Buying property in the Philippines involves navigating a complex landscape of taxes, including but not limited to Capital Gains Tax (CGT), Real Property Tax (RPT), Transfer Tax, Value Added Tax (VAT), Documentary Stamp Tax (DST), and property rental income tax. This guide provides an overview of how and when to pay these various property taxes in the Philippines and how Own Property Abroad can assist you in managing these tax responsibilities efficiently.
Types of property taxes in the Philippines
There are different types of taxes related to real estate in the Philippines. Property taxes in the Philippines include:
- Capital Gains Tax (CGT)
- Real Property Tax (RPT)
- Transfer Tax
- Value Added Tax (VAT)
- Documentary Stamp Tax (DST)
- Property rental income tax
Besides the different types of taxes on the sale or purchase of real estate, it’s also important to be aware of rental income taxes. Property owners who rent their property to short-term visitors, such as tourists on Airbnb, and long-term visitors, such as expats, must pay taxes on the income they generate through property rental.
Capital Gains Tax (CGT)
Capital Gains Tax in the Philippines is paid on selling property classified as a capital asset. The CGT tax is one of the most important taxes on the sale of real property in the Philippines and is levied on the presumed profit that the seller makes with the sale.
To calculate the Capital Gains Tax in the Philippines, the property’s selling price or fair market value is used (whichever is higher) and multiplied by the CGT tax rate of 6%. There is a CGT exemption of capital gains from the sale of principal residence property.
Capital Gains Tax calculator
You can calculate the Capital Gains Tax on the sale of property in the Philippines by using our CGT calculator below.
Overview
- In which situation to pay Capital Gains Tax? When selling a property in the Philippines.
- Who pays Capital Gains Tax? The seller of the property pays Capital Gains Tax in the Philippines.
- What is the deadline to pay Capital Gains Tax? Within 30 days following the sale to the BIR.
Whether you need help understanding your tax obligations, optimizing your tax payments, or simply managing the annual filing process, Own Property Abroad is here to assist. You can leave your details below or email us at [email protected] for more information or assistance with property taxes in the Philippines.
Talk with our tax agent in the Philippines
Real Property Tax (RPT)
Real estate owners, such as those of buildings and land, must pay an annual property tax called Real Property Tax (RPT). The Real Property Tax is one of the most crucial property taxes in the Philippines and is based on the assessed value of the property or land. The Real Property Tax is imposed by the LGU where the property is located. This tax is locally called amilyar and is due on January 1 yearly.
The Real Property Tax rate differs based on the location. According to the Local Government Code of 1991, there are two different tax rates:
- 1% of the assessed value for properties in the province.
- 2% of the assessed value for properties within Metro Manila.
To pay Real Property Tax, you need the Official Receipt of the previous tax payment, property title number, and Tax Declaration Number. This tax can be paid online and in person at the City Treasurer’s Office.
Real Property Tax calculator
You can use the calculator below to calculate how much Real Property Tax to pay in the Philippines.
Overview
- In which situation to pay Real Property Tax? When owning real estate in the Philippines.
- Who pays Real Property Tax? Property and landowners pay Real Property Tax in the Philippines.
- What is the deadline to pay Real Property Tax? Before January 31 of each year. If you can’t pay it all at once, it’s possible to pay in four installments before March 31, June 30, September 30, and December 31.
Transfer Tax
Transfer Tax is an important real estate tax in the Philippines and must be used when transferring a land title. There are several types of transfer taxes in the Philippines. Generally, a Transfer Tax with a rate of 0.5% is imposed on the selling price, zonal value, or fair market value, whichever is higher.
However, another tax rate is imposed in case of a land title transfer through a gift or inheritance:
- Donor’s Tax: This tax must be paid by anyone who transfers property by filing BIR Form 1800. The Donor’s Tax in the Philippines has a rate of 6%.
- Estate Tax: This tax is paid by the decedent’s heirs by filing BIR Form 1801. The Estate Tax in the Philippines has a rate of 6% imposed on the property’s value.
Besides the Transfer Tax, buyers must also pay a Registration Fee when transferring a land title. The Registration Fee is between ₱ 21 ($0.38) and ₱ 8,796 ($158), depending on the property’s value or selling price.
