 |
| Taxes and Fees Landowners in the Philippines Pay After Selling Land |
1. Capital Gains Tax (CGT)
The first and most important tax you’ll need to pay after selling your land is the Capital Gains Tax (CGT). Under the National Internal Revenue Code (NIRC) of 1997, the CGT is imposed on the sale of capital assets, including real property. The CGT for real estate is a flat rate of 6% of the gross selling price or the fair market value (whichever is higher).
This tax is non-negotiable, and the Bureau of Internal Revenue (BIR) requires it to be paid within 30 days of the sale. The sale will not be finalized, and the title cannot be transferred to the new owner without a Certificate Authorizing Registration (CAR) issued by the BIR, which certifies that the CGT has been paid.
Example Calculation:
If the land is sold for PHP 1,000,000, the CGT will be PHP 60,000 (6% of PHP 1,000,000).
Source: BIR Guide on Capital Gains Tax
2. Documentary Stamp Tax (DST)
Another tax landowners need to account for is the Documentary Stamp Tax (DST). This tax is also governed by the NIRC of 1997, specifically Section 196, and is imposed on the sale of real property at the rate of 1.5% of either the gross selling price or the fair market value, whichever is higher.
Just like the CGT, the DST must be paid before the transfer of ownership can proceed. The DST is due within five days after the close of the month following the date of the sale.
Example Calculation:
If the land is sold for PHP 1,000,000, the DST will be PHP 15,000 (1.5% of PHP 1,000,000).
Source: BIR Guide on Documentary Stamp Tax
3. Transfer Tax
In addition to the national taxes, you’ll also need to pay a Transfer Tax to the local government unit (LGU) where the property is located. The rate varies depending on the location but is usually 0.5% to 0.75% of the selling price, zonal value, or fair market value—again, whichever is higher.
This fee must be paid before the local government allows the transfer of the land's title to the new owner. The Transfer Tax payment is a prerequisite to receiving the Tax Declaration from the LGU.
Example Calculation:
If the land is sold for PHP 1,000,000 and the Transfer Tax rate in your area is 0.5%, the Transfer Tax will be PHP 5,000.
Source: BIR Guide on Transfer Tax
4. Registration Fee
Once the taxes have been settled, the final step is to pay the Registration Fee to the Registry of Deeds. This fee is for the transfer of the property’s title to the new owner. The fee is based on a graduated scale, as outlined by Presidential Decree No. 1529, known as the Property Registration Decree.
The amount varies depending on the property's value, but it typically ranges from PHP 8,000 to PHP 15,000 for most transactions involving residential land.
5. Broker’s Fee (If Applicable)
If you used the services of a real estate broker to facilitate the sale, you’ll also need to pay a Broker’s Fee. The typical commission is 5% of the selling price, though this can vary depending on the agreement with the broker. While this isn’t a tax, it's a cost you should account for when selling land.
6. Other Potential Fees
In some cases, there might be other fees involved, such as:
- Notarial Fees for the preparation and notarization of the Deed of Sale. This fee can range from PHP 1,000 to PHP 10,000 depending on the property's value.
- Homeowners’ Association Fees if the land is within a subdivision or gated community.
- Unpaid Real Property Taxes, which must be settled before the sale can proceed. Real property taxes are usually paid annually, and any arrears must be cleared with the LGU.
Failing to settle these taxes and fees on time can lead to penalties, interest charges, and the inability to transfer the title to the buyer. The BIR and LGUs have the authority to impose fines and penalties on late payments, which can add unnecessary financial burden.
The sale of land in the Philippines comes with various taxes and fees that can add up quickly. As a landowner, it’s essential to understand these costs to avoid any legal or financial surprises. To ensure full compliance and to make the process as smooth as possible, it’s highly recommended to consult with a real estate lawyer, tax advisor, or other financial experts before finalizing the sale.
Disclaimer
This article is for informational purposes only and should not be taken as legal or financial advice. Tax laws and regulations may change over time, and individual circumstances vary. Always do your own research and consult a professional financial advisor to ensure that you are fully aware of the applicable taxes and fees related to selling land in the Philippines.
If you found this article helpful, please consider following me and sharing it with others who may benefit from this information. Your support helps me continue writing articles that inform and inspire!
Stay tuned for more real estate insights!
No time to read? LISTEN HERE
Comments
Post a Comment