The Taxes Involved in a Sale of Real Estate Property

1. Value-added tax/Percentage tax, if the property to be sold is an ordinary asset

2. Creditable Withholding Tax, for real properties sold by habitually engaged real
estate sellers

There shall be imposed a 12% value-added tax (VAT) on real estate sales of those who are
engaged in the business of selling, developing, leasing or sub-leasing of real property and those
licensed to engage in real estate

In determining the transactions subject to VAT, the following threshold must be considered:

Type of Property Sold VAT-exempt

Residential Vacant lot ₱1,919,500 and below

Residential House & lot ₱3,199,200 and below

Residential Condominium unit ₱3,199,200 and below

Please note that real estate sales that are exempt from VAT based on the above threshold shall
be subject to 3% percentage tax. However, if the seller is a VAT-registered person, the sale of
his ordinary asset shall be subject to VAT even if the sales made are within the prescribed
threshold.

Further, a person should register as a VAT entity if his gross annual sales and/or receipts exceed
₱1,919,500.00 in a year

The VAT taxpayer in this case is a person who is engaged in the real estate business and is the
seller of a real property classified as an ordinary asset. Taxpayers engaged in the real estate
business shall refer collectively to real estate dealers, real estate developers, and/or real estate
lessors.

Registration with the HLURB or HUDCC as a real estate dealer or developer shall be sufficient
for a taxpayer to be considered as habitually engaged in the sale of real estate.

Real property considered as ordinary assets are those which are used in the trade or business of
the taxpayer.