Land Purchase....

[JohnSurrey 544]

In October last year we bought a small piece of land for about 18,000... in the middle of nowhere but with "potential"

 

Anyway, we pay the 18,000 and then last month my brother in law tries to sort the paperwork to "register" the sale etc...

 

The short story is we need to pay another 9,000 ... 7,000 of tax - think it was a capital gain and 2,000 of fines etc...

 

We decide not to register as I'm thinking once we register the land we'll have the tax man asking us for more tax etc...

 

 

So, my question is... what are the pros and cons of registering?

[BossHog 39,149]

My guess here is that it was an informal "purchase" and you don't have legal title.

 

Maybe tax declaration.

 

How much do you like the parcel of land?

 

It can take up to a decade to get clear title on that kind of land.

 

Good value, but it takes all sorts of work to get it done.

[Raven 638]

In October last year we bought a small piece of land for about 18,000... in the middle of nowhere but with "potential"

 

Anyway, we pay the 18,000 and then last month my brother in law tries to sort the paperwork to "register" the sale etc...

 

The short story is we need to pay another 9,000 ... 7,000 of tax - think it was a capital gain and 2,000 of fines etc...

 

We decide not to register as I'm thinking once we register the land we'll have the tax man asking us for more tax etc...

 

 

So, my question is... what are the pros and cons of registering?

If you plan to build on the land, you should have a Title in your name (wifes name)..I would never build on Dec. Land, you never no what or who will show up later..

 

Think its close to 10k yearly in taxes for our land ..1000m2+6000m2..most expensive is the 1000m2 city land

Edited May 28, 2013 by Raven

[BossHog 39,149]

We pay about 3,500 pesos a year tax on 47,000 sqm.

 

I think the Op is getting stitched up for back taxes which should have been investigated before buying the property.

 

Still, good luck.

[Raven 638]

We pay about 3,500 pesos a year tax on 47,000 sqm.

 

I think the Op is getting stitched up for back taxes which should have been investigated before buying the property.

 

Still, good luck.

Sounds like it, otherwise P7000,- in CG for purchase of P18.000,- is a very high (unless zonal value is very high in that area)

Edited May 28, 2013 by Raven

[JohnSurrey 544]

Yes I'm sure we're being asked to pay the back taxes... that's why I thought we wouldn't bother... we can just transfer it again and then the next person will have to pay the back taxes if they want good title... Presume that is how it works?

[Brucewayne 3,803]

In October last year we bought a small piece of land for about 18,000... in the middle of nowhere but with "potential"

 

Anyway, we pay the 18,000 and then last month my brother in law tries to sort the paperwork to "register" the sale etc...

 

The short story is we need to pay another 9,000 ... 7,000 of tax - think it was a capital gain and 2,000 of fines etc...

 

We decide not to register as I'm thinking once we register the land we'll have the tax man asking us for more tax etc...

 

 

So, my question is... what are the pros and cons of registering?

I can't quite remember, but it seems that the tax rate for property below 2.4 million pesos is only about 6% of what is paid for the land at the time of sale.

I am thinking most of that charge includes attorney fees and such which are numerous and your brother in law has simply not given you the itemized list.

Even with the P9,000 tax bill (probably back taxes), you are getting a good deal and I say go for it, get it registered.

[BossHog 39,149]

 

we can just transfer it again and then the next person will have to pay the back taxes

 

Well, it would be helpful to know why you bought the land.

 

Residential, agricultural, or as suggested to flip it to someone else?

[Raven 638]

I can't quite remember, but it seems that the tax rate for property below 2.4 million pesos is only about 6% of what is paid for the land at the time of sale.

I am thinking most of that charge includes attorney fees and such which are numerous and your brother in law has simply not given you the itemized list.

Even with the P9,000 tax bill (probably back taxes), you are getting a good deal and I say go for it, get it registered.

According to BIR .... The taxable base is whichever is higher of the gross selling price per

sales documents or the fair market value that appears in the latest tax

declaration or Zonal Value.

[Brucewayne 3,803]

According to BIR .... The taxable base is whichever is higher of the gross selling price per

sales documents or the fair market value that appears in the latest tax

declaration or Zonal Value.

?

 

Apples and oranges.

[Raven 638]

?

 

Apples and oranges.

Is there a question behind it...

[BossHog 39,149]

We bought our property at 9 pesos a square meter,

 

Still the surveying and legal paperwork ended up costing us more than the land itself.

 

And. as mentioned it took ten years to get a valid title.

 

But we fell in love with the property. It was worth the struggle.

[shadow 18,483]

P18,000 purchase price times 6% capital gains tax = P1080 for the capital gains tax.

 

Plus 25% PER MONTH penalty for every month past the first 5th of the month, for 12 months equals P3240. Plus the original P1080 equals P4280 for the capital gains tax alone.

 

Now, add in the documentary stamp tax and transfer fee tax...

 

If you buy property you have until the next 5th of the month to pay the taxes, or add 25% for that and every 5th of the month thereafter. In other words, the taxes will double every 4 months.

 

It pays to stay on top of things! 

[+RogerDuMond 14,353]

Yes I'm sure we're being asked to pay the back taxes... that's why I thought we wouldn't bother... we can just transfer it again and then the next person will have to pay the back taxes if they want good title... Presume that is how it works?

Make sure you pay the yearly property taxes or you could lose it after a period of time.

[Brucewayne 3,803]

You may not know this, but the tax code also says that if you build a new "primary" residence within 18 months of the date of purchase, the property shall be exempt from the capital gains tax.

What is the tax base/rate used for computing Capital Gains Tax on transfer of real property?

There shall be imposed a final tax rate of six percent (6%) based on whichever is higher of the following:

1) The fair market value as determined by the Commissioner (zonal value);
2) The fair market value as shown in the Schedule of Values of the Provincial and City Assessors; or
3) The selling price of the property or fair market value of the property received in an exchange transaction.

Capital gains presumed to have been realized from the sale or
disposition of their principal residence by natural persons, the
proceeds of which is fully utilized in acquiring or constructing a new
principal residence within eighteen (18) calendar months from the date
of sale or disposition, shall be exempt from payment of the capital
gains tax: Provided, That the historical cost or adjusted basis of the
real property sold or disposed shall be carried over to the new
principal residence built or acquired:

Provided, further, that the Commissioner shall have been duly
notified by the taxpayer within thirty (30) days from the date of sale
or disposition through a prescribed return (Form 1706) and \"Sworn
Declaration of Intent\", as prescribed in Revenue Regulations No. 13-99,
of his intention to avail of the tax exemption herein mentioned:
Provided, still further, That the said tax exemption can only be availed
of once every ten (10) years: Provided, finally, that if there is no
full utilization of the proceeds of sale or disposition, the portion of
the gain presumed to have been realized from the sale or disposition
shall be subject to capital gains tax. For this purpose, the gross
selling price or fair market value at the time of sale, whichever is
higher, shall be multiplied by a fraction which the unutilized amount
bears to the gross selling price in order to determine the taxable
portion and the tax due.

If the seller fails to utilize the proceeds of sale or disposition in
full or in part within the 18-month reglementary period, his right of
exemption from the capital gains tax did not arise to the extent of the
unutilized amount, in which event, the tax due thereon shall immediately
become due and demandable on the 31st day after the date of the sale,
exchange or disposition of principal residence.