Real Estate Taxes You Need to Know (Philippines, 2025)

1. Introduction: Why Real Estate Taxes Matter

Understanding taxes is essential for property investors, homebuyers, landlords, and even tenants. In the Philippines, real estate transactions are governed by multiple tax codes, and ignorance can cost you thousands of pesos or even result in legal penalties.

This guide will walk you through the most common taxes involved in buying, owning, renting, and selling real estate in the Philippines — with clear examples and updated 2025 rates.

2. Taxes When Buying Property

When you buy property, several taxes and fees apply at the time of transfer:

✅ 1. Capital Gains Tax (CGT)

• Rate: 6% of the selling price, zonal value, or fair market value — whichever is highest.

• Paid By: Seller (but often passed to buyer by agreement)

• Example: If the selling price is ₱5M → CGT = ₱300,000

✅ 2. Documentary Stamp Tax (DST)

• Rate: 1.5% of the selling price or zonal value

• Paid By: Buyer

• Example: ₱5M property → DST = ₱75,000

✅ 3. Transfer Tax

• Rate: 0.5% to 0.75% depending on LGU (Cebu City = 0.5%)

• Paid By: Buyer

• Example: ₱5M property → Transfer Tax = ₱25,000

✅ 4. Registration Fee

• Based on a graduated schedule (often around 0.25%)

• Paid to the Registry of Deeds to formally record title

• Estimated: ₱10,000–₱20,000 for a ₱5M property

3. Annual Property Taxes (Real Property Tax)

✅ Real Property Tax (RPT)

• Paid annually to the city or municipality

• Rate:

  • Metro Manila: 2% of the assessed value

  • Provinces (e.g. Cebu): 1% of assessed value

• Assessed Value: 20% of fair market value for residential

• Example:

  • FMV = ₱5M → Assessed value = ₱1M

  • 1% of ₱1M = ₱10,000/year

Deadline: January 31 (can be paid quarterly)

✅ Discounts: Up to 20% for early full-year payment in January

4. Taxes on Rental Income

✅ 1. Income Tax on Rent

• Required: If you lease your property, rental income is taxable.

• Options:

  • 8% flat tax on gross income (if gross ≤ ₱3M/year)

  • Graduated income tax (if gross > ₱3M/year)

Example:

• Monthly rent: ₱25,000 → Annual: ₱300,000

• 8% tax: ₱24,000/year

✅ Who Must File:

• Landlords (local or foreign) must register with BIR, get COR, and issue Official Receipts.

5. VAT on Rent

✅ When Is VAT Charged?

• If gross annual rental income exceeds ₱3,000,000, you are subject to 12% VAT.

Exemption:

• Rentals below ₱15,000/month or under ₱3M/year are VAT-exempt.

Example:

• 4 units rented at ₱20K/month = ₱960K/year → No VAT

• 10 units rented at ₱30K/month = ₱3.6M/year → Subject to VAT

6. Tax Obligations for Foreigners

Foreigners who legally own condominium units in the Philippines are subject to the same taxes:

• Income tax on rental income

• Real property tax annually

• Capital gains tax and DST upon sale

✅ However, foreigners cannot own land, only buildings or condos (up to 40% of any condo project).

✅ TIP: If a foreigner earns rent in the PH, they must secure a TIN, register with BIR, and file annual returns.

7. Estate Tax (on Inheritance of Property)

If a property owner dies, heirs must pay Estate Tax to transfer ownership.

✅ Rate: 6% of the net estate

• Net estate = Total assets – allowable deductions (debts, funeral, standard deduction ₱5M, family home up to ₱10M)

✅ Deadline: Within 1 year of death

⚠️ Tip: If unpaid, heirs cannot transfer property and incur penalties.

8. Taxes When Selling Property

If you’re selling your property:

• ✅ Capital Gains Tax (6%) — seller

• ✅ DST (1.5%) — buyer

• ✅ Withholding Tax (if buyer is a corporation)

• ✅ Broker’s Commission (not a tax, but expense)

Sample Sale:

• Selling Price: ₱8M

• CGT: ₱480,000

• DST: ₱120,000

• Transfer Tax: ₱40,000

• Registration Fee: ~₱20,000

9. Tax Incentives and Exemptions

✅ Senior Citizens & Persons with Disabilities (PWDs)

• May be exempt from real property tax (some LGUs)

• Need to apply with local assessor

✅ Affordable Housing Sales (RA 7279)

• Units under ₱2.5M may be VAT-exempt

10. Documentary Requirements for Tax Filings

When paying taxes related to property, prepare the following:

• TIN (Tax Identification Number)

• Notarized Deed of Sale

• Certificate Authorizing Registration (CAR)

• Tax Clearance Certificate

• BIR Form 1706 (CGT)

• BIR Form 2000-OT (DST)

• Valid IDs of buyer and seller

11. Penalties for Non-Payment

• Real Property Tax: 2% monthly interest (max 72%)

• Capital Gains or DST: 25% surcharge + 20% annual interest

• Income Tax: Compounded penalties + audit risk

TIP: Use a lawyer or licensed broker to ensure compliance.

12. How to Pay Real Estate Taxes

Step-by-Step (RPT):

1. Go to LGU Treasurer’s Office

2. Present latest tax declaration or previous receipt

3. Get computation and pay over-the-counter or online (some LGUs)

Step-by-Step (BIR Taxes):

1. Visit nearest BIR RDO

2. File forms (manual or online)

3. Pay via Land Bank, BIR accredited banks, or ePayment portal

13. Frequently Asked Questions

• Q: Can taxes be split between buyer and seller?
  A: Yes. Legally assigned roles exist, but in practice parties may agree to split or transfer tax responsibilities.

• Q: Do OFWs pay taxes on Philippine property?
  A: OFWs do not pay income tax on foreign earnings but must pay taxes on Philippine rental or capital gains.

• Q: What happens if I inherit a property but don’t pay Estate Tax?
  A: You cannot transfer the title, sell, or register the property until the estate tax is settled.

14. Summary Table of Real Estate Taxes

15. Final Thoughts

Real estate taxes are not just numbers — they shape investment returns, limit your liquidity, and affect your long-term ownership goals. Whether you’re buying a condo in Cebu, leasing a unit in Makati, or inheriting property in Davao, knowing which taxes apply will save you time, money, and legal complications.

When in doubt, always consult with:

• A licensed real estate broker

• A tax lawyer

• The Bureau of Internal Revenue (BIR)