6.Pay dues and assessments.
7. Give other unit owners the priority right to buy his unit (right of first refusal). If so required by the master deed.
Dues and Assessments
1.The Deed of Restriction usually provides for two kinds of assessments:
a.) Regular assessment – a monthly obligation to fund ordinary project expenses, such as security, garbage collection, repair and maintenance of the common areas, electricity and water bills on the common areas and realty tax and insurance on the common areas.
b.) Special assessment – this is imposed as the need arises, such as the need for replacement of the generator.
Extent of interest in common areas
In the absence of any provision in the master deed, all unit owners shall have equal share in the common areas. If the intent is to pro-rate the unit owners’ interest on the common areas, such fact must be expressly provided in the master deed. The interest based on floor area of ownership is arrived at by dividing the unit area by the total floor area of all condominium units.
Optional and Mandatory Requirement. The condominium corporation is optional if no unit will be sold in foreigners. However, the corporation is mandatory if some units, not exceeding forty percent interest in the project, will be sold to foreigners, in which case title to the land will be transferred in the name of the condominium corporation and thus comply with the constitutional mandate that corporations may acquire real estate provided that at least sixty percent of its capital or membership is Filipino
1.Principal Purposes: a) To hold title to the land and b) To set as the management body of the condominium project.
2.Conflict with Master Deed. In case of conflict between the articles of incorporation of the condominium corporation and the master deed of the condominium project, the latter should always prevail because:
a) It is the master deed which gives birth in the condominium project. The project cannot exist without a master deed, but it can exist without a condominium corporation.
The condominium law specifically provides that the articles of incorporation and by-laws of the condominium corporation shall not conflict with the master deed.
REAL ESTATE TAXATION
Assessment Level for Land:
Classification Not more than
Residential 20% of FMV
Commercial/ Industrial/ Mineral 50% of FMV Agricultural 40% of FMV Timber 20% of FMV Scientific/ Cultural/ Hospital 15% of FMV
Assessment Level of Improvement:
FMV over Not over Resd’l Comm’l/ Ind’l Agr’l Timber
175,000 0% 0% 0% 0%
175,000 300,000 10% 30% 25% 45%
300,000 500,000 20% 35% 30% 50%
500,000 750,000 25% 40% 35% 55%
750,000 1,000,000 30% 50% 40% 60%
1,000,000 2,000,000 35% 60% 45% 65%
2,000,000 5,000,000 40% 70% 50% 70%
5,000,000 10,000,000 50% 75% 50% 70%
10,000,000 60% 80% 50% 70%
Rate of Real Estate Tax
a) In Provinces – not exceeding one percent of assessed value.
b In Cities and Metro Manila Municipalities – not exceeding two percent of assessed value.
Special Education Fund Tax – an annual levy on real estate equivalent to one percent of assessed value which shall be in addition to the basic real estate tax
Date of Payment of basic realty tax and SEF tax:
a)May be paid in four equal quarterly installments on or before March 31, June 30, September 30, and December 31.
Payment in advance of the schedule is entitled to not more than twenty percent discount.
Delinquent payment shall be subject to interest of two percent per month but in no case to exceed thirty six months
CAPITAL GAINS TAX
Rate and Basis Tax – the rate of capital gains tax is six percent computed on the following basis:
a) Sale of Lot: - Basis is price per deed of sale or lot zonal value, whichever is higher.
b) Sale is Lot with improvement: - Basis is price per deed of sale, or lot zonal value plus improvement value, whichever is higher.
Conditions for exemption from Capital Gains Tax:
a) The seller is a natural person and the capital asset sold is his principal residence (family home).
b) The proceeds of the sale will be used to acquire / purchase construct a new family home.
c) The BIR is duly notified by the taxpayer within thirty days from the date of sale through a prescribed return, of his intention to avail of the tax exemption.
d) The tax exemption can only be availed of once every ten years.