Overview
- In which situation to pay the Transfer Tax? When transferring a land title in the Philippines.
- Who pays Transfer Tax? The seller or receiver of the property.
- What is the deadline to pay the Transfer Tax? Within 30 days following the land title transfer.
Value Added Tax (VAT)
A 12% Value Added Tax (VAT) is levied on the sale of real estate by those involved in professionally selling, developing, leasing, or sub-leasing real property, primarily real estate companies and businesses licensed to engage in such transactions. The VAT is levied on the gross selling price or the gross value of money earned from the sale or lease of property in the Philippines.
Overview
- In which situation to pay Capital Gains Tax? When selling a property in the Philippines.
- Who pays Capital Gains Tax? The seller of the property pays Capital Gains Tax in the Philippines.
- What is the deadline to pay Capital Gains Tax? Within 30 days following the sale to the BIR.
Whether you need help understanding your tax obligations, optimizing your tax payments, or simply managing the annual filing process, Own Property Abroad is here to assist. You can leave your details below or email us at [email protected] for more information or assistance with property taxes in the Philippines.
Talk with our tax agent in the Philippines
Documentary Stamp Tax (DST)
The Documentary Stamp Tax (DST) is a type of property tax in the Philippines that applies to all documents that prove the acceptance, assignment, sale, or transfer of an obligation, rights, or property. When selling a property in the Philippines, a Documentary Stamp Tax with a rate of 1.5% must be paid. This rate is based on the highest selling price, BIR zonal value, or assessed value by the provincial/city assessor.
Overview
- In which situation to pay Documentary Stamp Tax? When selling a property in the Philippines.
- Who pays Documentary Stamp Tax? The seller of the property pays DST by filing BIR Form 2000.
- What is the deadline to pay the Documentary Stamp Tax? Within 5 days after the close of the month when the taxable document was made.
Property rental income tax
Those who rent out property and earn income pay Personal Income Tax on their rental income. The Personal Income Tax in the Philippines is progressive, meaning the tax rate is higher the more you earn. Below is an overview of the Personal Income Tax for tax residents in the Philippines.
| Taxable income | Tax rate |
|---|---|
| Less than ₱ 250,000 ($4,500) | 0% |
| Between ₱ 250,000 ($4,500) and ₱ 400,000 ($7,200) | 15% |
| Between ₱ 400,000 ($7,200) and ₱ 800,000 ($14,400) | 20% |
| Between ₱ 800,000 ($14,400) and ₱ 2 million ($36,000) | 25% |
| Between ₱ 2 million ($36,000) and ₱ 8 million ($144,000) | 30% |
| More than ₱ 8 million ($144,000) | 35% |
Foreigners’ income tax for rental income in the Philippines
Foreigners who own property in the Philippines and earn rental income must pay a different tax rate:
- Foreign residents: 25% of the gross rental income.
- Foreign non-residents: 35% of the gross rental income.
How to pay property taxes in the Philippines?
Paying property taxes in the Philippines is straightforward once you are familiar with the steps involved. The process of paying property taxes differs for each type of real estate tax in the Philippines.
- Capital Gains Tax (CGT): Capital Gains Tax must be paid to the BIR within 30 days following the sale. The tax is calculated based on the gross selling price or the fair market value, whichever is higher.
- Real Property Tax (RPT): Real Property Tax in the Philippines is paid annually to the local government unit where the property is located. Payment is made at the municipal or city hall’s Treasurer’s Office. You need to present the Tax Declaration document for your property.
- Transfer Tax: Transfer Tax is paid to the local government unit where the property is located, similar to RPT. It is payable before the transfer of the title to the new owner.
- Documentary Stamp Tax (DST): Documentary Stamp Tax applies to documents facilitating property transactions. Payment is made to the Bureau of Internal Revenue (BIR) before the transaction is registered. DST is often paid through banks accredited by the BIR.
- Value-Added Tax (VAT): Value Added Tax may apply to the sale of property by VAT-registered persons or entities. Like CGT, VAT is paid to the BIR, which involves submitting the necessary documents to an accredited bank.
