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Unpaid capital gain tax- who is responsible


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#1 dealer

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Posted 11 January 2011 - 11:31 AM

Hi,

My partner and I are having a discussion, were looking at buying a property in Cebu, however, he says that he reads somewhere that if the seller agrees to pay the Capital Gain tax and then for some reason this is not paid within 30 days penalty tax is added and this then become the responsibility of the buyer. Everything i have read so far indicates that it is the seller who is making the capital gain on the sale and is legally obliged to pay this tax unless for some reason the buyer undertake to guarantee payment.
Can anyone add to this and tell us what is legally binding. Also my partner says that when paying for the property it is advisable to hold back the 6% capital gain tax and pay it yourself as buyer, therefore knowing for certainty it has been paid with in the 30 days. Any idea please.... Thanks .... cheers

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#2 Headshot

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Posted 11 January 2011 - 11:40 AM

It is the responsibility of the seller. However, unless you use a lawyer (who sets aside part of the sale price for payment of these taxes), it is likely that it will be you paying them. The government doesn't care who pays the tax. All they care about is that they get their money. The stick they use to make sure this happens is that they won't issue the property title or tax declaration unless the capital gains taxes have been paid. Of course, it is the buyer who cares about those things...not the seller. It may be possible to sue the seller over this later, but I wouldn't hold my breath. Once the seller has the money in their pocket, it will be difficult to get them to do anything, so think about these things upfront and set the money aside. Don't just trust that the seller will act in your best interest.

Edited by Headshot, 11 January 2011 - 11:42 AM.

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#3 shadow

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Posted 11 January 2011 - 11:47 AM

Theoretically, the seller pays the capital gains tax. In practice it doesn't always work that way. There is no way to "force" the seller into paying the tax. As far as I know there is no law stating WHO must pay the tax. If the buyer wants to put the property in their name, and doesn't wish to pay the 25% PER MONTH penalty for payment after 30 days of the sale, they should just plan on having to pay it and save themselves the grief.

Filipino logic dictates the seller needs the money or they would not be selling, and the buyer has plenty of money or they would not be buying.

The capital gains tax may be misnamed, as even if the property is sold at a tremendous loss the 6% capital gains tax on the sale price is still due within 30 days.

Who pays what should be negotiated at the same time the price of the land, etc. is. However, many is the seller who agreed to pay it that did not. In the meantime, add 25% PER MONTH while you argue it out with them.

As I said, often better to just plan on buyer paying the tax and save yourself the grief.

Larry in Dumaguete

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#4 SkyMan

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Posted 11 January 2011 - 12:13 PM

Legally the seller pays it. But in practice, if there is no prior agreement, your screwed. Have a lawyer handle your purchase and make sure he knows you want him to keep the amount necessary to cover the tax. There are other taxes too and they are your responsibility.

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#5 billy

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Posted 11 January 2011 - 01:54 PM

Theoretically, the seller pays the capital gains tax. In practice it doesn't always work that way. There is no way to "force" the seller into paying the tax. As far as I know there is no law stating WHO must pay the tax. If the buyer wants to put the property in their name, and doesn't wish to pay the 25% PER MONTH penalty for payment after 30 days of the sale, they should just plan on having to pay it and save themselves the grief.

Filipino logic dictates the seller needs the money or they would not be selling, and the buyer has plenty of money or they would not be buying.

The capital gains tax may be misnamed, as even if the property is sold at a tremendous loss the 6% capital gains tax on the sale price is still due within 30 days.

Who pays what should be negotiated at the same time the price of the land, etc. is. However, many is the seller who agreed to pay it that did not. In the meantime, add 25% PER MONTH while you argue it out with them.

As I said, often better to just plan on buyer paying the tax and save yourself the grief.

