TAXES INVOLVED IN THE SALE OF

REAL ESTATE PROPERTY

 TAXATION
• POWER OF THE GOVERNMENT TO IMPOSE BURDEN UPON PEOPLE,
PROPERTIES OR RIGHTS TO EARN REVENUES FOR THE USE AND SUPPORT OF
THE GOVERNMENT AND TO ENABLE IT TO DISCHARGE ITS APPROPRIATE
FUNCTION.

• 3 INHERENT POWERS OF THE GOVERNMENT

POLICE POWER
EMINENT DOMAIN
TAXATION
 KINDS OF TAXES

•INCOME TAX
•BUSINESS TAX
•TRANSFER TAX
 SALE OF REAL ESTATE PROPERTY
• REAL PROPERTY – IMMOVABLE PROPERTIES
• LAND, BUILDING OR ANYTHING ATTACHED TO THE SOIL WITH
PERMANENCE.
• INCLUDING THE RIGHTS AND FRUITS ATTACHED TO THE LAND
SURFACE, SUBSURFACE AND AIR RIGHT
RIGHTS TO HIDDEN TREASURE
RIGHT TO NATURAL, INDUSTRIAL AND CIVIL FRUITS
 CONTRACT OF SALE
BY THE CONTRACT OF SALE, ONE OF THE CONTRACTING PARTIES OBLIGATES
HIMSELF TO TRANSFER THE OWNERSHIP OF AND DELIVER A DETERMINATE THING
AND THE OTHER PARTY, TO PAY THEREFORE A PRICE CERTAIN IN MONEY OR ITS
EQUIVALENT.
PARTIES:
1. SELLER / VENDOR / TRANSFEROR – PARTY WHO TRANSFERS OWNERSHIP
2. BUYER / VENDEE / TRANSFEREE – PARTY WHO ACQUIRES OWNERSHIP
 DOCUMENTS OF SALE
• PREPARATORY CONTRACT (INSTALLMENT SALE)
• CONTRACT TO SELL
• DEED OF CONDITIONAL SALE
• SALE AND PURCHASE AGREEMENT
• MEMORANDUM OF AGREEMENT

• FINAL CONTRACT
• DEED OF ABSOLUTE SALE
• DEED OF SALE
 SELLER’S RESPONSIBILITY
• INCOME TAX IF THE PROPERTY TO BE SOLD IS AN ORDINARY ASSET.
• VALUE ADDED TAX OR PERCENTAGE TAX
• CREDITABLE WITHHOLDING TAX FOR REAL PROPERTIES SOLD BY HABITUALLY
ENGAGED REAL ESTATE SELLERS
• CAPITAL GAINS TAX IF THE PROPERTY TO BE SOLD IS A CAPITAL ASSET
• DOCUMENTARY STAMP TAX
 BUYER’S RESPONSIBILITY

• TRANSFER TAX (LOCAL GOVERNMENT UNIT)

• REGISTRATION TAX

• NEW REAL PROPERTY TAX

 TAXES
• INCOME TAX
THE PROCEEDS FROM THE SALE OF REAL PROPERTIES HELD PRIMARILY FOR SALE TO CUSTOMERS
IN THE ORDINARY COURSE OF TRADE OR BUSINESS OR SALE OF REAL PROPERTIES CLASSIFIED AS
ORDINARY ASSETS OF THE SELLER WHO IS NOT HABITUALLY ENGAGED IN REAL ESTATE BUSINESS,
SHALL BE INCLUDED IN THE SELLER’S GLOBAL INCOME. THIS FORMS PART OF THE SELLER’S OTHER
INCOME SUBJECT TO 30% REGULAR INCOME TAX OR 2% MINIMUM CORPORATE INCOME TAX IF
THE SELLER IS A CORPORATION OR A GRADUATED TAX RATE AT A MAXIMUM RATE OF 32% IF THE
SELLER IS AN INDIVIDUAL.
 VALUE ADDED TAX
• THERE SHALL BE IMPOSED A 12% VALUE-ADDED TAX (VAT) ON REAL ESTATE SALES OF THOSE WHO
ARE ENGAGED IN THE BUSINESS OF SELLING, DEVELOPING, LEASING OR SUB-LEASING OF REAL
PROPERTY AND THOSE LICENSED TO ENGAGE IN REAL ESTATE BROKERAGE BUSINESS BASED ON
THEIR COMMISSION.

