Quick Notes Real Estate Taxation

8/10/2019 Quick Notes Real Estate Taxation

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Local Taxation

Basic Realty Tax = 1% to 2% of Assessed Value

Special Education Fund Tax = 1% of Assessed Value

Idle Land Tax = not to exceed 5% of Assessed Value (Section 236, RA 7160)

Payment of Realty Tax = March 31 / June 30 / Sept 30 / December 31

Prompt Payment Discount = maximum of 20% of total tax; deadline is on or beforeJanuary 31 of the taxable year

Payment Under Protest:

o Should be filed within 30 days

o

Decision should be made within 60 days

o Refund may be given within 2 years

Interest on Unpaid Tax = 2% per month, not to exceed 36 months

Redemption period for properties sold through auction = One year from date of

certificate of sale

National Taxation

Installment Sale = total amount paid in first year of payments is 25% or less of tota

selling price

Deferred Payment Sale = total installment paid in first year of payments is more than

25% of total selling price

Documentary Stamp Tax on Sale = 1.5% of Tax Base

Documentary Stamp Tax on Mortgage = P20.00 for the first P5,000 plus P10.00 for every

succeeding P5,000 or a fraction thereof, or (Amount of Mortgage x 0.002) + P10.00 Capital Gains Tax = 6% of Tax Base

Creditable Withholding Tax (for real estate developers and dealers):

1.5%if selling price is P500,000.00 and below

3.0%if selling price is more than P500,000.00 and but less than or equal to P2 Million

5.0%if selling price is more than P2.0 million

6.0%if seller is not habitually engaged in sale of real estate, regardless of selling price

Percentage Tax = 3% of Gross Receipts

Value-Added Tax (VAT) = 12% of selling price before VAT

Donors Tax = from 2% to 15% (up to 4th degree of consanguinity) 30% if the donee is a stranger (beyond the 4th degree of consanguinity)

Estate Tax = from 5% to 20% of net estate subject to tax

i. Rule on Sales on Installment [RR No. Sec. 4.106-3 of RR No. 16-05 as amended by Sec. 3 of

RR No. 4-07]

Installment sale of residential house and lot or other residential dwellings with gross selling

price exceeding P1,000,000.00, where the instrument of sale (whether the instrument is


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nominated as a deed of absolute sale, deed of conditional sale or otherwise) was executed

prior to November 1, 2005, shall be subject to ten percent (10%) output VAT.

Sale of real property on installment plan means sale of real property by a real estate dealer

the initial payments of which in the year of sale do not exceed twenty-five (25%) of the gross

selling price.

In case of installment sale, the seller shall be subject to output VAT on the installmen

payments received, including the interests and penalties for late payment, actually and/o

constructively received, subject to the provisions of Sec.4.106-4 hereof. Correspondingly, the

buyer of the property can claim the input tax in the same period as the seller recognized the

output tax.

Installment payments, including interests and penalties, actually and/or constructively

received starting February 1, 2006 shall be subject to twelve percent (12%) output VAT.

ii. See also rule on sale of real property use in business (Sec. 14 (l) of RR No. 4-07)

(1) Sale of real properties not primarily held for sale to customers or held for lease in the

ordinary course of trade or business. However, even if the real property is not primarily held

for sale to customers or held for lease in the ordinary course of trade or business but the same

is used in the trade or business of the seller, the sale thereof shall be subject to VAT being a

transaction incidental to the taxpayers main business.

iii. Correlate with Sec. 109 on exempt sales of Real Property

(w) Sale of real properties not primarily held for sale to customers or held for lease in theordinary course of trade or business or real property utilized for low-cost and socialized

housing as defined by Republic Act No. 7279, otherwise known as the Urban Development and

Housing Act of 1992, and other related laws, house and lot and other residential dwellings

valued at One million pesos (P1,000,000) and below: Provided, That not later than January

31st of the calendar year subsequent to the effectivity of this Act and each calendar yea

thereafter, the amount of One million pesos (P1,000,000) shall be adjusted to its present value

using the Consumer Price Index, as published by the national Statistics Office (NSO);

2. Lease of Residential Units

[Sec. 4.109-1 (B)(q) of RR No. 16-05]Lease of residential units with a monthly rental per unit not exceeding 10k, regardless of the

amount of the aggregate rentals received by the lessor during the year, Provided, that not

later than January 31, 2009 and every three years thereafter, the amount of 10k shall be

adjusted to its present value using the consumer price index, as published by the NSO.

The foregoing, not withstanding, lease of residential units where the monthly rental per uni

exceeds 10k but the aggregate of such rentals of the lessor during the year do not exceed


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1.5M shall be likewise exempt from VAT, however the same shall be subjected to 3%

percentage tax.

In cases where a lessor has several residential units for lease, some are leased out for a

monthly rental per unit of not exceeding P10,000.00 while others are leased out for more than

P10,000.00 per unit, his tax liability will be as follows:

1. The gross receipts from rentals not exceeding P10,000.00 per month per unit shall beexempt from VAT regardless of the aggregate annual gross receipts.

2. The gross receipts from rentals exceeding P10,000.00 per month per unit shall be

subject to VAT if the aggregate annual gross receipts from said units only (not including

the gross receipts from units leased for not more than P10,000.00) exceeds

P1,500,000.00. Otherwise, the gross receipts will be subject to the 3% tax imposed

under Section 116 of the Tax Code.

The term residential units shall refer to apartments and houses & lots used for residentia

purposes, and buildings or parts or units thereof used solely as dwelling places (e.g.

dormitories, rooms and bed spaces) except motels, motel rooms, hotels and hotel rooms.The term unit shall mean an apartment unit in the case of apartments, house in the

case of residential houses; per person in the case of dormitories, boarding houses and bed

spaces; and per room in case of rooms for rent.

What real estate transactions are subject to Value Added Tax (VAT)?

Those involving sale, lease or sub-lease of real property by persons engaged in the business o

selling, developing, leasing or sub-leasing of real property.

The following are liable to pay VAT:

Those who are engaged in the business of selling, developing, leasing or sub-leasing o

real property. Those licensed to engage in real estate brokerage business based on their commission.

The following are the tax rates of VAT:

On sale of goods and properties twelve percent (12%) of the gross selling price or

gross value in money of the goods or properties sold, bartered or exchanged

On sale of services and use or lease of properties twelve percent (12%) of gross

receipts derived from the sale or exchange of services, including the use or lease o

properties

On importation of goods twelve percent (12%) based on the total value used by the

Bureau of Customs in determining tariff and customs duties, plus customs duties, excisetaxes, if any, and other charges, such as tax to be paid by the importer prior to the

release of such goods from customs custody; provided, that where the customs duties

are determined on the basis of quantity or volume of the goods, the VAT shall be based

on the landed cost plus excise taxes, if any.

On export sales and other zero-rated sales0%

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Quick Notes Real Estate Taxation