Capital gains tax

[Kingpin]

On 8/8/2023 at 6:25 PM, hk blues said:

 I think the seller doesn't actually pay but the buyer does

 

On 8/9/2023 at 12:18 PM, hk blues said:

BIR rules on this, it states that the buyer should pay the amount due

 

On 8/9/2023 at 12:18 PM, hk blues said:

the buyer is on the hook for the tax.  

 

On 8/9/2023 at 4:59 PM, hk blues said:

the buyer had to pay

 

Even in the Philippines, "pay" does not mean "withhold" or "deduct", it's actually the opposite:

Quote

In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from the seller and shall deduct from the agreed selling price/consideration the 6% capital gains tax - https://www.bir.gov.ph/index.php/tax-information/capital-gains-tax.html

 

 

 

 

[JJReyes]

There are no hard rules whether it's the buyer or seller who pays capital gains, stamp fee and other taxes to the Bureau of Internal Revenue.  This is subject to negotiation.  However, if the seller agrees to pay and does not, the BIR can go after the buyer.  Whoever pays, it is important for the buyer to possess proof of tax payments in the form of official receipts.

[Dave Hounddriver]

2 hours ago, JJReyes said:

There are no hard rules . . . the BIR can go after the buyer.

That sounds like a pretty hard rule if you happen to be the buyer.  In my experience, when buying from a reputable property developer I did not bother about the tax.  I trusted them to take care of it and never heard anything more.  When selling to a private individual I had a lawyer handle the "conveyancing"  (they don't call it that but its their equivalent).  The lawyer explained that he would deduct the tax as the money (in cash) exchanged hands in his office.  In effect the buyer paid me and I paid the lawyer and he paid the BIR.  That way everybody was covered.  You end up having to trust someone.  I would rather trust my lawyer or a reputable property developer than some anonymous person buying or selling a property.

[hk blues]

20 minutes ago, Dave Hounddriver said:

In my experience, when buying from a reputable property developer I did not bother about the tax.  I trusted them to take care of it and never heard anything more.  

Same here.

ETA: I'll hold my hands up that I was completely unaware of the concept of CGT here as in the UK it actually means what it says hence my ignorance.  So, when I bough my property I had no thought about CGT.  

 

Edited August 11, 2023 by hk blues

[hk blues]

14 hours ago, Kingpin said:

Even in the Philippines, "pay" does not mean "withhold" or "deduct", it's actually the opposite:

The buyer will withhold the amount of CGT from the purchase price and deposit this amount in a designated bank account as detailed in your earlier post.  Now, for me pay and deposit are pretty much the same thing in this context. 

Anyhow, this is in danger of becoming another 'Hosegate' so I'm out. 

 

[hk blues]

14 hours ago, Kingpin said:

Even in the Philippines, "pay" does not mean "withhold" or "deduct", it's actually the opposite:

I guess we're at cross purposes on this so I'll bow out. 

[Kingpin]

7 hours ago, hk blues said:

The buyer will withhold the amount of CGT from the purchase price

Correct

7 hours ago, hk blues said:

and deposit this amount in a designated bank account as detailed in your earlier post.

That's the part it doesn't say, you're assuming it implies the buyer makes the deposit. The BIR later clarifies who makes the deposit and who it gets refunded to:

Quote

the amount so deposited shall only be released to such Transferor

 

10 hours ago, JJReyes said:

 if the seller agrees to pay and does not, the BIR can go after the buyer.

There is no sale without BIR getting their cut first, so that isn't even relevant. Of course the 6% can be paid to the seller by the buyer during sales negotiation, but even in the Philippines a "capital gains tax" means a tax on a seller's capital gain, and the seller is the only legally responsible party for paying the BIR.

[fillipino_wannabe]

8 hours ago, Kingpin said:

Correct

That's the part it doesn't say, you're assuming it implies the buyer makes the deposit. The BIR later clarifies who makes the deposit and who it gets refunded to:

 

There is no sale without BIR getting their cut first, so that isn't even relevant. Of course the 6% can be paid to the seller by the buyer during sales negotiation, but even in the Philippines a "capital gains tax" means a tax on a seller's capital gain, and the seller is the only legally responsible party for paying the BIR.

The buyer pays it, the seller gets it when he proves he's spent the money building/buying a new house. That's only relevant when the seller tells the BIR he's selling his primary residence which I imagine is almost never, normally they'd either just say the buyer pays the CGT or pay it themselves and 95% of the time they probably declare a much lower sales price.

[Mike J]

19 hours ago, hk blues said:

Anyhow, this is in danger of becoming another 'Hosegate' so I'm out. 

I was sort of thinking the same.  

[Gator]

3 hours ago, fillipino_wannabe said:

The buyer pays it, the seller gets it when he proves he's spent the money building/buying a new house. That's only relevant when the seller tells the BIR he's selling his primary residence which I imagine is almost never, normally they'd either just say the buyer pays the CGT or pay it themselves and 95% of the time they probably declare a much lower sales price.

Not anymore. Case in point: albeit it was only property that the wife and I just bought, the BIR uses a set amount from a table of values. Agricultural land (in Cebu) is rated at 150 pesos per square meter. Residential at 300 pesos (higher tax rate to me means reduced incentive to purchase, go figure). Commercial and mixed use is even higher, 450 pesos per sqm I believe. So for example: one hectare = 10,000 square meters: (10,000 x 150) x 0.06 = 90,000 pesos. They use this method because too many  ppl were using fake deeds of sale that indicated a lower then actual selling price. 

But, and it’s a big but, that rate is also negotiable! With a little pasalobong to the BIR agent and a lot of arguing by the minister of war and finance plus her mom (she went into barangay captain mode), the rate was reduced to 75 pesos per square meter. The BIR was trying to say there were structures on the land (2 barns) and that is was a working farm ( they were using info from 2014). The land has been fallow since the owners death in 2016 and the two very small “barns” (more like small sheds) were blown away during the typhoons. 

In addition to the CGT, you are required to pay for Documentary stamps (aka Doc stamps). Assessment for the stamps: the final value of the property times 15 pesos per thousand (or any fraction thereof). Using the above example: 90,000 x 0.015 = 1,350 pesos. 

The bottom line is that it’s all negotiable, even when it comes to the amount of tax that is actually paid.