Here are the Fees and Taxes That Come With Buying a House in PH

house tax buying home
Photo by Mikhail Nilov 

Property Finds Asia | Here are the Fees and Taxes That Come With Buying a House in PH | So you’ve made the decision to purchase a home. Congratulations! You are all set with the initial payment, and a bank loan has been established in your name. But does that mean that there is nothing else to consider when buying a property? Many homeowners suddenly experience sticker shock when they learn that purchasing a home entails more than simply making a downpayment of twenty percent of the total purchase price. When it comes time to sign the documents, many people find out that they are responsible for a whole host of other taxes, fees, and charges that need to be paid up before the ink dries on your deed of sale. This is a rude awakening for many people.

The following is a list of the various taxes and fees that are typically associated with purchasing a home in the Philippines:

The tax on real property

This one is pretty standard, and it isn’t really a part of the process of purchasing a house at all. However, once a person purchases that house, they are legally responsible for the yearly reoccurring real property tax that is associated with that property. The RPT can be easily calculated by multiplying one percent of the property’s current fair market value by the assessment rate. This percentage increases to two percent if the property is located in Metro Manila. The maximum amount that can be assessed on residential properties stays at 20%, while the maximum amount that can be assessed on commercial or industrial properties is 50%.

In addition, the local government may impose additional surcharges on the property depending on the location of the property. RPTs are typically expected to be submitted by the end of the first quarter; consequently, house hunting during the second half of the year might be a good idea, particularly in the event that the seller has already paid for the current year.

Transfer Tax

The federal government imposes a tax on the sale of a home on each and every individual who makes a purchase in this market. This fee, which is also referred to as the transfer tax, is due once the sale has been successfully completed. The exact percentage can vary depending on the location of the property, but it is typically between 0.5 and 0.75 percent of the property’s selling price or its fair market value, whichever is higher. The person who is responsible for making the payment of the transfer tax is the buyer.

Fee for the Registration of Title

Before the buyer can be required to pay the transfer tax, this fee is frequently required first. The buyer will be responsible for paying the fee that covers the cost of changing their name as the legally registered owner of the property from the seller. After the buyer has paid any applicable taxes on the sale of the property and obtained the Certificate Authorizing Registration (CAR) and Tax Clearance (TCL) from the Bureau of Internal Revenue (BIR), the title registration fee is typically the next step. The Land Registration Authority published a computation table that served as the basis for arriving at the actual amount. A fee is indicated next to the price of any property with a value of less than P1.7 million. Those whose assets are worth more than P1.7 million are required to make a payment of P8,796.00 in addition to an additional P90.00 for every P20,000.00 or fraction that is over P1.7 million.

Tax on Stamps Applicable to Documents

When purchasing a home, there will be a significant amount of paperwork involved. Getting documents notarized by a lawyer and paying the tax on documentary stamps are required. The DST is typically applied to the Deed of Absolute Sale that is signed by both the buyer and the seller when real estate is being purchased. The tax rate is 1.5% of the selling price or the home’s estimated value in the current market. The responsibility for this one falls on the buyer as well.

This time, the seller responsible for paying the capital gains tax is the seller. By definition, this is the tax that is levied against individuals or entities whose value has increased as a result of the sale of a piece of property. In a nutshell, the government will want a portion of the money earned by the seller when the property in question is sold, regardless of whether it was a house, land, or some other type of property. Upon the conclusion of the sale, the seller is responsible for paying a capital gains tax that is equal to 6% of the property’s selling price or its true market value, whichever is greater. Even though the seller is the one who is legally obligated to make the payment, it is not unusual for sellers to include the cost in the price that they are asking for.

Prepare Yourselves for Extra Costs in the Future In the Event That You Are Purchasing a Home

Consider for a moment that you are investing one million pesos in the purchase of a home. If we include all of the taxes and fees that were just mentioned, the minimum amount that the government will most likely charge you is P103,236. They can be broken down into the following categories:

  • Transfer Tax equals P62,500 (at a median rate of 6.25%).
  • Tax on Documentary Stamps equals P15,000 (at a rate of 1.5%)
  • According to the LRA table, the title registration fee is 5,736.
  • The annual real property tax of 2% comes to P20,000.

If the seller adds the capital gains tax to your purchase price, you can anticipate paying an additional P60,000 for the acquisition of the property. The estimated cost is P163,236 for a property that is worth P1 million. In all candor, how many residential properties in the metro area are still being offered for sale at prices lower than one million pesos? Before you start the paperwork on your dream house, you should start including these fees in your plans as soon as possible.

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Photo by Mikhail Nilov