The Toll Fees of Buying A Property

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Buying a property goes beyond just being financially sound and stable because it can still become a disaster if you fail to prepare for the process. As you go along the way, there are tolls which you have to pass through and pay aside for the down payment.  This is what you need to familiarize yourself with because this is what scammers use for their modus operandi to take advantage of the unsuspecting buyers. You have to know the taxes that you really have to pay and with whom should you need to transact to for you to tell it apart from made up fees.

Here are some of the required taxes that must be paid when purchasing a property and who should shoulder them:

On the seller’s account:

The part of the seller in the transaction doesn’t end with just handing over the property and getting the payment in return because even sellers bear the responsibility of paying taxes implemented by the government. Not being able to do this will put conflict into the transaction. First, the seller should pay the capital gains tax which is 6% of the Selling Price or Zonal Value or Fair Market Value, depending on which is higher. The zonal value primarily depends on the location of the property. Also, the seller must pay business tax but only if applicable; rate depends on local government unit where property is located.

On the buyer’s account:

On the other hand, the buyer will pay not only the selling price but also taxes accompanying the selling transaction. This includes documentary stamp tax which is computed from the 1.5% of Selling Price or Zonal Value or whichever is higher. While Transfer Tax Rate depends on location of property (ranging from 0.25% to 0.75% of Selling Price or Zonal Value, whichever is higher)

Registration Fee on the other hand is graduated rate based on Selling Price while Real Estate Taxes (Amilyar) is for the remaining months of the year based on the date of full payment.

After settling these taxes, a contract shall be drafted by the broker. But before signing, the buyer must double or triple checks the terms that has been agreed upon first and make sure everything is clear with the seller. If there are clarifications, the buyer should not hesitate to ask questions

Mutual agreement, on the other hand can change and alter the roles of the parties involved when it comes to paying the costs and some of these costs can be passed on the other party. However, the Sales Contract or the Deed of Sale, must explicitly mention the parties in charge of shouldering the costs in order to avoid problems in the future.

Now, let’s have a sample computation from house in Forbes Park that is bought supposedly for P388 million ($9 million.) The relevant taxes and fees paid are shown in the table below.

This computation assumes that the purchase price was P388 million and this Selling Price (SP) was the highest value compared to the Zonal Value or Fair Market Value of the property. This also assumes that there were no business taxes or realty taxes paid, that the registration fee was negligible, and that the transfer tax rate was 0.75%.

Assuming the above assumptions are correct, the purchase of the Forbes Park property resulted to the seller to pay total Capital Gains Tax of P23.28 million. While the buyer, paid a total of P8.73 million for documentary stamps tax and transfer tax. This adds up to the house’s cost of 388 million pesos.

This is just an example of a transaction and how much it can cause. Of course, the price would still depend on the location and the value of the house. On this case, it is really pricey because the house is on an exclusive area. Knowing about these fees and taxes will give us an impression of what we can expect and what we must prepare when buying a property. Also, being knowledgeable about these fees will protect buyers from being victimized by scams.

District 23