Just like taxes charged on top of the price tags for products we pluck out of grocery shelves, transactions on real properties in the Philippines do not only involve the property value; there are also several taxes that need to be settled.
This should be kept in mind so that every time we negotiate price of say a condo unit or a vacant lot, you not only prepare for the value of the property, but also allocate for taxes payable thereafter.
Let us examine these fees and better understand why we need to pay them.
1. Capital Gains Tax
This is equivalent to 6% of the residence’s sales price, zonal value or fair market value, whichever is highest. Usually but not always, this is paid by the seller. To make computation simple, this rate can also be incorporated into the price tag which is understood that it is shouldered by the buyer. This and must be paid within 30 days after each transaction.
2. Transfer Tax
This is equivalent to 0.5% to 0.75% of the property sale price, zonal or fair market value, whichever is highest.
3. Documentary Stamp Tax
This is equivalent to 1.5% of the property sale price, zonal or fair market value, whichever is highest.
4. Title Registration Fee
This varies according to a published registration fee table; generally around 0.25% of the sales price. Registration fees are paid to the Register of Deeds or Land Registration Authority where the real property is located.
These taxes will vary, obviously, based on the property price. And price will also vary depending on location of property, size, condition and other factors. Settling these taxes are prerequisite with the formality of transaction and failure to do so would result in penalty and surcharges.