A sale is not finished until the tax declaration is transferred in the name of the new owner.
When I started my project selling career around 15 years ago I was with a developer who did majority of the paperworks as its service to both their marketing and their buyers as well – this included paying the necessary taxes after the client pays the whole amount already. This process helps an agent concentrate on getting the next client as every moment should be focused on prospecting and closing rather than on paying taxes, waiting for release of papers, dealing with government agencies and other items which could be outsourced to another department.
Inhouse sellers are focused on getting reservations, downpayments and payments for the balance through either, inhouse, bank or even the government’s Pag-ibig financing. Since also, full payments happen 3-5 years down the road for pre-selling projects – there is not a need to learn the process.
Doing full brokerage requires learning the full real estate cycle and especially the taxes and fees for the closing of the deal. As we all know, there are taxes that need to be paid when a real estate property is sold.
WHAT ARE THE USUAL FEES THAT A SELLER NEEDS TO PAY?
The standard procedure is that Capital Gains Tax ( if seller is an individual ), Creditable Withholding Tax ( if seller is a corporation ), Broker’s Professional Fees ( if applicable ) are for the Seller’s account. There are instances when a seller would give a NET price excluding the above fees. Here is where a broker should be careful in analyzing what types of fees s/he should include in the computation. I have personally encountered sellers whose property is under a corporation but was not disclosed offhand. Only when I got the title for due diligence did I see that the property was under a corporation. This of course, changed the selling price of the property. I will write more about taxes for a corporation on my next article.
WHAT ARE THE USUAL FEES THAT A BUYER NEEDS TO PAY?
The Buyer then pays for the Documentary Stamps Tax, Transfer Tax, Registration Fees, Notarial Fees and any transfer related charges. The problem I’ve encountered is that the computation is sometimes inaccurate and the payees of the manager’s checks payable for the corresponding taxes to the Bureau of Internal Revenue , City Treasurer and Register of Deeds are erroneous. What’s worse is that the amounts are also incorrect. This causes delay and frustration on all parties concerned, particularly the Seller and Buyer.
WHAT IS THE PROPER PROCEDURE?
(The proper procedure is to have the computation done by the respective agencies.)
Bureau of Internal Revenue (BIR)
For capital gains tax / creditable withholding tax, 6% is the normal tax imposed ( by the way, capital gains tax in the Philippines doesn’t necessarily mean that a gain was made by the seller, it’s just a terminology used by the government, it should actually be called sales tax ). I actually had a client who bought a property at 9M and sold at 8M. However zonal value is computed at 10,000,000, he said that he did not gain from the transaction so there should not be a tax anymore. But government says anything that gets sold – there is a gain.
The documentary stamps tax ( 1.5% ) is also computed ( most errors i’ve seen here is when the amount is rounded off which causes a disparity in amount ). An officer of the day ( ONETT ) will assist you, a deed of sale must be shown together with a copy of both the title and tax declaration for then get the zonal value as the tax is computed on either selling price or zonal value whichever is higher.
For the Transfer Tax, proceed to the City Treasurer as the computation varies for in some cities. They vary from .5% to a high of .75% of zonal value or selling price whichever is higher.
Register of Deeds
Finally, proceed to Register of Deeds for the Registration Fees. This one is tougher to compute as they use a table based on the amount of sale involved and add on other figures to come out with the final Registration Fee amount.
All checks payable to Bureau of Internal Revenue, City Treasurer and Register of Deeds have to in a Manager’s Check. Please ask them the proper way of wording the payees as FAO and IFO have to be included in the names of the payees.
By the way, zonal values can be looked up at the website of BIR ( www.bir.gov.ph ). If you have time to hold, you may call BIR at (632) 981-8888.
Thanks for your time, hope this could somehow guide you in your future deals. Till the next blog. Best regards ….