Taxes, fees and deadlinesYou have just found the perfect property for your home. After reviewing your finances and completing the
due diligence on the title of the property, you are ready to make your first purchase. But wait, is the purchase price the only consideration for the buyer? The answer is no. Below is a list of the associated costs and expenses for the buyer when purchasing a real property. At the time of purchase: 1) Documentary stamp tax (DST) – due to Bureau of Internal Revenue (BIR) DST is a tax imposed on the document (Deed of Sale or a transfer of real property agreement). Rate & Tax Base: 1.5% X Selling Price/Consideration or Fair Market Value, whichever is higher. Deadline: Within 5 days after the close of the month when the agreement was executed. 2) Transfer tax – due to Local Government Unit (LGU) Transfer tax is a tax on sale, donation, barter, or any mode of transferring ownership or title of real property. Rate & Tax Base: Not more than 50% of 1% of the Selling Price/Consideration or Fair Market Value, whichever is higher. Note that the regulation states a “not more than” provision so the local government may impose a lower percentage than 50% of 1% as per local government guidelines. Deadline: Within 60 days from when the agreement was executed. 3) Registration fee & IT Fee – due to Register of Deeds (ROD) or Land Registration Authority (LRA) where the real property is located. Rate & Tax Base: The registration fee is computed based on the LRA Registration Fee Table found in LRA’s website. An IT Fee is also collected which is minimal (about P5,000). Deadline: After payment of taxes to the BIR, a Certificate Authorizing Registration (CAR) and Tax Clearance (TCL) is secured by the buyer. Both CAR and TCL should be presented to the ROD, together with other requirements, within 2 years as the CAR is only valid for 2 years from issuance date. Otherwise, buyer will need to request for issuance of a new CAR. 4) Title Transfer Service Fee (Optional) – payable to documentation services company or services of a broker. Instead of personally going to these government agencies to process the title transfer, the buyer may engage a third-party individual or company or broker to process all the title transfer procedures, and a fee is collected as agreed by the parties. The Capital Gains Tax (CGT) is usually paid by the Seller, unless it is explicitly stated that CGT will be for the buyer’s account. CGT is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines. The word “gains” in CGT should not be misconstrued as tax on the profit (selling price less cost of acquisition) as the tax base is the higher of the Selling Price or Fair Market Value. Rate & Tax Base: 6% X Selling Price/Consideration or Fair Market Value, whichever is higher. Deadline: Within 30 days from when the agreement was executed. Regular Payments after purchasing the property: 1) Real property tax (RPT) – due to Local Government Unit (LGU) Rate & Tax Base: Deadline: 4 equal quarterly installments of Basic RPT: 31 March – 1 st quarter 30 June – 2 nd quarter 30 September – 3 rd quarter 31 December – 4 th quarter Note: The LGU gives a discount for Advance Prompt Payment (annual payment) not exceeding 20% of annual tax due. Note that the regulation states a “not exceeding” provision so the local government may impose a discount percentage lower than 20% as per local government guidelines. 2) Association dues – this is usually collected by a subdivision’s Homeowner Association (HOA) or a condominium’s property manager and the amounts vary. Property owner may opt to pay monthly or do an advance payment for the full year to avail of discounts, as may be applicable. are you looking for a house and lot for sale in the Philippines? Author: Angie Wee, CPA
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