In a third world country such as the Philippines, having the ability to purchase a real estate property may it be a land, house, or a condominium unit could be thought of as one of the greatest dreams and accomplishments of a Filipino. Taking into consideration the amount of salary awarded to a typical citizen, it requires a whole lot of years for a Filipino to be able to save enough money to buy a property and sad to say, the price of the property to be purchased is not the sole thing that has to be taken into consideration when planning to acquire one.
As though the final purchase price of each property being sold in the country is not pricey enough, its price is not the only significant amount that must be considered by the buyer. Unfortunately, just like when we buy different products on our current market where other fees and taxes are being charged, it is applicable on this kind of transaction too and shall, consequently, affect the whole cost of the property you are eyeing. This article will provide vital pieces of information that will help in understanding the process and fees of buying real properties.
First, let us familiarize ourselves with a term or two. There are some words that may be used by real estate sellers to which we are not familiar with and these may include:
- Zonal Value. A zonal value is a value assigned and determined by the Bureau of Internal Revenue (BIR) – it does not necessarily provide the true market value of a property and it is purely for taxation purposes only. It is the basis of the BIR, City Assessor’s Office, and Register of Deeds when computing respective taxes due on a property.
- Fair Market Value. This is the total value that the seller is willing to sell the property for to which a buyer can agree with.
These terms are commonly used especially when trying to determine additional fees and taxes.
What are the Fees and Taxes to be Considered?
Different taxes and fees may vary depending on the property you are buying. Nevertheless, here are a few of the most common ones that you will encounter when buying a property in the Philippines:
- Documentary Stamp Tax. Documentary stamps tax or DST is the tax being charged on the documents, instruments, loan agreements, and papers that prove the acceptance, assignment, sale, or transfer of an obligation, right, or property. Think about it this way, when a property is transferred by sale, the DST is applied on the Deed of Absolute Sale, where the tax rate is 1.5 percent of either the property’s selling price, zonal value, or fair market value, whichever of the three is higher. This means that for a property which has a selling price of PHP1,000,000.00, the DST will be PHP15,000.00, taking into consideration that this amount is higher than the property’s zonal value or fair market value.
- Transfer Tax. This is the tax implemented on any method of transferring the possession of a real estate property either through sale, donation, barter, or any other form. The Transfer Tax’s rate can vary from 0.5% to 0.75% of either the zonal value or the total selling price of the property (whichever is higher) and depending on the place where the property is actually located.
- Registration Fee. These fees are paid for the registration of a deed of sale, any instrument, order, judgment or decree stripping off the title of the registered owner or consolidation of ownership over a property sold.
- Real Property Tax (RPT). This is a property tax that is paid annually and is inflicted on all types of real properties such as lands, houses, buildings, improvements, and machinery. Real Property Tax is one of the sources of revenues of our Local Government Units which are usually earned from local and external sources. It is the responsibility of the owner to pay for this tax every year. The RPT rate for the cities and municipalities in Metro Manila area is two percent of the property’s assessed value while it is one percent for provinces.
Aside from the taxes and fees mentioned above, there are a few additional charges that must be considered when buying a condominium unit. These fees usually include:
Association Dues
This is a monthly fee that needs to be paid by the condo unit owner or occupant for all of the operational expenses of the whole building. Association dues are subject to Value Added Tax (VAT) and usually include security, janitorial services, administration, management, and more.
Membership Fees
Depending on the contract and terms, some providers make unit owners automatic members while others may charge membership fees separately. Membership fees are usually for the full use or access of amenities such as the pool, spa, gym or sports complex.
(NOTE: In Sec. 5 of Resolution No. 770 series of 2004 Framework for Governance of Homeowners Association, it is ordered that membership must always be voluntary unless stated in the contract, Deed of Sale, or property title.)
In addition, some condominiums also charge for Parking Fees, Broker’s Fee, and more.
Purchasing a real property needs a lot of thinking and consideration not only because it involves a big amount of money, but also because it is a lifetime possession and responsibility too. The location, the timing, and the potential value of a property are very important. Even though most of us are not familiar with these fees, process, and laws involved, there are a lot of real estate lawyers in Manila, Philippines that we can rely on to such as the ones in Yap, Kung, Ching & Associates Law Office. If you ever need assistance with buying real estate properties, the right lawyers can always provide you with the best advice and options so you would know your best choice for your well-earned money.
Certainly! It's clear that the article touches on various facets of real estate acquisition in the Philippines, emphasizing the nuances beyond the purchase price. Let me break down the concepts and terms covered:
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Zonal Value and Fair Market Value: These terms define the value assigned to properties. Zonal value is for taxation purposes, set by the Bureau of Internal Revenue (BIR), City Assessor’s Office, and Register of Deeds. Fair Market Value is the actual price the seller is willing to sell for, and the buyer agrees upon.
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Fees and Taxes:
- Documentary Stamp Tax (DST): Charged on documents proving transfer or sale of property. The tax rate is 1.5% of the property's selling price, zonal value, or fair market value (whichever is higher).
- Transfer Tax: Imposed on transferring real estate property, ranging from 0.5% to 0.75% of either the zonal value or total selling price (whichever is higher).
- Registration Fee: Paid for registering deeds, orders, or judgments concerning property ownership.
- Real Property Tax (RPT): An annual property tax, usually two percent in Metro Manila and one percent in provinces, applied to lands, buildings, etc.
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Additional Charges for Condominiums:
- Association Dues: Monthly fees for building operational expenses, including services and maintenance, subject to Value Added Tax (VAT).
- Membership Fees: Charged for access to amenities like pools, gyms, based on the terms of the contract.
- Parking Fees, Broker’s Fee, etc.: Additional charges depending on the condominium's policies and services offered.
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Considerations in Real Estate Purchase: Beyond monetary considerations, aspects like location, timing, and potential property value are crucial. The article suggests seeking advice from real estate lawyers, such as those at Yap, Kung, Ching & Associates Law Office in Manila, Philippines, for guidance.
The piece emphasizes the complexity involved in property acquisition in the Philippines, shedding light on various fees, taxes, and legalities that go beyond the property's actual price. This comprehensive understanding can greatly assist anyone planning to invest in real estate in the country.
