REAL ESTATE TAXES IN A NUTSHELL
Owning property in the Philippines does not end with finalizing the sale terms and signing the papers. In fact that is only the beginning, as a property owner,you first responsibility is to have the property assessed for taxation requirements.
Here are the key types of taxes you will encounter in real estate to help you avoid penalties and additional expenses.
1. REAL PROPERTY TAX or (RPT)- The Real Property Tax is the annual tax you have to settle as the owner of real property which is defined as land,buildings or machinery. It is mandated by the Republic Act R.A no.7160 and imposed by the local government unit LGU to help fund their public service responsibilities. Negligence to pay the RPT can be grounds for the LGU to auction off the property. The RPT is computed by a fiexd local rate of either 2% for Metro Manila or 1% for provinces,of the property’s assesed value which depends on the size,fair market value and function (ex. Residential,Commercial,Agricultural,Industrial,etc.). Property owners can opt to pay annually or by installments before end of January,every year.
2.Capital Gains Tax or CGT- The Capital Gains Tax is paid by the seller and is levied n their earnings made based on the National Internal Revenue Code of the Bureau of International Revenue (BIR). It is applied to the sale of a capital asset,that is defined as properties NOT used for trade or business,trade stock or inventory stock,and properties that are subject to an allowance for depreciation. The CGT is 6%,of the gross selling price or fair market value-whichever is higher. This needs to be filled to the BIR (BIR Form No.1706) no later than 30 days after the sale has been made.
3.DOCUMENTARY STAMPs TAX or (DST)- The Documentary Stamps Tax refers to the taxes levied on all documents necessary for the sale or transfer of property to be paid by the buyer. The DST is 1.5% of whichever is highest between the property’s selling price,zonal value,or fair market value. It is filled to the BIR (BIR Form No.2000-OT)within 5 days that the document was made.
4.REGISTRATION FEE- This refers to the charges paid by the buyer to get the property ownership officially registered. The rate depends on the type of property,starting from 0.25% of the sale price,or zonal value or fair market value,whichever is higher. This is paid to the Register of Deeds or Land Registration Authority (LRA) where the real property is located.
5.TRANSFER TAX- The Transfer Tax is the tax imposed on different forms of transferring of real property ownership such as sale,donation,barter,etc. The rate varies from 0.5 to 0.75% if the zonal value or selling price of the property,whichever is higher and depending on the municipality rules of the property. It is filed to the BIR (BIR Form No.1606) within 30days.
6.DONOR’s TAX- Unlike the Transfer Tax,The Donor Tax is composed when the real property transfer is made free as donation or gift between living people. It refers to a single tax rate filed to the BIR OF 6% of net donations and is composed for gifts above P250,000 annually as per the amendment made under the TRAIN LAW on January 2018. It must be filed (BIR Form No. 1800) within 30 days of the donation.
7.ESTATE or INHERITANCE TAX- The Estate Tax refers to the tax imposed on the transfer of property upon the death of the owner to the lawful heirs. Upon the TRAIN LAW,the Estate Tax imposes a rate of 6% of the value of such NET ESTATE determined during the time of death of the property owner. It is to be filed with the BIR (BIR For No.1801) within 1 year of the decedents death.