In almost any country, you will always hear a word that will sound familiar to you as life goes by: taxes. Whenever you buy a product or pay for services, there is always a small percentage that is allocated towards certain fees. In a developing country like the Philippines, taxes are essential in order for the local and national government to earn money that will be dedicated towards improving the nation as a whole.
Even with buying a house, there are also taxes that you need to pay for. It is mandated by law and should not be neglected. With that in mind, you should be aware of the fees and taxes that you’ll need to pay for buying a house or selling it in the Philippines.
Unfortunately, not everyone has a clue when it comes to paying taxes when buying o selling a property. Therefore, here’s a list of charges that you need to pay when buying a property here in the Philippines.
Taxes can be divided between two parties; the SELLER and the BUYER. To better understand where each taxes will come in, here’s a brief insight on the process for selling and buying property here in the Philippines.
- The owner and the broker will sign a contract of agreement on the price of the property, commission fee, and other matters that concern the transfer.
- Owner or SELLER of the said property should issue an Authority to Sell document.
- The real estate broker checks the condition of the property for sale.
- The real estate broker will advertise the property for sale
- Interested parties will view the property for sale.
- When an interested party or BUYER is interested, he/she should send a Letter of Intent or Offer to Buy.
- Once the Owner or SELLER sees the Letter of Intent and signs the document, the SELLER is now bound not to sell the property to other interested parties.
- Earnest money or reservation fee is given from the BUYER to the Owner or SELLER.
- All legal documents are then processed by both the BUYER and the SELLER to legitimize the transaction.
The SELLER of the property needs to pay for the following taxes:
- Capital Gains Tax – Equivalent to 6% of the selling price indicated in the Deed of Sale. It could also be the zonal value. Withholding tax is included if the seller is a corporation.
- Agent’s/Broker’s Commission – This is the fee that is paid to the broker based on the percentage of the sale that was made from purchasing the property.
- Unpaid real estate taxes due, if any is present.
The BUYER pays for the cost of Registration:
- Documentary Stamp Tax – It’s 1.5% of the zonal value or selling price of the property being sold.
- Transfer Tax – This is 0.5% of the zonal value or selling price of the property being sold.
- Registration Fee – 0.25% of the original selling price of the property being sold.
- Any incidental or miscellaneous expenses incurred during the registration process.
The Deed of Sale will be given by the Registry of Deeds and all registration fees, the transfer tax, and documentation stamp taxes will be paid by the buyer of the said property.
There are also other taxes in the Philippines that are of real estate concern as well:
Real Property Tax – In the Philippines, certain local government units in big cities like Manila and Cebu have their own local taxes which are known as revenue sources. One of these revenue sources is the Real Property Tax or RPT. This is a tax that is imposed on all types of real estate property, such as apartments and condos.
Donor’s Tax – As the name suggests, it is a tax imposed when property is given as a donation.
Always remember that paying taxes in the Philippines might require a little patience on your side, but in the end, it is all worth it. Besides, think of it as an investment in fulfilling your life-long dream of getting your own house.
Image source: http://www.persquare.com.ph/for-sale/beach-house-central-visayas-cebu-liloan/beachfront-house-lot-for-sale-in-liloan_88472
