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Want to know your eligibility for certain condo tax exemptions?
There are laws and terms you'll need to break down in order to understand your overall eligibility, first. Value Added Tax (VAT) and Capital Gains Tax (CGT) tend to be the most important ones for prospective condo buyers; depending on what you choose from Property List, your unit may or may not be exempt from these legal costs.
Once you buy a condo, you'll have to contend with Real Property Tax (RPT) and your Documentary Stamp Tax (DST), though your local government unit (LGU) may provide certain waivers or exemptions for these costs under specific laws or programs.
By reading up on these terms and keeping up with recent updates to these laws, you can equip yourself with must-know information that may help you save on costs. Understand the importance of taxes with this Condo Arena guide, and you'll get to discover your eligibility for exemptions to these Philippine rules.
Ready for potential savings opportunities on these local fees and other expenses? Keep on reading to learn more about this real estate investment topic today.
Why condo tax exemptions matter for buyers and investors
Condo buyers like you should know about local exemptions for your desired property purchases, in case you might be eligible for certain deductions and programs. Check out this quick rundown of these types of incentives for your reference as an investor.
The latest rules for investing in real estate
Here are some of the most recent and relevant updates to local rules and VAT exemption thresholds in the Philippines for prospective buyers like you:
- Updated VAT exemption limits for residential condos - In 2024, the BIR raised the VAT exemption cap to Php3.6 million, based on Consumer Price Index (CPI) values published by the Philippine Statistics Authority (PSA) for 2023. This increase in the limit made VAT-free housing more accessible to middle-income Filipino families, making homes generally more affordable across the country.
- RPT amnesty programs for owners - Current homeowners with delinquent or unpaid RPT from before July 5, 2024, are also eligible for some amount of RPT amnesty under RA 12001. This amnesty program waives past penalties, interest fees, and surcharges, and provides them more time to settle these pending obligations with their LGUs until July 5, 2026.
- Local government incentives and how these vary by city or province - Of course, these key incentives may vary depending on where your development or home of choice is located. LGUs may have their own incentive programs on real estate, so make sure to study your city or province’s laws accordingly.
VAT exemptions and your condo price in the Philippines
VAT exemptions can directly affect condo prices and buyers’ financial plans, for better or for worse. Here are some of the ways that these laws can directly influence your choice of condo price in the Philippines:
- VATable vs. VAT-exempt condo projects - If the gross selling price or fair market value of a unit exceeds the Php3.6M threshold, then it’s immediately subject to 12% VAT. If it falls under the Php3.6M threshold, then it’s VAT-exempt. Take note that the threshold will apply to the zonal value or gross selling price of the unit, whichever is higher – so ask about these amounts from your developer or agent to find out if the condominium sale is VATable or not.
- Developer classification rules - Under the BIR, residential condominium developers and corporations must be legal VAT-registered sellers, and are required to collect and remit this tax on properties that exceed the current Php3.6M threshold.
- How VAT affects buyers - Developers may pass the responsibility of paying the 12% VAT on to their buyers, but only if it’s clearly stated and agreed upon in their sale contract. Otherwise, these sellers shoulder the tax, resulting in reduced net earnings from the sale. Either way, this fee will affect your opinion when you’re buying a condo and comparing its price with other units.
Types of condo tax exemptions and who qualifies
Considering a purchase, but want to know what it might entail in terms of tax? Here's another rundown of the different kinds of exemptions available to real estate property investors like you right now.
Tax exemptions and your real estate investment
Check out these common scenarios where condo tax exemptions may or may not apply, based on your social category, your developer’s classification, or your choice of property:
- First-time buyers of affordable residential units - If you’re a first-time buyer who’s purchasing property under the Php3.6M threshold based on its gross selling price, zonal value, or fair market value, then your purchase is automatically exempt.
- Sellers using the “principal residence” exemption - If the seller you’re talking to is an individual, and not a developer or corporation, who is selling their principal residence, which also falls under the Php3.6M threshold, then their property sale is also exempt from VAT and CGT under the “principal residence” rule.
- Senior citizens or PWD owners availing LGU discounts - Depending on the LGU you’re buying property in, you may qualify for discounts and financial support as a senior citizen or PWD. Make sure to check with your local government first to figure out your general eligibility.
- Socialized housing - If you’re buying a low-cost or socialized housing property from Pag-IBIG, NHMFC, or other government housing programs, then a tax exemption applies to your real estate. Low-cost housing is generally offered to families that fall under the low-income economic bracket, while socialized housing is usually offered to underprivileged and homeless Filipinos.
Exemptions for current condo owners
If you’re already an owner but are still curious about potential dispensations for your current or future properties, then you should also know that there are some RPT exemptions rooted in RA 7160 of 1991. Here’s a breakdown of the law’s clauses, as related to real estate in the Philippines:
- Government, charitable, educational, and cooperative-owned properties – According to RA 7160, real property owned by the government, charitable institutions, religious institutions, educational institutions, and duly registered cooperatives are exempt from taxation.
- How LGU ordinances affect RPT rates and exemptions - According to the same law, your LGU may also enact additional ordinances that can grant more RPT exemptions in the Philippines. Of course, these still have to fall in line with country-wide laws and legislative provisions requiring or exempting taxes.
How to check if you qualify
Want to know if you qualify for any kind of incentive or exemption for current or upcoming real estate investments? Here's a simple but practical checklist to see if you qualify for these waivers today:
- Ask the developer about the unit’s status. By directly inquiring with your developer, you can determine if they're a mandatory VAT taxpayer, and if the property you're interested in is VATable or not.
- Confirm the selling price against the BIR's exemption threshold. Check to see if your chosen property falls under the Php3.6M threshold based on its gross selling price, zonal value, or fair market value. This will help you determine if your property is eligible or not for waivers.
- Review your city’s RPT exemption programs. Take a look at your own LGU's programs for RPT, as they may have local ordinances or unique incentives for current condo owners.
- Verify documentation for CGT or DST waivers, if applicable. Consult again with your developer or real estate agent if the condominium is subject to the processing of CGT or DST or not, so that you'll know if you have to prepare for these additional expenses ahead of time too.
As always, seek professional advice from a property lawyer, experienced agent, or financial adviser before making any real estate decisions. They can help you navigate the complicated world of tax requirements, ensuring you have the insight needed to successfully invest in real estate.
Beyond knowing how to pay condo tax
It’s important to know how you can maximize waivers and exemptions to save on real estate expenses. Remember to bring these final reminders with you as you pursue the investment of your dreams:
- Familiarize yourself with your dream home. Study your unit and its developer to see what categories they fall under in terms of legal requirements, zoning laws, and developer classification rules.
- Know your responsibilities ahead of time. Read up on the latest VAT, CGT, RPT, and DST laws to know if you’ll need to pay these taxes, and how much they’ll cost in addition to your sales price.
- Always consult with a professional. Confused about all these terms and requirements? Get in touch with your real estate agent or an experienced lawyer to help you figure out these complex rules ahead of time.
Ready for the ideal property that fits your financial needs? Check out Real Estate Comparison to find the perfect development for you.
