Wednesday, October 3, 2007

Philippine Taxes on Realty Estate Deals

TAXES ON REAL ESTATE TRANSACTIONS


X x x. So before we hop on to the condo bandwagon, we should study the following checklist of taxes generally involved in condominium purchases, as well as their corresponding rates:

1. The 12 percent value-added tax (VAT). VAT is payable if the purchase is from a real estate developer. This is because according to our Tax Code, the sale of real properties held primarily for sale to customers in the ordinary course of trade or business of the seller shall be subject to VAT.

2. The 6-percent capital gains tax (CGT). CGT is payable if the condo to be purchased is second-hand. CGT is likewise based on the GSP or FMV of the said condo (whichever is higher), and is usually payable by the owner since it is his gain that is being taxed.

3. One and half percent documentary stamp tax (DST). DST is imposed on conveyances of real property (condo units, in this case) as the rate of P15 for every P1,000 (or 1.5 percent, for easy computation) of the consideration or value received for such property. DST is applicable whether the sale concerns a brand new condo unit (sold by a real estate developer) or a second-hand unit (sold by a broker of the owner), and is also usually payable by the seller. Like, CGT, the party liable therefore may also be previously agreed upon by the parties.

4. Fifty to 75 percent of one percent local transfer tax (LTT). With respect to the transfer of real property the LTT thereof shall not be more than 50 percent of one percent if located in a city, of the GSP involved in the acquisition of the condo unit or FMV, whichever is higher. The LTT is usually shouldered by the buyer, and is likewise payable whether the condo unit is brand new or second-hand.

5. Registration fees (to Register of Deeds). Registration fees vary depending on locality. It is safe to assume, however, that said fees range for 0.25 percent to 0.50 percent of the selling price or assessed value of the condo unit, whichever is higher. Registration fees are usually paid by the buyer.

X x x.

Source:

Rommel R. Ramos and Jose A. Osana, SGV & Co., “CONDO-MANIA: TAX TRAVAILS OF BUYING A CONDO”, Phil. Daily Inquirer, 10/6/06, p. B4

Edited by:

Atty. Manuel J. Laserna Jr.

Laserna Cueva Mercader Law Offices

LCM LAW

Las Pinas City

Tel/Fax 8742539

Email: lcmlaw@gmail.com

http://groups.msn.com/lasernacuevamercader