Real Estate Sales Taxes in the Philippines

Real Estate Philippines: Taxes You Should Pay When Purchasing Property

 Whether you’re planning to purchase or sell real estate in the Philippines, there are more things to consider than looking for a buyer and agreeing on the selling price. Apart from the property’s value, you should understand the taxes you should pay when buying a property.
 
So, in this article, we will share real estate sales taxes in the Philippines to help you assess your financial responsibilities before purchasing or selling a property.

1. Capital Gains Tax

Real estate sellers who sell or exchange a property must pay capital gains tax after the transaction. You can calculate it by checking the current fair market value (FMV) and multiplying the figure by 6%. For example, a property worth PHP 1,500,000 gets a PHP 90,000 Capital Gains Tax. Based on the Bureau of Internal Revenue, the Capital Gains Tax Return (BIR Form No. 1706) must be filed and paid by real estate sellers 30 days after selling the property.
 
To pay it, they should also seek assistance from concerned agencies, such as the Authorized Agent Bank (AAB)/Revenue Collection Officer (RCO) of the Revenue District Office (RDO), where the real estate seller made the deal.

2. Creditable Withholding Tax (CWT)

CWT refers to the percentage of the property’s total purchase price that must be withheld and remitted by the buyer to the Philippine government. In short, the property seller can utilize the withheld sale tax to pay in advance their income taxes. To process the offset, the buyer should provide the BIR Form No. 2307 or Certificate of Creditable Taxes Withheld to the seller.
 
Meanwhile, the amount of CWT varies based on the property’s type and transaction value, ranging from 1.5% to 6%. However, the buyer should withhold a CWT based on the following:

• Gross selling price or total amount of the property for sale
• Current fair market value of the property

 
On the other hand, Capital Gains Tax should be applied to capital asset property since CWT is for ordinary assets only.

3. Documentary Stamp Tax (DST)

DST refers to an excise tax involving documents indicating the acceptance, assignment, sale, or transfer of rights, property, or obligation. When you sell property in the Philippines, the rate of taxes is 1.5%, which depends on the highest selling price, assessed value, or BIR zonal value. Aside from that, the following documents related to a real estate sale are taxable:

• Bank checks
• Birth certificate
• Deed of sale
• Debt instrument
• DTI business name certificate
• Lotto
• Leases
• Power of attorney
• Original issuance of stocks
• Other hiring agreements

4. Value-added/Percentage Tax (VAT)

Real estate sellers should also pay a 12% VAT after selling a property. However, as per the Tax Reform for Acceleration and Inclusion (TRAIN) law, an individual may be exempted from paying VAT given they meet any of the conditions below:

• You possess residential properties, such as house and lot
• You utilized your property for socialized housing
• You sell your property for lower than PHP 3,199,200

5. Transfer tax

This tax applies when transferring the property’s ownership via a sale, barter, donation, or other methods. The transfer tax is up to 0.50% of the property's total selling price, current fair market value, or zonal value. Nonetheless, the tax percentage varies per location, like in Metro Manila, which is 0.75%.
 
For instance, if you’re buying a property worth PHP 1,500,000 in Metro Manila, the transfer tax is around PHP 11,250. By paying this tax, you can register a deed or obtain a new title in your name. You’ll also get a new tax declaration.