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liquido

Capital Gains

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liquido

Have a lady friend that just got back from being an oversea's worker and actually saved a decent amount of money.She told she purchased a piece of land with a clear title using a lawyer (if that means anything)..My friend tells me now that she has to pay a Capital Gains tax now,I said what?I told her Capaital gains is a tax on profit only,she said thats how they do it here..Her english is not that great so I think im not understanding correctly....Are these hidden taxes the seller did not pay?if so how can it have been a clean title?

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Headshot

You are incorrect in your assumptions. Capital gain tax here is really just a sales tax (on the entire declared amount). It is supposed to be paid by the seller, but if she allowed the seller to take the money without having the capital gains tax amount being withheld, then she is responsible for the tax. She cannot get the title transferred to her name until the tax is paid. It doesn't sound like her lawyer gave her very good advice.

Edited by Headshot
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Davaoeno
22 minutes ago, liquido said:

Have a lady friend that just got back from being an oversea's worker and actually saved a decent amount of money.She told she purchased a piece of land with a clear title using a lawyer (if that means anything)..My friend tells me now that she has to pay a Capital Gains tax now,I said what?I told her Capaital gains is a tax on profit only,she said thats how they do it here..Her english is not that great so I think im not understanding correctly....Are these hidden taxes the seller did not pay?if so how can it have been a clean title?

Capital Gains in the Philippines has nothing at all to do with capital gains !!  It is just a  flat fee charge  [ 6% and 1.5% doc stamp on any  property purchase].  

Usually the seller pays it but who pays it is whatever is written in the contract .  If nobody pays it the BIR will not let the buyer process the sale

The so called " CGT ' will be assessed by the BIR . They will charge it on the greater of  1. the amount the parties declared  or 2. the current zonal value    .

Edited by Davaoeno
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towboat72

You are right about seller should pay the tax but if they do not then a lien can be placed on the property to collect the taxes.

So this way the new owner knows taxes are paid

Should have been figured in when price was figured because now per sq my price PSID is actually higher then agree on but if everyone is happy all is good 

 

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Davaoeno

If you do not file the Notarized Deed of Sale with the BIR within 30 days of signature then the BIR will assess an immediate  25% penalty on the  cgt assessed by them , plus 30% a year penalty  until paid. 

Edited by Davaoeno
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liquido
29 minutes ago, Davaoeno said:

Capital Gains in the Philippines has nothing at all to do with capital gains !!  It is just a  flat fee charge  [ 6% and 1.5% doc stamp on any  property purchase].  

Thats were I got confused...

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Davaoeno
4 minutes ago, liquido said:

Thats were I got confused...

It is an incredibly bad choice of words !! 

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SkyMan
5 hours ago, Davaoeno said:

If you do not file the Notarized Deed of Sale with the BIR within 30 days of signature then the BIR will assess an immediate  25% penalty on the  cgt assessed by them , plus 30% a year penalty  until paid. 

True if buying from an individual.  If buying from a corp. even a family corp. the CGT is called something else (I've forgotten) but the percentage is the same.  There is a set date of the month this tax has to be paid by, like the 7th or something, and so you may not have a full 30 days.

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Cgu

If the buyer will process the paper (and taxes) I would also secure a special power of attorney (SPA) from the seller, as the buyer will process he papers on behalf of the owners (depending where it will be processed it will be required to have this SPA - not all offices behave the same). The seller (owner) is still on the title at this stage and according the law is based on the process where the seller pays the CGT.

Normally, if agreed that buyer will process and pay taxes, this (SPA signing) will be done during signing the deed, as it does not cost nothing and its done. At this stage the seller is totally out (otherwise you might depend on it).

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