This is to update the blog below I did way back in November 2014. It is now important to update the tax declaration of the property to current status prior to closing a deal, particularly on the improvement which means that an inspection must be done by the assessor’s office every three years ( this actually is in the the assessor’s office guidelines but unfortunately isn’t implemented consistently in all municipalities ). Take note a certified true copy of a tax declaration of both tax declaration on land and improvement is easy to get for supposedly enough ” due diligence”.
When the Certificate Authorizing Registration is released by the Bureau of Internal Revenue, a new title under the new owner can now be processed by the Register of Deeds, the next procedure is to apply for a new tax declaration and this is where most problems occur as when the property ( house and lot, factory, warehouse, building, any property with improvement ) is inspected and the floor area doesn’t coincide with the correct measurement stated in the Tax Declaration, back taxes will be imposed and since the SELLER is normally paid and / or migrated, the penalty on the back taxes would have to be shouldered by the BUYER, something ALL hate to go through. Everyone hates SURPRISES, specially if its an additional expense you didn’t factor in when purchasing a property. As i always mention in my seminars / short talks, it is the burden of the Owners / Buyers / Investors to know the law and it pays to always go through a professional licensed realtor or a real estate lawyer who is updated with the law. CAVEAT !
About a month and half ago, i mentioned in my blog about a transaction with the Bureau of Internal Revenue wherein the Revenue District Officer suddenly implemented a new zonal value inspite of the fact that we just cleared all figures and requirements with the ONETT. We went to to Revenue District Officer to plead our case as it would affect the taxes ( capital gains tax, creditable withholding tax, value added tax, and transfer tax ) for both the Seller and the Buyer.
By the way, the new zonal value was implemented without the required revenue regulation memorandum which should first be approved, go thru hearing and finally circularized to the corresponding districts implementing the change.
We then informed both the Seller and the Buyer of the situation. The Seller being a lawyer, claimed that as per the wordings of the Deed of Absolute Sale wherein it specifically says : Capital Gains Tax, Creditable Withholding Tax, Value Added Tax, if applicable, shall be for the account of the Seller UP TO THE SIGNING OF THE DEED OF ABSOLUTE SALE ( meaning any changes or additional legal government imposed taxes after the Deed of Absolute Sale shall be for the account of the Buyer ) ! Since this procedure of implementing new zonal values prior to the revenue regulation, we have seen a number of cases experiencing this same fate. So what happens, the grieved party may sue BIR thus delaying the transfer of title into their name. Unfortunately, either the Seller, Buyer or even the licensed broker ends up paying the difference in order to complete the documentation of the Sale.
In light of this transaction and the ever changing rules being implemented by the Bureau of Internal Revenue, we have now revised the wording or both of Contract to Sell and Deed of Absolute Sale to specify the following and to clearly draw the line of responsibility for both Seller and Buyer.
To wit, we now have the revised version :
Capital Gains Tax, Creditable Withholding Tax, Valued Added Tax and any legal Government Imposed Tax up to the Release of the Certified Authorizing Registration shall be for the account of the Seller.
All taxes on land and improvement must be updated and current as per Assessor’s Office prior to release of Tax Clearance.
Documentary Stamps Tax, Transfer Tax, Registration Fees and any other expenses pertaining to the transfer of Title into the Buyer’s Name shall be for the account of the Buyer.
Hope this helps with your future transaction. As always, please clear all requirements and updated zonal value before proceeding with your transaction.
Finally, take note that Capital Gains Tax / Creditable Withholding Tax and Documentary Stamps Tax now have to filled out using the BIR eForms prior to payment.
Please consult your Real Estate Lawyer or Accountant prior to purchasing a property.
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Robert G. Sarmiento Properties
Professional Affiliation :
Philippine Association of Real Estate Brokers
Member, City of Taguig Real Estate Board 2016, 2017
Real Estate Broker’s Association of the Philippines 2000-2015
President, Greenhills Chapter 2008, 2009
Philippine Association of Real Estate Brokers
San Juan Mandaluyong Chapter 1998, 1999
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