As the saying goes by Warren Buffett, “Risk comes from not knowing what you’re doing.” a potential buyer should be aware of the latest standard practice in sharing expenses on taxes when buying a property in Cebu or another location in the Philippines.
First, all parties must know the expenses on who will pay the taxes and fees when buying a property — either the Buyer or shouldered by the Individual Seller or Real Estate Developer.
It is important to know who, what, and how much is the standard taxes during a property transaction in the Philippines.
The rate and sharing of expenses on Taxes and Fees in Real Estate Buying transactions in the Philippines are as follows:
The Property Seller will pay:
- Capital Gains Tax (CGT) – 6% based on the sale price or the BIR zonal value, whichever is higher.
- Unpaid Yearly Real Property Tax – based on the rate of assessor’s office where the property is located
- Broker/Agent/Realtor Professional Fee (Commission) – 5% standard rate
The Property Buyer will pay:
- Documentary Stamp Tax (DST) – 1.5% based on the sale price or the zonal value, whichever is higher
- Registration Fee – 0.8%
- Transfer Fee – 0.5 of 1%
- Notarial (Lawyer) Fee – 2% (IBP Standard but negotiable)
- Title Transfer Processing fee – ranges from 20K to 50K
But in most property sale transactions happening in the year 2021, the Seller will give a price net of taxes, meaning that the Buyer is responsible for paying all the taxes due in the sale except for the Professional Fee of the Licensed Real Estate Broker, Realtor or Agent.
On the other hand, when a Buyer buys Pre-selling or Ready for Occupancy (house and Lot, townhouse, Lot or condominium unit) direct from a Real Estate Developer, the sharing of Taxes and Fees are the following:
The Real Estate Developer pays for:
- Real Estate Broker, Realtor & Agent Professional Fee (commission) – 5% Standard rate
- Title Transfer Processing fee- Developer’s Liason Officer
The Property Buyer pays for:
- Capital Gains Tax or Creditable withholding tax – 6%
- Documentary Stamp Tax (DST) – 1.5%
- Registration fee – 0.8%
- Transfer Fee – 0.5 of 1%
- Notarial Fee –
- Value Added Tax (VAT) – 12% for Lot only sale; If the house and Lot, Townhouse, and Condominium price exceed the VAT exempt threshold of P3,199,200 as of 2021.
The Rate on Transfer Taxes varies depending on the Local government unit (LGU) prescribed rate.
Taxes and fees on account of the Buyer when buying from a Developer are summarized as transfer charges of around 10% of the total price. The Developer’s Liason Officer pays all Real Estate taxes and fees and processes the title to the Buyer.
It is important to note that buying a property entails a lot of due diligence. There are different and relevant factors a person needs to consider to obtain a wise purchase or sale. If the work is too technical, we recommend hiring a legit realtor.
MC dela Fuente Realty has been in the business since 1997, helping several property buyers compute taxes and fees when buying a property in Cebu, Philippines, either from an individual seller or from a Real Estate Developer.
Worry no more. We do it for you the right way.
Other Services Offered:
- Processing of Title Transfer
- Extrajudicial Settlement of Estate Among Heirs
- Land Survey
- Real Estate Appraisal
- Real Estate Buying, Selling, Leasing & Management