Taxes come in different forms across the stages of owning a house or a condominium unit — from the purchase process to being awarded with the property and having your name on the title. Not familiar with the taxes associated in real estate property? Check out this list of all the taxes you will encounter in real estate and how they are computed.
We start with the end. Filipino homeowners are mandated by the Local Government Code of 1991 or Republic Act 7160 to pay real property tax (RPT). The RPT is payable to your local government unit (LGU) annually every 31st of January, but homeowners have to option to pay quarterly every 31 March, 30 June, 30 September and 31 December. Some LGUs offer discounts to early bird taxpayers so be on the nose for these promos. RPT is computed with this simple formula: RPT = Real Property Tax Rate x Assessed Property Value Whereas, Assessed Property Value = Fair market value x Assessment level Properties in cities and municipalities in Metro Manila have a 2% real property tax rate, while those in provinces have 1%. The maximum assessment level for a residential property is 20%. To give you an example, let us compute a condominium unit in Quezon City worth PhP 4,000,000. RPT = 2% x (PhP 4,000,000 x 20%) RPT = PhP 16,000 Failure to pay your real property tax may result to a 2% surcharge per month up to a maximum of 72% or 36 months. Nonpayment will result to foreclosure of your property for being tax-delinquent.
A property’s Deed of Absolute Sale is subject to a documentary stamps tax (DST) amounting to PhP15.00 for every PhP1,000 of the property’s selling price. Using the previous example, the DST for a property with a price tag of PhP4 million will cost PhP60,000.
Should you decide to sell your property for a higher price, it will be subject to a capital gains tax. A property is considered a capital asset if it is not used in any kind of trade or business. The seller of the property should shoulder the payment of the capital gains tax amounting to 6% of gross selling price or fair market value, whichever is higher. So if you sell your PhP4 million property for PhP4.5 million, the capital gains tax will amount to PhP270,000. However, if the fair market value amounts to PhP4.8 million, then the capital gains tax will be PhP288,000
Estate tax is paid by owners of those inherited following the death of the previous owner. Estate tax amounts to 6% of the net estate. A donor’s tax is also imposed on properties given as donation or gift, which also amounts to 6%.