Selling a property in the Philippines involves more than finding the right buyer and negotiating the sale price. Among the crucial factors to consider are the various taxes and fees that apply to such transactions. Given the complexities of the Philippine tax system, it can be challenging to understand the full scope of your financial obligations as a seller. This article will discuss the various taxes to pay when selling a property in the Philippines.
Types of taxes to pay when selling a property in the Philippines
As a seller, you must pay various selling property taxes and other fees to complete the transaction. Here are the different types of taxes to pay when selling a property in the Philippines:
1. Capital Gains Tax (CGT)
When it comes to taxes to pay when selling a property in the Philippines, the most important is the Capital Gains Tax (CGT). It is a tax levied on the presumed profit acquired by the seller from selling a property classified as a capital asset. These capital assets include properties not utilized in any form of trade or business, like homes and land, that are not income-generating.
Philippines Capital Gains Tax calculator
When calculating the Capital Gains Tax on the sale of property in the Philippines, the property’s selling price or fair market value is used, whichever is higher. Then, you multiply the value with the tax rate of 6%. You can use our calculator below to calculate the Capital Gains Tax in the Philippines.
2. Personal Income Tax
Personal Income Tax can be a significant element in calculating taxes to pay when selling a property in the Philippines, particularly when the seller is engaged in the real estate business. In this case, the sold property is treated as an ordinary asset, and the Personal Income Tax will be computed based on tax rates ranging from 15% to 35%, correlating with the seller’s annual income.
3. Value Added Tax (VAT)
A 12% Value Added Tax (VAT) is imposed on real estate sales of those involved in selling, developing, leasing, or sub-leasing real property and those licensed to engage in the real estate brokerage business. When selling a property in the Philippines, the VAT and other taxes apply even if the real property is not primarily held for sale to customers or leased in the ordinary course of business.
4. Documentary Stamp Tax (DST)
Documentary Stamp Tax (DST) is an excise tax levied on documents evidencing the acceptance, assignment, sale, or transfer of an obligation, rights, or property therein. The taxes to pay when selling a property in the Philippines involve a rate of 1.5% based on the highest selling price, BIR zonal value, or assessed value by the provincial/city assessor.
5. Transfer Tax
The Transfer Tax shouldn’t be overlooked when discussing taxes to pay when selling a property in the Philippines. The BIR defines it as a tax imposed on any mode of transferring absolute property ownership, with a rate of 0.5% imposed on the highest selling price or zonal value, depending on the municipality where it is located. In the case of donation or inheritance, a Donor’s Tax or Estate Tax of 6% is paid over the property’s value at the moment of the land title transfer.
Other fees to consider when selling property in the Philippines
In addition to the taxes above, there are additional fees that you may need to pay as part of the taxes to pay when selling a property in the Philippines, including:
- Registration fees: The registration fees cover registering the property transfer with the Register of Deeds. These fees are calculated as a percentage of the property’s selling price or fair market value.
- Notarial fees: For any property transaction in the Philippines, including selling property taxes, it is necessary to have a notary public notarize the registry of deeds transaction, which incurs notarial fees. These fees depend on the property’s selling price.
- Unpaid real estate taxes: Any outstanding property taxes to pay when selling a property in the Philippines must be paid. The debt cannot be transferred from you to the person buying the property. Failing to pay these could result in the proposed transaction being voided.
- Agent’s or broker’s commission: If you choose to enlist the help of an agent or broker to sell your property, you will be responsible for their commission fee. Be sure to factor this into your calculations when selling the property.
Get assistance on property taxes in the Philippines from Own Property Abroad
Understanding the complex property taxes in the Philippines can be challenging. Own Property Abroad offers support for property owners, including assistance with all types of property taxes, such as property sales taxes, Capital Gains Tax (CGT), Real Property Tax (RPT), Transfer Tax, Value Added Tax (VAT), and Documentary Stamp Tax (DST).
Our team can assist you in understanding which property taxes to pay, preparing tax reports, filing tax returns, and ensuring timely payment of all property taxes. If you want more information on how we can help you with these services, please leave your contact details below or email us at [email protected].
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Frequently Asked Questions (FAQs)
What are the taxes paid by the property seller in the Philippines?
The taxes paid by the property seller in the Philippines involve several fees and taxes. The cost of selling property in the Philippines includes the Capital Gains Tax, Real Property Tax, Value Added Tax, Documentary Stamp Tax, Transfer Tax, notarial fees, and other fees.
Who pays Capital Gains Tax in the Philippines: buyer or seller?
The seller is responsible for paying the Capital Gains Tax in the Philippines. CGT is one of the taxes to pay when selling a property in the Philippines.
How much is the Capital Gains Tax in the Philippines?
The current rate for the Capital Gains Tax in the Philippines is 6% of the selling price, zonal value, or fair market value, whichever is highest. Capital Gains Tax is one of the taxes to pay when selling a property in the Philippines.
What are the requirements for selling property in the Philippines?
The requirements for selling property in the Philippines include an original copy of the land title, Tax Declaration, real estate tax receipts, and clearance from the Homeowner’s Association. Also, one of the procedures for selling property in the Philippines is to prepare the Deed of Sale, agree on payment terms, and settle the required taxes. The selling cost will depend on the agreed sale price and the applicable taxes set by the government.
6 Responses
How much percentage charge for Registration Fee per fair market value. Is the broker commission and other fees are deducted from the capital gain?
Hi Leilani, the registration fee ranges from 0.25% to 1% of the property value, based on the higher selling price, fair market value, or zonal value. The broker commission is typically 3% to 5% of the selling price, paid by the seller. The Capital Gains Tax (CGT) is a flat rate of 6% on the higher of the gross selling price or fair market value. Broker’s commission and other selling expenses are not deducted from this calculation. Other costs, such as notary fees, local transfer taxes, and documentary stamp taxes, are usually the seller’s responsibility but can be negotiated.
Hi. What is the Closing Fee being charged to the buyer upon full payment of the property? Is the buyer subject to EWT on top of the Closing Fee + Transfer Fee?
Hi Michael, the Closing Fee charged to the buyer typically includes costs related to the transfer of title, such as notarial fees, registration fees, and documentary stamp taxes. The buyer is not subject to Expanded Withholding Tax (EWT), which is usually a seller’s obligation. However, the buyer is responsible for the Capital Gains Tax or Creditable Withholding Tax, if applicable, in addition to the Closing Fee and Transfer Fee.
My step son’s land property is still in the brokers name. He has paid the. Real property tax . What are the steps he need to take or be responsible of. Thank you.
Hello Carmelita. To transfer the property from the broker’s name to your stepson’s name, you will need to execute a deed of sale, which should then be notarized. Following this, the deed of sale must be submitted to the Registry of Deeds for the official transfer of the title. It’s also important to ensure that all taxes and fees associated with the transfer are paid, including the capital gains tax, documentary stamp tax, and transfer tax.