• TYPE OF PROPERTY TO BE SOLD VAT – EXEMPT

RESIDENTIAL LOT P1,919,500 AND BELOW
RESIDENTIAL HOUSE AND LOT P3,199,200 AND BELOW
RESIDENTIAL CONDOMINIUM P3,199,200 AND BELOW
LOW COST HOUSING P 750,000 AND BELOW
SOCIALIZED HOUSING P 450,000 AND BELOW
 CAPITAL GAINS TAX
• CAPITAL GAINS PRESUMED TO BE REALIZED FROM THE SALE OF A REAL PROPERTY NOT
CATEGORIZED AS ORDINARY ASSET IS SUBJECT TO A TAX OF SIX PERCENT (6%) BASED ON THE
HIGHEST AMONG THE (1)SELLING PRICE, (2)BUREAU OF INTERNAL REVENUE (BIR) ZONAL VALUE,
AND (3)ASSESSED VALUE BY THE PROVINCIAL/CITY ASSESSOR.
• THE SALE OF A PRINCIPAL RESIDENCE IS EXEMPT FROM CAPITAL GAINS TAX. THE ENTIRE
PROCEEDS FROM THE SALE OF THE PRINCIPAL RESIDENCE SHOULD BE FULLY UTILIZED IN
ACQUIRING OR CONSTRUCTING A NEW PRINCIPAL RESIDENCE WITHIN 18 CALENDAR MONTHS.
THIS EXEMPTION CAN ONLY BE EXERCISED ONCE EVERY 10 YEARS. THE BIR COMMISSIONER
SHOULD BE DULY NOTIFIED THROUGH A PRESCRIBED RETURN 30 DAYS FROM THE DATE OF SALE
OR DISPOSITION OF THE TAX PAYER’S INTENTION TO AVAIL OF THE TAX EXEMPTION.
 DOCUMENTARY STAMP TAX
• THE DOCUMENTARY STAMP TAX IS AN EXCISE TAX LEVIED ON DOCUMENTS, INSTRUMENTS,
LOAN AGREEMENTS AND PAPERS EVIDENCING THE ACCEPTANCE, ASSIGNMENT, SALE OR
TRANSFER OF AN OBLIGATION, RIGHTS, OR PROPERTY INCIDENT THERETO.
• THE AMOUNT OF TAX IS EITHER FIXED OR BASED ON THE PAR OR FACE VALUE OF THE
DOCUMENT OR INSTRUMENT. IN THE CASE OF THE SALE OF REAL ESTATE PROPERTIES, THE RATE
SHALL BE 1.5% BASED ON THE HIGHEST AMONG THE (1)SELLING PRICE, (2)BUREAU OF
INTERNAL REVENUE (BIR) ZONAL VALUE, AND (3)ASSESSED VALUE BY THE PROVINCIAL/CITY
ASSESSOR.
 CREDITABLE WITHHOLDING TAX
• CREDITABLE WITHHOLDING TAX (CWT) IS THE TAX WHICH IS WITHHELD BY THE
BUYER/WITHHOLDING AGENT FROM HIS PAYMENT TO REAL ESTATE DEALERS, DEVELOPERS,
OPERATORS AND PERSONS OR ENTITIES WHO ARE CONSIDERED TO BE HABITUALLY ENGAGED
IN REAL ESTATE BUSINESS, AND WHICH TAX IS CREDITABLE AGAINST THE INCOME TAX PAYABLE
OF THE SELLER.
• P500,000 AND BELOW 1.5%
• OVER 500,000 NOT MORE THAN 2,000,000 3.0%
• OVER P2,000,000 5.0%
• NOT HABITUALLY ENGAGED 6.0%
 CERTIFICATE AUTHORIZING REGISTRATION (CAR)

• TAX CLEARANCE ISSUED BY THE BIR WHICH MEANS THAT

ALL APPLICABLE TAXES ON THE SALE OF PROPERTY HAVE
BEEN MADE.
• IT IS A MANDATORY REQUIREMENT AND THE TITLE OF THE
PROPERTY WILL NOT BE TRANSFERRED IN THE ABSENCE OF
CAR.
 TRANSFER TAX
• TRANSFER TAX IS THE TAX IMPOSED ON ANY MODE OF CONVEYING THE OWNERSHIP OF A
REAL PROPERTY, EITHER THROUGH SALE, DONATION, BARTER, OR ANY OTHER MODE. THE TAX
RATE VARIES DEPENDING ON THE LOCATION OF THE REAL PROPERTY AS PRESENTED BELOW:
• IF THE PROPERTY IS LOCATED IN THE PROVINCE, TAX MUST NOT EXCEED 50% OF THE 1% OF
THE TAX BASE STATED ABOVE.
• IF THE PROPERTY IS LOCATED IN METRO MANILA OR ANY CITIES IN THE PHILIPPINES, TAX MUST
NOT EXCEED 75% OF THE 1% OF THE TAX BASE STATE ABOVE.
 REAL PROPERTY TAX
• RPT IS A PROPERTY TAX THAT IS PAID YEARLY. IT IS IMPOSED ON ALL TYPES OF
REAL PROPERTIES INCLUDING LANDS, BUILDINGS, IMPROVEMENTS, AND
MACHINERY.
• THE RPT RATE FOR THE CITIES AND MUNICIPALITIES IN METRO MANILA IS TWO
PERCENT (2%) WHILE FOR PROVINCES IT IS ONE PERCENT (1%).
• TO COMPUTE FOR RPT, THE RPT RATE IS MULTIPLIED BY THE ASSESSED VALUE
OF THE PROPERTY.
 DEADLINE FOR PAYMENT OF RPT
• TAXPAYERS CAN OPT TO PAY FOR ONE WHOLE YEAR. IF SO, THE PAYMENT IS DUE ON OR BEFORE
THE THIRTY-FIRST (31ST) OF JANUARY EACH YEAR. HOWEVER, IF THEY DECIDE TO PAY IN
INSTALLMENT, THEY HAVE TO RELIGIOUSLY REMEMBER THESE DATES:
• 1ST QUARTER: ON OR BEFORE MARCH 31
• 2ND QUARTER: ON OR BEFORE JUNE 30
• 3RD QUARTER: ON OR BEFORE SEPTEMBER 30
• 4TH QUARTER: ON OR BEFORE DECEMBER 31
 PENALTIES FOR LATE OR NON-PAYMENT OF RPT

• LATE PAYMENTS SHALL SUBJECT THE TAXPAYERS TO THE

PAYMENT INTEREST AT THE RATE OF TWO PERCENT (2%)
PER MONTH ON THE UNPAID AMOUNT TO A MAXIMUM OF
SEVENTY-TWO (72%) PERCENT OR THIRTY-SIX (36)
MONTHS.
Thank you