Real estate offers both long-term appreciation and passive income. However, understanding the tax implications is critical for success. One of investors' most pressing issues is navigating the thin line between tax avoidance and tax evasion, two concepts often confused but with vastly different consequences. Let’s learn about their differences, updated tax obligations, tax tips for investors, and recent developments in Philippine taxation processing.

Tax Evasion vs. Tax Avoidance

Tax evasion is the illegal act of deliberately misrepresenting or concealing information to reduce tax liabilities. Common forms include underreporting income, overstating deductions, or failing to file tax returns. The Bureau of Internal Revenue in the Philippines has intensified efforts to crack down on tax evasion, especially in high-value sectors like real estate.

On the other hand, tax avoidance is the legal practice of minimizing tax liabilities through legitimate means such as utilizing tax exemptions, deductions, or incentives provided by law. For example, transferring property through donation to family members within legal limits or using a corporation to structure a real estate portfolio can be lawful strategies to reduce tax burdens.

Real Estate and Tax Obligations

Real estate investors should be aware of several key factors:

• Capital Gains Tax – typically 6% of the property’s selling price or fair market value, whichever is higher.
      
• Documentary Stamp Tax – usually 1.5% of the selling price.
      
• Value-Added Tax – applies in certain cases, especially if the seller is a VAT-registered entity and the property exceeds thresholds set by law.
      
• Withholding tax – when properties are sold by corporations or developers, a creditable withholding tax may apply.
  
  

Failure to accurately report and pay these taxes may result in audits, penalties, or even criminal prosecution. As of 2025, the BIR has launched advanced digital monitoring systems and is collaborating with the Land Registration Authority to detect undervaluation and unreported transactions. Properties purchased through cash, inconsistent declarations of selling price, and sudden wealth accumulation have become red flags for investigation.
Moreover, the government is encouraging voluntary compliance through tax amnesty programs and educational campaigns. Investors are urged to take advantage of these initiatives while they are available.

Tax Tips for Real Estate Investors

Here are some tips to handle tax obligations for Philippine investors:

• Hire a licensed tax consultant or lawyer familiar with real estate transactions.
      
• Register all transactions accurately with the BIR, and request official receipts.
      
• Use legal tax planning strategies, such as forming a real estate holding company.
      
• Stay updated on tax reforms that may affect your investments.
  
  

Final Thoughts

Tax avoidance, when done legally and ethically, is a smart financial strategy. Tax evasion, however, puts your assets and reputation at serious risk. For Filipinos investing in real estate, it’s important to be informed, compliant, and strategic. Knowledge is both power and protection when it comes to navigating Philippine tax laws. You may visit us at the REALS Corporation website and Facebook page to check out an updated listing of properties for sale in the Philippines.

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For many Filipinos, investing in real estate is the ultimate goal. Whether you’re buying your first home, flipping properties, or acquiring rental assets, real estate offers long-term growth and financial security. But before you seal the deal and sign the deed of sale, there’s one crucial thing you should know: underdeclaring the property’s selling price is illegal and can get you into serious tax trouble.

What Is Underdeclaration in Real Estate?

Underdeclaration happens when the buyer and seller agree on a selling price – say, PHP 5 million – but only declare PHP 3 million in the Deed of Sale submitted to the Bureau of Internal Revenue. This tactic is usually done to reduce taxes like the Capital Gains Tax and the Documentary Stamp Tax. However, this practice is a form of tax evasion, and yes, it’s a criminal offense in the Philippines.

How the BIR Determines Property Value?

You can’t just declare any amount you want when transferring property ownership. The BIR uses the zonal value or the fair market value of a property to compute taxes. This means even if you underdeclare, the BIR will still assess taxes based on the higher value between your declared price and the zonal value. Zonal values are regularly updated and published by the BIR based on the property’s location, classification, and other factors. If the declared selling price is way below the zonal value, that’s a red flag for the BIR – and it could trigger an audit.

Legal and Financial Consequences

Under the National Internal Revenue Code, specifically Section 254, willfully attempting to evade taxes, like by underdeclaring the property value, can result in:

• A fine of PHP 500,000 to PHP 10 million.
      
• Imprisonment of 6 to 10 years.

The BIR can also impose surcharges, interest penalties, and temporarily shut down businesses involved in the transaction through programs like Oplan Kandado. With the digital transformation of BIR processes, including electronic tax filing and property databases, it’s becoming harder to game the system.

Evidence for Tax Evasion

Tax evasion may be filed against the seller who did not declare the real price of the sold propertyeven if the buyer agreed to underdeclare it. The BIR can find out about the underdeclaration if there’s proof that shows the real transactions. Some pieces of evidence can be used to prove that the seller and buyer declared a price that is undervalued through the following:

• Receipts and bank transfers that show a higher amount.
      
• Email and chat conversations that confirm the real price.
      
• Notarized agreements and side contracts.
      
• Complaints from either the seller or buyer, and other witnesses.
      
• Asset declarations do not match the records of sale.

Final Thoughts

​If you’re planning to invest in real estate, always play it straight. Declare the true selling price, know the zonal value of the property, and consult with a licensed real estate broker if needed. You may contact us at the REALS Corporation official website or Facebook page. Our professional real estate agents in Baguio City will help you make informed decisions before buying or selling a property in the Philippines.

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So, you’re finally ready to buy your dream home, but unless you’re sitting on a mountain of cash, you’ll likely need a housing loan to make it happen. Good news, applying for a home loan in the Philippines isn’t as intimidating as it sounds. Whether you’re eyeing a cozy condo in Baguio City or a house and lot in Cavite, here’s what you need to know to get started.

