; and (3) a tax refund for overpayment of percentage tax.


RA 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law provides that starting Jan. 1, 2021, the threshold of VAT exemption for transactions involving residential dwellings be decreased from P2.5 million to P2 million. The implementing regulations adjusted the threshold to P3,199,200 based on the 2010 Consumer Price Index Values pursuant to RR 16-2012.

Taxpayers raised worries regarding the legislated decrease because even after it was raised to approximately P3.2 million, some low-income families will find it hard to afford. Concerns were raised that the full 12% VAT will be passed on to buyers seeking decent dwellings; some buyers of affordable homes may be put off from buying due to the VAT. 

Hope arose when the CREATE Bill passed in the Senate, which raised the VAT exemption threshold to P4.2 million. The upward adjustment was vetoed by the President, who said the P4.2 million is highly distortive as it will benefit even those not targeted for VAT exemption — those who can afford proper housing. With the President’s veto, the P2 million threshold under the TRAIN Law remained, as implemented by RR 4-2021 in April.

With the issuance of RR 8-2021, the BIR has now reverted the VAT-exempt threshold to P3,199,200. This is good news considering that many of us have made the decision to stop renting and are now starting to invest in houses due to work-from-home setups because of the community quarantine. Filipinos can continue to enjoy the VAT exemption for residential dwellings not exceeding P3,199,200 when buying affordable housing.

The P3,199,200 VAT-exempt threshold, however, should only apply to sale of detached homes and other residential dwellings like condominiums. Sales of residential lots only are not included in the threshold exemption.


Section 12 of the CREATE Act, which amended Sec. 109 (BB) of the Tax Code, provides the VAT exemption from January 1, 2021 to December 31, 2023 on the sale or importation of the following:

1. Capital equipment, its spare parts and raw materials, necessary to produce personal protective equipment components;

2. All drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of COVID-19; and

3. Drugs, including raw materials, for the treatment of COVID-19 approved by the FDA for use in clinical trials.

RR 8-2021 subsequently added that these goods are not subject to the issuance of an ATRIG and may be released by the Bureau of Customs (BoC) immediately. ATRIG is an authority issued by the BIR, addressed to the Customs Commissioner, to allow the release of imported goods from the ports upon payment of duties and taxes or the presentation of proof of exemption.

The procedure for acquiring the imported COVID-19 products will now be relatively easier because the BIR removed the requirement of obtaining an authority before such items can be released by the BoC. This is in line with the government’s effort to achieve herd immunity following the launch of the vaccination process. Sans the exemption from ATRIG, importers would still have to collate supporting documents and wait for the BIR’s approval. Worthy to note, however, is that post-audit investigations on importers exempt from ATRIG could still be conducted.


Any person whose sales or receipts does not exceed the P3 million VAT threshold and who is not VAT-registered is exempt from paying VAT and is to pay percentage tax on quarterly gross sales or receipts. Under the CREATE Act, the percentage tax rate was decreased from 3% to 1% which is to be in effect between July 1, 2020 and June 30, 2023. Since there is retroactive application of the decreased rate, there are taxpayers who overpaid percentage tax. Under the rules, the default treatment of the overpaid percentage tax is applied to the next taxable quarters. 

Under RR 8-2021, a tax refund can be availed of by those taxpayers who:

1. Shifted from Non-VAT to VAT-registered status; and

2. Have opted to avail of the 8% income tax rate at the beginning of TY 2021.

The CREATE Law was enacted to drive the economy towards global competitiveness. It further seeks to improve the tax system by lowering the tax rate, widening the tax base, and reducing tax distortions. Through the CREATE Act, the government also aims to provide support to businesses in their recovery from the COVID-19 outbreak. RR 4-2021 was issued to implement the VAT and Percentage Tax under the CREATE Law. Meanwhile, RR 8-2021 appears to be the BIR’s response to the economic effects of COVID-19, specifically by acknowledging that the demand for housing is not dampened by the pandemic, by easing procedures in releasing imported goods to fight the virus, and by providing rules to recover overpaid percentage taxes. After more than a year of dealing with the coronavirus and with the ongoing drive to inoculate the population, we cannot wait for the economy to fully recover and be stable soon.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.


As published in BusinessWorld, dated 22 June 2021