Purchasing Real Estate In The Philippines
I wish to purchase real estate in the Philippines. What do I need to know?
A lot of people, both foreigners, and Filipinos, wish to own property in the Philippines. However, more often than not, prospective buyers hesitate to do so as the consideration for buying real estate does not only involve the question of “Would I be able to afford a property based on its selling price?”. More importantly, buyers of real estate also take into account the concomitant taxes, government fees, and charges consequent to such purchase.
Most buyers do not even have any idea that there are resultant taxes and fees imposed in purchasing a property much less the amount of said taxes, fees and charges.
So, in this article, we tackle the frequently asked questions regarding purchase of real property in the Philippines.
What are the taxes and fees that will be imposed in purchasing a property?
The taxes and fees that will be imposed are as follows:
- Capital Gains Tax
- Documentary Stamp Tax
- Transfer Tax
- Registration Fees with the Register of Deeds
What is Capital Gains Tax? Who pays the Capital Gains Tax? When should Capital Gains Tax be paid? Where will I pay Capital Gains Tax?
Capital Gains Tax (CGT) is imposed on the presumed gain of the seller (who should not be engaged in the business of selling real estate). Given its purpose, it is the seller who is to pay the Capital Gains Tax. However, the parties may agree for the Buyer to shoulder the Capital Gains Tax.
Capital Gains Tax should be paid within thirty (30) days after the sale of the real property to the Bureau of Internal Revenue District Office where the property sold is located.
What is Documentary Stamp Tax? Who pays the Documentary Stamp Tax? When Should the Documentary Stamp Tax be paid?
Documentary Stamp Tax (DST) is a tax applied to documents or agreements evidencing, among others, the sale or transfer of rights or property. The tax is paid by the party making, signing, issuing, the document or accepting or transferring the property. Documentary Stamp Tax shall be filed within five (5) days after the end of the month when the taxable document was made and signed and it shall be paid in the Bureau of Internal Revenue District Office where the property sold is located.
When should Transfer Tax be paid? Where do I pay the transfer tax?
Transfer taxes should be paid within sixty (60) days from execution of the Deed of Absolute Sale and it shall be paid at the local government unit where the property is located.
What happens if I don’t pay the Capital Gains Tax, Documentary Stamp Tax and Transfer Tax?
The title and tax declaration of the property cannot be transferred to the name of the buyer as payment of the said taxes is a prerequisite.
What happens if I pay late the abovementioned taxes?
Appropriate penalty shall be imposed by the BIR and the LGU concerned.
If I purchase a condominium unit, will the abovementioned taxes and fees still apply?
Yes. Capital Gains Tax (provided Seller is not engaged in the business of selling real properties), Documentary Stamp Tax, Transfer Tax and Registration Fees shall be applied whether the buyer purchases a land or a land with improvement or a condominium unit.
Can foreigners purchase real estate in the Philippines?
Foreigners can buy condominium properties in the Philippines.