If there is no full utilization for the proceeds of the sale, the portion of the gain presumed to have been realized from the sales shall be subject to capital gains tax
Installment Sale – A sale is considered on installment basis when the initial payment in the year of sale is twenty-five percent or less, in which case the transferor may opt to pay initially a portion of the tax in accordance with the following formula:
Initial Tax = Initial Payment x Total Tax
Transactions Subject to Withholding Tax – Sale, exchange, or transfer of ordinary asset by natural persons, corporations, estate or trust.
Rates and Basis – Computed on the same basis as capital gains tax, the rates of creditable withholding tax.
Rate of Withholding Tax
0% - When the property sold is part of an HLURB registered socialized housing project of the seller
1.5% - When the seller is habitually engaged in real estate business and the price does not exceed P500,000.00
3.0% - When the seller is habitually engaged in real estate business and the price is over P500,000.00
5.0% - When the seller is habitually engaged in real estate business and the price exceeds P 2 million.
6.0% - When the seller is not habitually engaged in real estate business.
1.Concept – A tax payable to the local government (City or Provincial Treasurer) for the sale or other disposition of real estate, regardless of classification of the property.
2.The rate is not more than one percent for properties located in cities and municipalities in Metro Manila, and not more than one-half percent for properties outside of Metro Manila.
3.Basis is the contract price or market value per tax declaration whichever is higher. However, the local government may enact an ordinance prescribing as basis the contract price or zonal value, whichever is higher.
1.On Sales – P15.00 per P1,000.00 or a major fraction thereof, computed on the same basis as capital gains tax, and payable within five days following the month when the document was notarized.
2.On Mortgages – P20.00 for first P5,000.00 and P10.00 per P5,000.00 after the first P5,000.00
On leases – P3.00 for first P2,000.00 or fraction thereof, and additional P1.00 for every P1,000.00 or fraction thereof in excess of the first P2,000.00 for each year of the term of the lease
SALIENT FEATURES OF E-VAT RELATING TO REAL ESTATE Concept : Expand Value Added Tax is an indirect tax. It can be passed on to the buyer. However, it is should be inputed or built-in the price. The sales contract cannot stipulate the “E-VAT shall be for the account of the buyer.”
Transactions subject to E-VAT
1.Sale, barter or exchange or real estate held primarily for sale to customers in the ordinary course of trade or business where the annual gross sales or invoice exceed P750,000.00, except sale by real estate dealers and/or lessors of house and lot and other residential dwellings price P1.5 Million and below.
2.Lease of real estate for commercial use when the annual gross receipts exceed P750,000.00
3.Lease of real estate for residential use when the monthly rental per unit exceeds P10,000,000 and the annual gross receipts exceed P750,000.00
Liability as non-VAT taxpayer
1.In cases where the real estate dealer or lessor is not subject to E-VAT, he shall be liable as a non-VAT taxpayer subject to three percent tax. However, he has the option to register as VAT taxpayer subject to 10% VAT with the benefit of input tax.
Commissions of real estate brokers are subject to E-VAT if the annual gross receipts exceed P550,000.00, otherwise they shall be subject to seven percent tax.
Real estate dealers are not allowed to withhold the E-VAT from commissions of real estate brokers
Computations of E-VAT payable
1.E-VAT payable = output tax (sales receipts x 1/11) less input tax (purchase receipts x 1/11)
Credit for input tax can only be availed of if the payee is VAT-registered.
Basis of E-VAT
1.Cash/Deferred payment plan – Basis is the contract price or zonal value whichever is higher. In the absence of zonal value, basis shall be market value per tax declaration or contract price, whichever is higher.
Installment Plan – Basis is actual consideration received, including interests and other charges. However, upon full payment, if the zonal value is higher than the total receipts / collection, the additional E-VAT shall be paid accordingly
Expenses for execution and registration of sale In the absence of any stipulation to the contrary, the seller shall pay for the execution and registration of the sale.