Capital gains tax

[stevewool]

Can anyone enlighten me about capital gains tax in the Philippines, is it when you sell a house or  condo that what you have gained in wealth then you are taxed on that amount and it’s not a tax if you are buying a property .

Plus the land value of said property when you buy it can the government come and then reduce the cost per meter so you then have ended up paying lots more for that said property 

[Possum]

As best I recall the capital gains tax is about 6% and is separate from income tax. If you are reinvesting the proceeds from sale of a house to build another house I think you're exempt but you have to notify BIR.

[Freebie]

Its misnamed. Its not what you and I understand as Capital Gains.

If the real estate is a capital asset, the purchase is subject to capital gains tax (CGT) of 6% of the gross selling price or current fair market value, whichever is higher, and documentary stamp tax (DST) of 1.5% of the actual consideration for the sale.

 

Neither of the assessments have anything to do with "gains".

[hk blues]

56 minutes ago, Freebie said:

Its misnamed. Its not what you and I understand as Capital Gains.

If the real estate is a capital asset, the purchase is subject to capital gains tax (CGT) of 6% of the gross selling price or current fair market value, whichever is higher, and documentary stamp tax (DST) of 1.5% of the actual consideration for the sale.

 

Neither of the assessments have anything to do with "gains".

That's my understanding - the CGT here is more like what we'd call VAT or Sales Tax.  

[fillipino_wannabe]

4 hours ago, stevewool said:

Plus the land value of said property when you buy it can the government come and then reduce the cost per meter so you then have ended up paying lots more for that said property 

That's the Assessed Value for property tax, it's not relevant to what the land is actually worth. Most LGUs calculate the assessed value at 20-30% of the real value then you pay 1% tax per year on the assessed value, 2% if it's in Metro Manila.
I think Iloilo is the only place where the assessed value is 100% of the actual value.

[JJReyes]

An added wrinkle in tax calculation is called, "zonal" or something similar.  The local government has an estimate for land value in a given area.  This is to prevent owners from declaring a much lower value to reduce their tax obligation. 

[Dave Hounddriver]

6 hours ago, hk blues said:

the CGT here is more like what we'd call VAT or Sales Tax. 

I thought the Buyer pays the VAT?  In Philippines its the Seller who pays the CGT, at least that is what the law says.

[Kingpin]

4 hours ago, Dave Hounddriver said:

In Philippines its the Seller who pays the CGT, at least that is what the law says.

In practice sellers almost always demand the buyer pays.

The real issue is most sales are exempt, the seller doesn't need to pay CGT if within 18 months after the sale of a primary residence, proceeds are then used to buy or build a new primary residence.

So what usually happens is the seller gets the 6% from the sad buyer, deposits  it all into an escrow account with the BIR, buys a new house, and then gets that 6% released back to him.

Edited August 7, 2023 by Kingpin

[Sea Turtle]

9 hours ago, Dave Hounddriver said:

I thought the Buyer pays the VAT?  In Philippines its the Seller who pays the CGT, at least that is what the law says.

before clear title will be transferred,  it must be payed.   often buyer is on the hook,  or they need to get that money from the seller at the same time as they give the money for the purchase.

[Jack Peterson]

1 hour ago, Sea Turtle said:

before clear title will be transferred,  it must be payed.   often buyer is on the hook, 

When we bought our lot we split the payments ( agreed with the seller), then we deducted (again with agreement) our 1/2 then when paid we have the receipt ( well a copy) to show it had all been Paid. All was well as we have the Title