Day by day people who invests on condominiums units are becoming bigger in number. Reasons may vary but usually it is because of work locations. Professionals are relocating in the urban area so they need some space and condo units is the answer. Also, condominium units are good investments because of easy acquisition. It can also be sold or rented if you don’t need it any more.
If you are considering to buy a condo unit, the real estate broker will show the unit price and the mortgage rates but will not openly talk about hidden fees which include government taxes that you should pay when you get and owned the condo unit. That is why many buyers are sometimes are shocked after they have entered into the contract. To avoid the ill-and-sour face scenarios, let’s take a look at it.
What are the taxes that you should pay if you have a condo unit?
Transfer and Registration fees (upon buying the unit)
Documentary stamp tax (upon buying the unit)
VAT on Association Dues and Membership Fees
Realty Tax of the unit
Percentage Share of Realty tax of the land and common areas
Quite a lot, right?! The old system of tax mandated of the government upon purchasing a condo unit are 1.5 percent of the selling price for the documentary stamp tax and another 1.5 percent for the transfer and registration fees. Then when the unit is turned over to you, you’ll start to pay the 12% VAT for Association Dues and Other Fees. Realty taxes depends on the size and location of the unit. Lots of taxes! This is not to discourage all those who wanted to buy a new condo unit. As we said, this was the old system. Are there any good news? Does the new law on taxes have an impact to these fees? Yes, indeed!
The TRAIN (Tax Reform for Acceleration and Inclusion) or Senate Bill 1592 signed last December 19, 2017 makes the tax system efficient and simpler for the Filipinos. One of the highlights is the real estate industry. It made some exemptions for residential housing and condominium units. It made the tax fair for the property sectors and even encouraged Filipinos to invest more on real estate properties.
After the TRAIN Law have taken effect in January 1, 2018, the association dues, membership fees and other charges collected by the condominium corporations are exempted from VAT! Also a VAT exemption on leasing a residential unit have increased from Php 12,800 to Php 15,000 and that every three years it will be adjusted to the present value using Customer Price Index as published by the Philippine Statistics Authority (PSA). The VAT threshold also have gone up to 3 million.
So did you already compute how much will you save for the VAT exempt association dues? Condo unit lifespan according to the law of the Philippines is 50 years. Could you imagine the amount you’ll save within those years? Though still a small amount but it will still an additional amount on your income or reducing the portion being cut on your salary for the monthly expenses.
This provision will actually lead to encouraging professional to live nearby their workplaces so as to get work efficiency at a high level by removing the trouble of commuting daily. The developers will also have a great benefit for these because they will sell the units fast. Then the condominium corporations will no longer get in trouble of considering the amount of fees with the taxes that they will present to the owners. Both parties, the seller and the buyer of condo units and socialized housing, will both experience an advantage to the new system of this tax reform law.