Thursday, January 30, 2014
Buying and selling of properties in the Philippines involves taxes and fees over the selling price. Be aware of the common practice of sharing these expenses between buyer and seller.
When selling or buying real estate properties, there are some transaction expenses, even on the seller’s side. These costs include Philippine taxes, registration fees and expenses for real estate agents or brokers, lawyers and notaries.
The expenses may add up to quite a considerable amount, depending on the selling price of the property. Buyers and sellers may come to a mutual agreement on how to split the costs during negotiations, or before the Deed of Sale is signed.
However, based on standard practice in the Philippines, this is how the expenses are shared between seller and buyer.
Property sellers are required to pay Capital Gains Taxes. This current rate is six percent of the gross selling price, zonal value or fair market value - whichever is higher. The gross selling price is the buying price agreed upon by the seller and buyer and appears in the Deed of Sale.
The fair market value can be found on the tax declaration of the real estate property, and this is computed and prepared by local assessors, while the Bureau of Internal Revenue (BIR) establishes and prepares the zonal value for each zone in the country.
The Capital Gains Tax should be paid within thirty days from the sale of the property.
If the seller is a corporation, the seller should also pay for the Witholding Tax. If there are any unpaid real estate taxes due, the seller is also responsible for these expenses. Also, it is common practice for sellers to enlist the services of an agent or broker, and as such, the seller will also need to shoulder the agent or broker’s commission fees. This fee may vary, depending on your agreement with your agent.
The buyer is usually responsible for paying the Documentary Stamp Tax. The rate of the documentary stamp tax is currently set at 1.5 percent of the gross selling price, fair market value or zonal value - whichever is higher.
Payment should be made within five days after the end of the month when the document is signed. The buyer also covers the Registration Fee and the Transfer Tax, at 0.25 and 0.5 percent of the selling price, zonal value or fair market value, respectively.