Fees and Taxes You Need to Know About When Buying a House

Taxes are a sign of adulting. After all, you've finished years of education and are now working to make a living and financially provide for your family. But now that you have attained a certain level of financial security enough to buy an affordable house and lot for sale, you are also required to pay some other taxes related to your house and lot purchase.

Conversely, if you are selling an affordable house and lot among potential buyers, you will also have tax obligations in relation to your property selling. But whether you're a buyer or a seller, and you're not fully certain about your tax compliance requirements after buying or selling your property in the Philippines, this article from Lumina Homes will give you a primer on the real estate-related taxes you need to pay.

List of Taxes to Pay When Buying a House and Lot in the Philippines

The seller with whom you purchased your real estate property may have failed to inform you about your tax obligations after the transaction. It may be frustrating to know later that you have other financial obligations, but neither your seller nor broker told you about it. But still, whether you were properly informed or not, it is your duty as a real estate investor and as a citizen to pay your taxes accordingly.

Meanwhile, as a seller, it's also indispensable for you to learn about your tax obligations. For example, you will be taxed for your earning after a successful selling deal, which we will discuss more below. If you have a real estate agent representing you, he or she may inform you about your tax duties.

Without more ado, here's a quick list of what taxes buyers and sellers need to pay when buying or selling a house and lot in the Philippines:

• Documentary Stamp Tax
• Capital Gains Tax
• Transfer Tax
• Title Registration Fee
• Real Property Tax

If you want to know more about what these fees and taxes are exactly, read on for more details below.

Documentary Stamp Tax

Documentary Stamps Tax (DST) is an excise tax being paid for on documents, loan agreements, instruments, and other relevant papers that will serve as proof of acceptance, a Deed of Absolute Sale, and transfer. The amount of DST to be paid is 1.5 percent or ₱15 for every ₱1,000 of the property's selling price, zonal value, and fair market value, whichever is higher.

If you bought a property amounting to ₱1,000,000, you will pay ₱15,000 for the DST. If you purchase a house and lot for ₱2,000,000, meanwhile, your DST will be ₱30,000. To calculate your own potential DST amount to be paid, refer to the example below.

Property's selling price (or whichever is higher) x 1.5 percent (e.g. 1,000,000 x .015 = ₱15,000)

Capital Gains Tax

Capital Gains Tax (CGT), in simple terms, refers to the tax you will pay for the gains you earned from a sale. CGT practically deduces that you earned from a property sale by selling it at a relatively higher price than what you initially purchased it with. As such, the CGT amount will be six (6) percent of the selling price of your property, the zonal value, or the fair market value — again, whichever is higher.

If your property is sold for ₱1,000,000, your CGT obligation will be ₱60,000. This is provided that your property's selling price is higher than the zonal value or fair market value. The seller shall pay for his or her CGT dues within 30 days after the transaction was completed and finalized. To calculate the amount of CGT you need to pay after making the sale, here's how:

Property's selling price (or whichever is higher) x 6 percent (e.g. 1,000,000 x .06 = 60,000)

Transfer Tax

As its name suggests, transfer taxes are a tax obligation for the transfer of property ownership from one individual or entity to another. After it is paid for by the buyer, this will indicate the official transfer of the property to the person who bought it.

The amount to be paid varies per location. That being said, it's lower in provincial regions, which is 0.50 percent of the property value, zonal value, or fair market value — whichever amount is higher. In Metro Manila, they charge more at 0.75 percent. The local transfer tax due will be paid to the local government unit.

Title Registration Fee

To register the title for the new owner, the buyer needs to pay the registration fee to the Registree of Deeds of the property's location. But before this, the new owner must first secure tax clearances from the Bureau of Internal Revenue (BIR). In general, the amount to be paid is 0.25 percent of the property's selling price.

Real Property Tax

Locally known as amilyar, real estate property owners are required to pay real property tax annually. This is a tax imposed on the value of one's property. It can be paid annually with a lump sum amount or through quarterly payments.

The amount to be paid depends largely on the property's value as well as where it's located. For example, the tax rate for provincial properties is 1 percent, while real estate properties in the National Capital Region are taxed at 2 percent. To compute your tax dues, multiply your property's assessed value by either 1 or 2 percent, depending on your location. For example:

1,000,000 (property's assessed value) x 0.01 percent (provincial tax rate) = 10,000

Your tax obligations after sealing a property purchase are one major proof that buying a house and lot in the Philippines does not stop with just paying for the property's selling price. In essence, before making a property investment purchase, make sure that you are fully financially up for the challenge, and that you will dutifully pay your taxes.

If you want to save money without sacrificing quality, you can avail of an affordable house and lot through Lumina Homes. Our real estate brand specializes in affordable housing that is specially catered to Filipino families with low- to moderate-income streams.

Moreover, we take pride that our housing communities nationwide are near establishments like marketplaces, shopping centers, medical facilities, and more. This makes homeownership with Lumina Homes more convenient and efficient. Speak to one of our sales representatives and real estate agents today for your would-be house and lot.