Buying and Selling Real Estate in the Philippines

The SELLER pays for the:

  • Capital Gains Tax equivalent to 6% of the selling price on the Deed of Sale or the zonal value, whichever is higher. (Withholding Tax if the seller is a corporation)
  • Unpaid real estate taxes due (if any).
  • Agent / Broker’s commission.

The BUYER pays for the cost of Registration:

  • Documentary Stamp Tax – 1.5% of the selling price or zonal value or fair market value, which ever is higher.
  • Transfer Tax – 0.5% of the selling price, or zonal value or fair market value, which ever is higher.
  • Registration Fee – 0.25% of the selling price, or zonal value or fair market value, which ever is higher.
  • Incidental and miscellaneous expenses incurred during the registration process.

The above sharing of expenses is the standard practice in the Philippines. However, buyers and sellers can mutually agree on other terms as long as it is done during the negotiation period (before the signing of the “Deed of Sale”).

Documentary Requirements:
1) One original copy and one photocopy of the Notarized Deed of Sale or Exchange

2) Photocopy of the Transfer Certificate of Title; Original Certificate of Title; or Condominium Certificate of Title

3) Certified True Copy of the tax declaration on the lot and/or improvement during nearest time of sale

4) “Certificate of No Improvement” issued by the Assessor’s office where the property has no declared improvement, if applicable or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees

5) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable

6) Duly approved Tax Debit Memo, if applicable

7) “Sworn Declaration of Interest” as prescribed under Revenue Regulations 13-99, if the transaction is tax-exempt

8) Documents supporting the exemption

Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures.

Procedures:
File the Capital Gains Tax return in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the property is located. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer.

Tax Rates:
For real property – 6%.
Deadline:
Within 30 days after each sale, exchange, transfer or other disposition of real property.

What To Do Before Buying A Property?

When our firm had over the weekend its first outreach program, Carlos was the first person to approach me. He worked as a computer programmer for 10 years in Dubai. Upon his return to his hometown, he opened a small computer shop below the apartment unit where he is staying. After six (6) months of renting this apartment, his landlord offered to sell the apartment to him. Anxious about the offer, he went to seize the opportunity and asked: “Sir, what do I need to do before buying a property”?

Due diligence is the answer. A buyer must conduct a due diligence on the property he wants to buy before agreeing to buy such property. Due diligence involves researching and verifying relevant information such as the seller’s title to the property and checking the real property itself. Due diligence aims at assessing the risk involved in the acquisition of the real property. This is why it is more prudent to get the assistance of a lawyer in conducting a legal due diligence.

Nevertheless, I provided Carlos a checklist of items that he must particularly look into before finally deciding to buy the property. These are:

1. Get a copy of the owner’s duplicate copy of the title; compare this copy with the original copy filed with the Register of Deeds; check if the title bears security marks and its unique texture; compare the serial number; notably, the last two digits of the title number must be the same as the the last two digits of the page number located at the top right hand portion of the title.
2. Know the owner and/or the seller. Inquire about his citizenship, age, and civil status.
3. Know the extent of ownership. Is it exclusive or co-owned?
4. If the person signing the deed of sale is an agent, or a person other than the owner himself, ask if the agent has a special power of attorney, or in case of a corporation, a board resolution authorizing the sale.
5. If the sale is through an agent, ask if the registered owner is still alive?
6. What was the manner of acquisition? Was it through purchase, succession, or donation?
7. Check compliance with the legal formalities such as notarization.
8. Take note of the annotations of liens or encumbrances at the back of the title.
9. Check the Entry Book of the Register of Deeds.
10. Verify the name and signature of the Register of Deeds appearing on the title.
11. Confirm payment of taxes, including real property tax with the Office of the Treasurer and the Assessor’s Office.
12. Ask around the neighborhood within the immediate vicinity about the persons living in the property.