Choose Where to Apply for a Housing Loan

You’ve got options: banks, Pag-IBIG Fund, or in-house financing, which developers usually offer. For bank home loans, this is great for flexible terms and larger loan amounts. Big names like BDO, BPI, Metrobank, and Security Bank offer competitive housing loan interest rates. Pag-IBIG housing loan is popular among first-time homebuyers and OFWs as it offers lower interest rates and longer repayment terms of up to 30 years. In-house financing is easier to qualify for, but usually comes with higher interest rates and shorter terms.

Know the Requirements

Here’s a general list of housing loan requirements in the Philippines:

• Valid government IDs.
      
• Certificate of Employment and latest payslips for the employed.
      
• Income Tax Return or BIR Form 2316.
      
• Proof of Billing to verify your address.
      
• Marriage Certificate, if applicable.
      
• For OFWs, a job contract, proof of remittance, and a special power of attorney are required.
  

Get Pre-Qualified

This step helps you estimate how much you can borrow based on your income. Most banks and Pag-IBIG have online housing loan calculators to give you an idea of your monthly amortization. However, your monthly amortization should not exceed 40% of your gross monthly income.

Submit Your Application

Once you’ve chosen a lender, submit your documents online or through their nearest branch. The lender will review your credit standing, employment status, and income to assess your capacity to pay. Approval can take anywhere from 5 days to a few weeks, depending on the lender and how complete your documents are.

Loan Approval and Release

If approved, you’ll receive a Letter of Guarantee for bank loans or a Notice of Approval for Pag-IBIG. After signing the loan documents and submitting additional requirements, the funds are released directly to the seller or developer.

Final Thoughts

Applying for a housing loan in the Philippines doesn’t have to be a stressful experience. With a bit of research and the right documents, you’re well on your way to becoming a homeowner. Just make sure to compare interest rates, loan terms, and fees before deciding on a lender. Whether you’re buying your first home or investing in real estate, knowing how home financing in the Philippines works is the key to making smart, confident moves in the property market. REALS Corporation is the leading real estate brokerage firm in Baguio, please let us know how we can help you. Send us a message or browse through our listing to find the best properties for sale in the Philippines.

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Transfer of real properties may be done by way of donation, either to immediate family members, relatives or to a friend or an acquaintance. However, the transfer of real property should comply with the legal and regulatory requirements in the Philippines. Here’s a quick steps guide to donating a real property.
 
Identification of the relationship between donor (person or entity making the donation) and donee (person or entity receiving the donated property) for consideration of donor’s tax.
Donor’s tax treatments between parties:

a) Donations to Relatives Within the fourth degree of consanguinity (parents, siblings, children, grandparents, cousins) – Exemption of Php250,000 cumulative value per taxable year. Donor’s tax is imposed on the value above this amount.
b) Donations to “Stranger” - Not within the fourth degree of consanguinity or affinity. A friend is considered a stranger for tax purposes. No exemptions. Donor’s tax is imposed on the full value.
 
Process of donation of real property

STEP 1

Written agreement between donor and donee
Deed of donation (must be notarized)
should include:
a) Full names of the donor and donee
b) Full description of the property
c) Declaration by donor that it is being given freely and without compensation
d) Acceptance by the donee

STEP 2

Payment of Donor’s Tax to BIR
(within 30 days from date of donation)
 
Computation:
Donor’s Tax = Tax Base multiply by 6%
Tax Base: higher of the zonal value or fair market value
· To persons within fourth degree of consanguinity – tax base is amount more than Php250,000.
· To strangers – tax base is the full value
For submission to BIR:
a) Notarized Deed of Donation
b) Tax Identification Numbers (TIN) of donor and donee
c) Valid IDs of donor and donee
d) Certified True Copy of Title (from Registry of Deeds)
e) Tax Declaration (from Assessor’s Office)
f) Certificate of No Improvement (if vacant lot)
g) BIR Form 1800 (Donor’s Tax Return) and payment

STEP 3

Securing a Certificate Authorizing Registration (CAR) from BIR
N.A.
Issued by the BIR after payment of donor’s tax.

STEP 4

Pay Transfer Taxes at the Local Treasurer’s Office (LGU)
 
Computation:
0.5%–0.75% multiply by the higher of zonal or fair market value
a) Notarized Deed of Donation
b) Tax Identification Numbers (TINs) of donor and donee
c) Certified True Copy of Title (from Registry of Deeds)
d) Certificate Authorizing Registration (CAR) issued by BIR
e) Tax Declaration (from Assessor’s Office)
f) Valid Government-issued IDs of both parties
g) Donor’s Tax Receipt
h) Transfer Tax Return (Local Government Form)

STEP 5

Transfer of title at Register of Deeds
Cancellation of the old title and issuance of a new one under the donee's name
a) Notarized Deed of Donation
b) Original title
c) Certificate Authorizing Registration (CAR) issued by BIR
d) Transfer tax receipt
e) Valid Government-issued IDs of both parties

STEP 6

Updating of tax declaration at local assessor’s office
Cancellation of the old tax declaration and issuance of a new one under the donee's name
a) Notarized Deed of Donation
b) New title (under donee’s name)
c) Certificate Authorizing Registration (CAR) issued by BIR
d) Valid Government-issued IDs of both parties
e) BIR Form 1800 (Donor’s Tax Return) and proof of payment
f) Tax Declaration (from Assessor’s Office)
g) Barangay clearance (optional - as may be requested)

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