Larry in Dumaguete


the capitol gains is due the 5th of the following month in cebu if not paid on time it is 25% monthly late fee plus interest plus an additional fine i forget the name around 5000-8000 pesos. i'm positive on this i went through it. so if you close on the 30th or the 1st of the month it's due on the 5th no 30 day policy as just written

#6 shadow

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Posted 11 January 2011 - 02:13 PM


Theoretically, the seller pays the capital gains tax. In practice it doesn't always work that way. There is no way to "force" the seller into paying the tax. As far as I know there is no law stating WHO must pay the tax. If the buyer wants to put the property in their name, and doesn't wish to pay the 25% PER MONTH penalty for payment after 30 days of the sale, they should just plan on having to pay it and save themselves the grief.

Filipino logic dictates the seller needs the money or they would not be selling, and the buyer has plenty of money or they would not be buying.

The capital gains tax may be misnamed, as even if the property is sold at a tremendous loss the 6% capital gains tax on the sale price is still due within 30 days.

Who pays what should be negotiated at the same time the price of the land, etc. is. However, many is the seller who agreed to pay it that did not. In the meantime, add 25% PER MONTH while you argue it out with them.

As I said, often better to just plan on buyer paying the tax and save yourself the grief.

Larry in Dumaguete


the capitol gains is due the 5th of the following month in cebu if not paid on time it is 25% monthly late fee plus interest plus an additional fine i forget the name around 5000-8000 pesos. i'm positive on this i went through it. so if you close on the 30th or the 1st of the month it's due on the 5th no 30 day policy as just written



No, the documentary stamp tax (1.5%) is due on the 5th of the month, the capital gains tax is due 30 days from notarization of the deed of sale.

I'm positive on this, my wife does land titling, we have been through it 14 times in 5 years.

From the BIR website;

Deadline
Within 30 days after each sale, exchange, transfer or other disposition of real property.

http://www.bir.gov.p.../tax_capgin.htm

Larry in Dumaguete

#7 greatplace

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Posted 11 January 2011 - 03:34 PM

Yep by law the seller has to pay if there was no Conditions of Sale draw up.

We are going thru the process now of taking a Lawyer and his seller to court over them not paying the Capital Gains Tax. I don't care if it takes years I am use to the courts, I just like seeing these bastards pay up.

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#8 towboat72

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Posted 24 March 2011 - 10:22 AM

Legally the seller pays it. But in practice, if there is no prior agreement, your screwed. Have a lawyer handle your purchase and make sure he knows you want him to keep the amount necessary to cover the tax. There are other taxes too and they are your responsibility.



i have bought two pieces of property since ive been here.i used a lawyer and still got a bit pissed when the deal was done i found out i needeed to pay the taxes .i asked the lawyer y i was not informed of this at the start of the dear ,she said it was phil way .this brought up the total price that i paid up . eedless to say i was not happy and have since found another to handle my business .

#9 Headshot

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Posted 24 March 2011 - 10:39 AM

i have bought two pieces of property since ive been here.i used a lawyer and still got a bit pissed when the deal was done i found out i needeed to pay the taxes .i asked the lawyer y i was not informed of this at the start of the dear ,she said it was phil way .this brought up the total price that i paid up . eedless to say i was not happy and have since found another to handle my business .

This brings up the point that you can't necessarily trust your lawyer to act in your best interest either. The key to any kind of business dealings here is that you can't assume anything. Just because things work a certain way where you come from doesn't mean they will work that way here. Get everything you expect to have done written into the contract, including having any money owed in loans, liens and outstanding taxes withheld in escrow. Otherwise, all of the money will go to the seller and you will be shafted. Even then, you may be surprised if the local government entity decides to charge using a different basis than they used before (which they do sometimes). In the end, it will be the buyer who has to come up with any extra funds once the money has been transferred.

#10 shadow

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Posted 24 March 2011 - 11:22 AM

i have bought two pieces of property since ive been here.i used a lawyer and still got a bit pissed when the deal was done i found out i needeed to pay the taxes .i asked the lawyer y i was not informed of this at the start of the dear ,she said it was phil way .this brought up the total price that i paid up . eedless to say i was not happy and have since found another to handle my business .


The lawyer is in business for one reason, to make money. If the deal goes through he makes plenty, if you get pissed because someone wants you to pay the tax and back out, he makes nothing. In his mind, better the deal goes through.

Start thinking like a Filipino, and life gets easier.

Larry in Dumaguete




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