We're on the final stretch into moving in to our new home, and by now, we are so busy finalizing our documents. Of course, part of that is settling the BIR taxes involved. Let me just say how happy I am that our developer is shouldering majority of the BIR cost. I don't feel duped that I'm paying out a fraction of the cost to them because they will absorb the rest, and it will save us the hassle of transacting with government people.
Nonetheless, I felt I needed to be educated about these things. These are entirely new to me, and I want to be have knowledge with all the documents and fees that everyone is talking about. Also, I wanted to compute on how much our cost would be if we would be the one to pay for the fees using our purchase price. Mind you, I was dumbfounded with the figure that I arrived with.
All I can say is..BIR is really raking in a lot of money from real estate taxes, and all the related taxes from purchasing real property. Sa lagay na yan, booming ang real estate industries with all the condos and subdivisions popping everywhere, so malaki ang kaban ng BIR. I just hope that they really put Tax money to good use kasi pera yon ng mga kawawang Pinoy, like me.
Going back, here are the taxes to be paid to BIR. The purchase price is always used as reference in getting the associated value of each tax.
1. 5% Income Tax. As a general rule, the buyer is required to withhold 5% of the purchase price, zonal value or TD value of the property, whichever is higher, to be credited to the income tax of the developer. In our case, the tax was inclusive of our purchase price so we did not pay extra income tax.
2. 12% VAT. Effective January this year, the Bureau of Internal Revenue, with the endorsement of HUDCC, has effected a higher threshold for value added tax or VAT on real estate products such as lots, house and lots, and other residential dwellings such as condominium units. Previously, properties priced at P2.5 million below enjoyed VAT-free transactions. Now, the VAT-free ceiling has been increased to properties priced up to PhP3,199,200.
3. 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.
4. 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 on the execution of the DOS to the BIR.
5. 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.
6. Registration Fee. Registration fees are payable to the Register 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.
When I computed our potential cost, naloka ako! That's why I'm really thankful that we are only paying 14% of the BIR cost, and the rest will be through our developer. Malaki siguro patong nila sa purchase cost kaya all-inclusive na.
This is really an eye-opener for me. It's just sad that in our country, you will shed blood and tears before you can own a real property, be it a house, a piece of land, a car, etc. In the US where my sister lives, owning a house is way easier! She also just purchased their own house built from scratch. The lot area is way bigger, and the floor area is large too. For the big space they have, they're really paying cheap compared to our purchase here. Madami pang add-ons sa kanila.
I hope our government will find ways to cut taxes. WISH!!!!!! Oh sya, libre naman mangarap. Baka magkatotoo sa lifetime ko.