Professional Documents
Culture Documents
Saving On Real Estate Related Taxation
Saving On Real Estate Related Taxation
Saving On Real Estate Related Taxation
RELATED TAXES
“The only way of finding the
limits of the possible is by
going beyond them into the
impossible”
THE PRESENT LAW
(National Taxation)
January 1, 1998
A. TAXATION - Definition
Taxation
is the inherent power of the sovereign State to
raise money or revenue necessary to finance
the functions and operations of the
Government.
“ lifeblood of government ”
Nature of Taxation Power
The power of taxation is both inherent
and legislative in character.
• It is inherent because it has been reserved
by the State for itself to exercise. It is
possessed by the government without being
expressly conferred by the people. The
power is inherent in the people because of
sustenance of the government requires
contributions from them.
The power of taxation is legislative in
character because only the legislature can
make tax laws. The levying of taxes has
been characterized as the exercise of a high
act of sovereignty, to be performed only by
the legislature upon considerations of
policy, necessity and the public welfare.
Aspects of Taxation
The first – Levy – deals with the provisions
of law which determine or work out the
determination of the person or property to
be taxed, the sum or sums to be raised, the
rate thereof, and the time and manner of
levying, receiving and collecting the taxes.
The second – collection – is constituted of
the provision of law which prescribed the
manner of enforcing the obligation on the
part of those taxed to pay the demand thus
created.
Forms of Escape from Taxation
There are six basic forms of escape from taxation.
They include:
(1) shifting;
(2) capitalization;
(3) transformation;
(4) evasion;
(5) avoidance; and
(6) exemption.
The first three are non-legal, the fourth illegal; and
the last two legal means of escape.
Shifting
Shifting may be defined as the transfer of
the burden of a tax by the original payer or
the one on whom the tax was assessed or
imposed to another or someone else, who
bears it. Shifting is possible only in
connection with a price transaction, whether
of goods, services, or of the factors of
production.
There are three (3) kinds of shifting: forward,
backward, and onward.
• Forward shifting involves the transfer of the tax
from a factor of production through the factor of
distribution until the burden finally rests on the
consumer. When the tax is shifted forward, the
price which constitutes the vehicle for shifting will
increase thereby allowing the factor of production
to escape the burden of the tax. Example: The
developer may shift the tax to the contractor who
in turn shifts it to the real estate marketing
(retailer) who likewise shifts the tax to the final
consumer (buyer of property).
Backward shifting involves the transfer of the tax
from the point of consumption through the factors
of distribution to the factor of production. When
the tax is shifted backward, the price which
constitutes the vehicle for shifting will decrease as
compared with what is would have been.
Example: The consumer may shift the tax to the
retailer by refusing to purchase unless the price is
reduced, and the later may in turn shift the tax to
the wholesaler who finally shifts the tax to the
manufacturer.
There is onward shifting when the tax is
transferred two or more times through the
factors of distribution or production.
Onward shifting may, therefore, be
forwarded or backward. Example: A
transfer from producer to wholesaler is a
shift, the transfer from wholesaler to
retailer is another shift; and when there are
two or more shifts there is onward shifting.
Capitalization
Tax capitalization is a special form of backward
shifting. It occurs in cases where the good is a
durable good, and thus is subject to a series of
successive annual taxes during its lifetime. If the
whole series of future taxes on the good is to be
shifted backward at the time of purchase, the
future taxes must be capitalized and deducted in a
lump sum from the price offered. This must
necessarily be so far there will be no later
opportunity for backward shifting.
Transformation
P 5,000,000
P 2,000,000
X 6%
__________
P 120,000.00 CAPITAL GAINS TAX EXEMPTION
5. The Commissioner shall have been duly notified by
the taxpayer within thirty (30) days from the date of
sale or disposition
P 1,500,000
P 2,000,000
X 6% Unutilized Amount - ( P 500,000.00)
__________
P 120,000.00 Capital Gains Tax - P 30,000
SURCHARGE - 7,500
Interest Penalty [ 1yr.] - 6,000
TOTAL - P 43,500
EXEMPT TRANSACTIONS FROM VAT
( As per BIR Revenue Regulations No. 16-2005
dated September 1, 2005)
LOW-COST HOUSING
SOCIALIZED HOUSING
Or
Provided, That not later than January 31, 2009 and every three (3) years
thereafter, the amounts stated herein shall be adjusted to its present value
using the Consumer Price Index, as published by the National Statistics
Office (NSO); Provided, further, that such adjustment shall be published
through revenue regulations to be issued not later than March 31 of
each year;
If two or more adjacent residential lots are sold or disposed in favor
of one buyer, for the purpose of utilizing the lots as one
residential lot, the sale shall be exempt from VAT only if the
aggregate value of the lots do not exceed P1,500,000.00.
LOT 11 LOT 12
P 900T P1.0 M
Provided, that not later than January 31, 2009 and every
three (3) years thereafter, the amount of P10,000.00 shall be
adjusted to its present value using the Consumer Price
Index, as published by the NSO;
Residential Apartments – P 9,500 per month rental
250 units
P 800,000 + P 1,000,000
Surveys show that a very significant factor for our poor tax
collections is the apparent unawareness of most taxpayers
of existing tax laws, rules and regulations. With taxes
increasing both in rate and variety, it becomes all the more
pressing to wage an effective dissemination of information
on taxation that will permeate all strata of our society not
least, the youth, for someday, they too will have to share
the tax burden. (Ernesto M. Angeles, CPA)
“Always do what you are afraid to do”
THANK YOU!