Taxation

on Real Estate Transactions

Purchases from Individuals

Capital Gains Tax

Imposed upon the total gains when selling a property classified as capital assets.
Capital gains tax is equivalent to 6% of the residence’s sales price, zonal value, or
fair market value, whichever is highest.
Capital gains tax is one of the obligations property owners need to settle upon
selling their property, wherein sellers must file a capital gains tax return 30 days
after the transaction. Non-compliance will result in a penalty up to PhP 50,000 with
a 25% surcharge and 20% interest. Non-compliance due to fraudulent acts has a
higher surcharge of up to 50%.

Transfer Tax

This is equivalent to 0.5% to 0.75% of the property sale price, zonal or fair market
value, whichever is highest.

Documentary Stamp Tax

This is equivalent to 1.5% of the property sale price, zonal or fair market value,
whichever is highest.

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.

Brokers Fee 3% – 5% of actual sale price.

Purchases from Developers

1. Capital Gains Tax – 10% of actual sale price. This value might be expressed as
part of the sale price.
2. Document Stamp Tax – 1.5% of the actual sale price
3. Transfer Tax – 0.5% of the actual sale price
4. Registration Fee – 0.25% of the actual sale price

Gross Price Vs. Net Price in Home Buying

Gross price and net price are two common terms when real estate is discussed.
Understanding the difference of gross and net price.
Gross Price

The gross price in real estate is the how much the buyer will have to pay to purchase
the property. This is not the amount that the seller will receive because the fees for
attorneys and real estate brokers are not included. This is usually the advertised
price of real estate.

Net Price

The net price of real estate is the other way that professionals discuss real estate
prices. The net price in real estate is how much the seller will have in his pocket
after the transaction is completed and all fees for attorneys and real estate brokers
are deducted.

The way to calculate net price is to find the amount to be paid for the real estate
property and find all of the fees and commissions that will have to be paid during
the transaction. Then all of the fees and commissions are subtracted from the real
estate price. Net price is left.

What Is Real Property Tax?

Local government units (LGU) are given the authority to collect their source of
revenue to fund public expenditure. Real property tax (RPT) is a type of revenue
source for the LGU. It is levied every year, and the property owner or administrator
is responsible for the tax payment.

RPT can be imposed on residential, agricultural, and commercial properties. All the
fixed provisions for the RPT are discussed in the Title II of the Local Government
Code (LGC), Republic Act No. 7160.

Rates Of Real Property Tax In The Philippines

Under Section 233 of the RA 7160, the rate of real property tax within the
Metropolitan Manila Area is 2% assessed value of the real property. In comparison,
the rate for provincial areas is 1% of the assessed value of the real property. The
assessment levels used to determine real property value are fixed according to
ordinances.

To compute your property’s RPT, you need to multiply the RPT rate along with your
property’s assessed value. You can refer to the assessment levels prescribed in
Section 218 of the RA 7160.

Apart from the real property tax, LGUs can collect additional taxes from you,
accrued to the Special Education Fund. An additional 1% can be levied on top of the
assessed value of the real property. This will be used as part of the budget of local
schools.
Another additional tax that can be levied from real estate properties includes the ad
valorem tax on properties that become idle. For this, the rate will not exceed 5% of
the assessed value of the real property.

Republic Act No. 7160 or RA 7160, the government shall administer, apprise, levy,
and collect real property tax.

Sources:
https://philippine-property.net/1845-taxes-to-be-paid-on-real-estate-transactions-
in-the-philippines.html
https://manilaexpatcare.com/real-estate-transaction-costs-in-the-philippines/