Explanation of taxes and fees in the Philippines?

Explanation of taxes and fees in the Philippines?

(a) Real Property

Income Tax
If you are a corporation, or individual who is a Philippine resident, and engaged in real estate business, you will be subject to an ordinary income tax of up to 35% on the income derived from the sale of property. As a general rule, your buyer will be required to withhold 5% of the purchase price, zonal value or the market value under the Tax Declaration of the property, whichever is higher, and pay the same to the BIR to be credited to your potential income tax liability.
Capital Gains Tax
If you are a corporation or individual (whether a Philippine resident or not), not engaged in the real estate business and the property is not used in the ordinary course of your business, the property will be treated as a capital asset. As such, the sale shall be subject to capital gains tax at the rate of 6% of the purchase price, zonal value or the market value under the Tax Declaration of the property, whichever is higher.

Value-Added Tax

If you are engaged in the real estate business, the sale of real property is subject to value added tax at the rate of 12% of the purchase price, zonal value or market value under the Tax Declaration, whichever is higher, except where the property sold is a residential lot with price below P1,500,000 or a residential dwelling with price below P2,500,000.

If the Seller is a corporation or individual not engaged in the real estate business and the property was not used in the ordinary course of the corporation’s business, the sale is not subject to value-added tax.

Documentary Stamp Tax

Documentary stamp tax at the rate of 1.5% of the purchase price, zonal value, or TD value of the property, whichever is higher, is payable upon the execution of the DOS to the BIR.

Local Transfer Tax

Local transfer tax is imposed by the local government unit where the property is located generally at the rate of 50% of 1% of the purchase price, zonal value, or TD value of the property, whichever is higher.

Registration Fees

Registration fees are payable to the Registry of Deeds where the property is located at the rate of P8,796.00 for the first P1.7million, plus P90.00 for every P20,000.00 or fraction thereof in excess of P1.7 million.

(b) Sale of Shares in a Corporation Owning Real Property

The sale of shares is typically subject to the following transaction costs:

Capital Gains Tax

The sale of shares not traded through the stock exchange shall be subject to a final tax at the rate of 5% of the first P100,000.00 of net gain derived from the sale, and an additional 10% in excess thereof..

Documentary Stamp Tax

Documentary stamp tax on the transfer of shares are payable at the rate of 0.75 for every 200.00, or fraction thereof, based on the par value of the shares.

(c) Other Modes of Unloading Property

Ownership of assets (whether shares of stock or real property) may also be transferred through donation or succession.

The transfer of property by succession is subject to estate tax at a rate based on the total value of the net estate. The net estate is the total gross estate of the decedent less allowable deductions. For purposes of computing the gross estate, the fair market value of real property transferred by succession shall be the higher of the zonal value or the market value under the Tax Declaration of the real property. The estate tax imposed under Philippine tax laws shall be credited with any estate tax that the estate of the non-resident decedent may have paid to the authority of a foreign country, subject to certain limitations.