Real Estate Tax Payment Procedures

Here’s another issue that i’ve seen so many Sellers, Buyers and Brokers / Salesmen tend to overlook.   As we all know, there are taxes that need to be paid when a real estate property is sold.

The standard procedure ( 99% of the time ) 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.

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.

The proper procedure is to have the computation done by the respective agencies.  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 ).  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.

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 9818888.

Thanks for your time, hope this could somehow guide you in your future deals.  Till the next blog.   Best regards ….

robert

 

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