9.18.2019

Buying Land In The Philippines Part 3: BIR Taxes

Buying Land In The Philippines Part 3: BIR Taxes






Disclaimer


This is the third part in the series about buying land in the Philippines. As always, nothing you read here is to be taken as legal advice or professional guidance. This is our personal experience that we are sharing with you. So caveat lectorum.

BIR Capital Gains Tax 


The Bureau of Internal Revenue (BIR) web-page regarding the Capital Gains Tax states:
The Capital Gains Tax Return (BIR Form No. 1706) shall be filed and paid within thirty (30) days following the sale. Therefore, it is important to get that tax paid ASAP after you execute notarization of the DoAS.
The BIR web-page states that it is the seller/transferor who files the Capital Gains Tax Return. You must work out with the seller/transferor the specifics of which one of you pays this tax. Many times it is the buyer who ends up paying it. In our case it was us, the buyer, who filed with the BIR and paid the taxes. That was the deal that we worked out with the seller, who is related to us.

As stated on the BIR web-page, the capital gains tax rate for real property is a flat 6%. The tax is assessed on the higher of: sale price, fair market value, or zonal value. The basis of the tax is the gross amount of the higher of those three values.

Documentary Requirements For Capital Gains Tax Filing


Two copies of each of the following:
  • Taxpayer Identification Number (TIN) of Seller/s and Buyer/s
    • Those with no TIN must submit Form 1904 with the following:
      • Original/Photocopy of NSO Birth Certificate or photocopies of any two (2) government issued IDs that show name, address and birth date
      • If married attach a photocopy of the marriage contract
      • Photocopy of the Deed os Sale
  • Notarized Original Deed of Absolute Sale/Deed of Transfer
  • Certified True Copy/ies of the latest Tax Declaration
    • From Municipal Assessor’s Office in the municipality where the property is located
  • Certified True Copy/ies of Original/Transfer/Condominium Certificate/s of Title (OCT/TCT/CCT)
    • From Registry of Deeds
  • Certificate of No Improvement
    • From Municipal Assessor’s Office
  • Validated return and Original Official Receipt/Deposit Slip as proof of payment; for no payment return, copy of Acknowledgment Receipt of return filed thru eBlRForms
  • Acknowledgment receipt of proceeds of sale from the seller
  • Notarized Original Special Power of Attorney (SPA) if the person signing is not one of the parties to the Deed of Transfer 
  • Other documentation may be required.

BIR Documentary Stamp Tax


The BIR web-page regarding the Documentary Stamp Tax states:
The return shall be filed within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred or upon remittance by revenue collection agents of collection from the sale of loose documentary stamps. In my understanding this means that if you execute your DoAS on the last day of the month, then you only have five days to file the Documentary Stamp Tax Declaration Return.
As stated on the BIR web-page under Tax Rates - Tax Rate Code 196, the capital gains tax rate for real property is a flat 1.5%. The tax is assessed on the higher of: sale price, fair market value, or zonal value. The basis of the tax is the gross amount of the higher of those three values.

BIR Processing And Certificate Authorizing Registration


Once you have all required documents gathered and organized proceed to the BIR. BIR will verify that your documents are in order and tell you what additional documentation is required if any. When the BIR accepts your documents for review it may take a day or a few days for them to get back to you depending upon their work load.

When the document review is complete BIR will notify you to report to their office so that you can pay the taxes due. You will then proceed to the approved bank to pay. You will present your receipts of payment to BIR and then you will wait a day or two (maybe more) for final approval.

When your case is approved with the BIR you will receive the Certificate Authorizing Registration (CAR) from the BIR. The CAR is part of the documentation that is submitted to the Department of Agrarian Reform (DAR) and to the Land Registration Authority (LRA) in the final steps required for titling.

The Bottom Line:


In addition to the Capital Gains and Documentary Stamp taxes that are paid to the Bureau of Internal Revenue (BIR) there is also annual real property tax that is assessed by the Municipal Assessor's Office. It is important visit the Municipal Assessor's Office before buying a property to check for delinquent annual real property taxes, as suggested in Part 2.

Once you execute the notarization of your DoAS You have thirty (30) days to file a Capital Gains Tax Return. A Documentary Stamp Tax Declaration Return must also be filed within five (5) days after the close of the month when the taxable document was made.

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