Taxes and Fees when Buying Property in the Philippines
When buying and selling real estate properties in the Philippines, the final purchase price is not and should not only be the relevant amount.
Other taxes and fees charged on the transaction must be considered by both the buyer and seller because these costs affect the total transaction price.
Although the costs are usually associated with the buyer or seller, some of these can actually be passed on to the other party subject to mutual agreement. The Sales Contract or the Deed of Sale, however, must explicitly mention the parties in charge of shouldering the costs in order to avoid problems in the future.
In the Philippines, the following fees and taxes are charged on real estate transactions.
Real Estate Taxes and Fees in the Philippines
For the account of the Seller (to be paid by the Seller):
- 1. Capital Gains Tax
6% of the Selling Price or Zonal Value or Fair Market Value, whichever is higher
- 2. Business Tax
Paid only if applicable; rate depends on local government unit where property is located
For the account of the Buyer (to be paid by the Buyer):
- 1. Documentary Stamps Tax
1.5% of Selling Price or Zonal Value, whichever is higher
- 2. Transfer Tax
Rate depends on location of property (ranging from 0.25% to 0.75% of Selling Price or Zonal Value, whichever is higher)
- 3. Registration Fee
Graduated rate based on Selling Price
- 4. Real Estate Taxes (Amilyar)
For the remaining months of the year based on the date of full payment
In the case of Manny Pacquiao’s Forbes Park house that he bought supposedly for P388 million ($9 million), the relevant taxes and fees paid are shown in the table below.
The computation assumes that the purchase price was P388 million and this Selling Price (SP) was the highest value compared to the Zonal Value or Fair Market Value of the property.
It also assumes that there were no business taxes or realty taxes paid, that the registration fee was negligible, and that the transfer tax rate was 0.75%.
Sample Computation: Real estate fees paid by Manny Pacquiao
|Paid by||Rate||Amount Paid|
|Capital Gains Tax (CGT)||Seller||6% of SP||P23,280,000.00|
|Documentary Stamps Tax (DST)||Buyer||1.5% of SP||P5,820,000.00|
|Transfer Tax||Buyer||0.75% of SP||P2,910,000.00|
Assuming the above assumptions are correct, the purchase of the Forbes Park property resulted in the following payment of taxes and fees:
- The seller (rumored to be Roque Tordesillas of Marsh Philippines) paid total Capital Gains Tax of P23.28 million
- Manny Pacquiao, as buyer, paid a total of P8.73 million for documentary stamps tax and transfer tax
That’s a lot of taxes in one single real estate transaction!
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