- Property rental income tax: Personal Income Tax is paid annually. Property owners must register their rental business with the BIR, issue official receipts, and file income tax returns accordingly.
When to pay property taxes in the Philippines?
The deadline to pay real estate property taxes in the Philippines differs for each property tax. Here is an overview of when to pay property taxes in the Philippines:
- Capital Gains Tax (CGT): CGT is due within 30 days following the sale of the property.
- Real Property Tax (RPT): The deadline for annual payment is January 31, with the option for quarterly payments.
- Transfer Tax: The deadline varies by local government but is generally paid before or within 30 days after the transfer of title.
- Documentary Stamp Tax (DST): DST must be paid within 5 days after the close of the month when the taxable document was made, signed, issued, accepted, or transferred.
- Value-Added Tax (VAT): VAT is payable to the BIR monthly and summarized quarterly.
- Property rental income tax: The usual deadline for filing the annual Income Tax Return in the Philippines is April 15 of the following year.
Get help with filing property taxes in the Philippines
Navigating the complexities of property taxes in the Philippines, especially for those living abroad or with multiple investments, can be challenging. Own Property Abroad offers support for property owners, including assistance with all types of property taxes, such as Capital Gains Tax (CGT), Real Property Tax (RPT), Transfer Tax, Value Added Tax (VAT), and Documentary Stamp Tax (DST), along with income tax, business taxes, and other taxes related to buying and selling properties.
Our legal team is experienced in the Philippine tax system and is dedicated to ensuring that your tax filings are accurate, timely, and compliant with local regulations. Whether you need help understanding your tax obligations, optimizing your tax payments, or simply managing the annual filing process, Own Property Abroad is here to assist. You can leave your details below or email us at [email protected] for more information or assistance with property taxes in the Philippines.
Talk with our tax agent in the Philippines
Frequently Asked Questions (FAQs)
What are the taxes to be paid when selling a property in the Philippines?
When selling a property in the Philippines, the seller is typically responsible for paying the Capital Gains Tax (CGT) and the Documentary Stamp Tax (DST). The CGT on the sale of property is charged at 6% of the gross selling price or the current fair market value, whichever is higher. The DST is calculated at 1.5% of the selling price, the zonal value, or the fair market value, whichever is highest.
How to compute Documentary Stamp Tax on the sale of real property in the Philippines?
To compute the Documentary Stamp Tax (DST) on the sale of real property in the Philippines, multiply the selling price, the zonal value, or the fair market value of the property (whichever is highest) by 1.5%. For example, if the selling price of a property is ₱ 2 million ($36,000), the DST payable would be ₱ 2 million ($36,000) x 1.5% = ₱ 30,000 ($540).
Does paying property tax give ownership in the Philippines?
Paying property tax in the Philippines does not confer ownership of the property. Property taxes in the Philippines are annual obligations property owners must pay to the local government unit. Ownership is legally transferred and recognized through executing a deed of sale and the subsequent property registration with the Registry of Deeds.
How much is property tax in the Philippines?
Property taxes in the Philippines are typically set at 1% of the property’s assessed value for provinces and 2% for cities and municipalities within Metro Manila. The actual amount depends on the assessed value, which is determined by the local government’s assessor’s office.
What are exemptions from real property tax in the Philippines?
Exemptions from Real Property Tax in the Philippines include properties owned by the government, charitable institutions, churches, cooperatives, and cultural sites. Additionally, machinery and equipment used for pollution control and environmental protection are exempt. Owners of properties under a specific assessed value may also qualify for exemptions or reductions as provided by local ordinances.
How much is the land tax in the Philippines?
Land tax, commonly called Real Property Tax, is based on the assessed value of the land. The rate is 1% in provinces and 2% in cities and municipalities within Metro Manila. The specific amount depends on the property’s assessed value, which the local assessor’s office determines.
What to do if I have property tax issues in the Philippines?
If you encounter issues with property tax in the Philippines, the first step is to consult with the local government’s Treasurer’s Office or Assessor’s Office where the property is located. They can provide guidance and clarification on your tax concerns.
