When buying a foreclosed property, the buyer often shoulders the Documentary Stamp Tax (DST). In the Buena Mano Green Tag Foreclosed Property listings for example, it is explicitly stated that DST is for the account of the buyer and DST is 1.5% of the Selling Price (SP) or Zonal Value (ZV), whichever is higher. To illustrate, I’ll reuse the example I used in my post about CGT.
Sample DST computation:
Example: A residential condominium in Makati City with a floor area of 50sqm has a Selling Price (SP) of 1.0M. The current zonal value per square meter for that condo in Makati is currently Php50,000/sqm. It is stipulated that the buyer shall shoulder DST. How much is the DST?
First let’s compute for the ZV:
ZV=Zonal Value x Floor Area
=50,000 pesos/sqm x 50sqm
=2,500,000 pesos
Since ZV is higher than SP, we shall use ZV to compute the DST:
DST=1.5% x ZV
=0.015 x 2,500,000 pesos
=37,500 pesos
Therefore, the buyer shall have to pay 37,500 pesos for the DST.
Is that it?! It’s that simple? Yes, it’s that simple. If you are looking for a more detailed (and more complicated) explanation about DST, you may also visit this particular page at BIR’s website.
Upcoming posts about taxes would cover Real Property Tax and Transfer Tax. Please do watch out for these posts. You may also want to read my previous posts about Capital Gains Tax and Creditable Withholding Tax.
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Jay, I hope you can clarify this for me. Since the buyer shoulders the DST and the seller pays for the CGT, that means they can pay for these taxes separately, correct? If so, what does the buyer need to have on hand when having the DST assessed at the BIR prior to paying it at the AAB? Thanks!
Hi Jay!
Nice Topic…
By the way, you have a topic on How to Compute Documentary Stamp Tax on Debt Instrument (for less than 1 year and more than 1 year)?
More Power!
hi sir! college student here 🙂 tanong lang po ano po yun Zonal Value= zonal value x floor area? thanks po! 🙂 ano po yung (ZV)? sa ZV= zonal value x floor area
your site helped me a lot!!!. next week i will be going to report about real estate taxes.thank you for sharing your knowledge to us.i’ll make it sure that your site will be acknowledged during my presentation.hope i can deliver my report properly.wish me luck!! :))
Sir Jay,
Need your help on the computation of the DST and CWT. I was advised by BIR that they will based the computation of the DST and CWT not on the selling price of Php 1.8M since there was a clause in our contract that all docs stamp, taxes, notarial fee will be borne by the Buyer. I know that the computation of DST and CWT is based on the zonal value or selling price which ever is higher. They said that I need to add an additional 6% to the selling price thus it will be Php 1.9M and from there I need to compute for the DST and CWT. For your guidance please. Thank you.
Hi Evelyn,
I find your situation very odd. I checked the latest deed of sale executed between me and a bank and it also stipulates that DST, transfer fees, registration fees, etc, will be for the account of the buyer(me) and the BIR officer at the ONETT section simply used the selling price as the tax base (zonal value was lower). However, our deed of sale also stipulated that CWT is for the account of the seller(the bank) based on the selling price and any additional applicable difference (in case the zonal valuation is higher) will be for the account of the buyer(me). Maybe because of having this clause, the BIR no longer needed to gross-up the tax base. The bank paid the CWT based on the selling price on the deed of sale. They (the bank) prepared our deed of sale so I suppose they are already very familiar with how the BIR handles such. I hope this helps. Thanks for sharing and goodluck!
If one of the contracting party is a city government, would the DST be based on the actual sale value in the contract rather than the market and ZV?
Hi Mike, it would be based on whichever is higher of the three (actual sale vale, market, or zonal). Thanks for dropping by!
Good day Jay,
Our client is willing to purchase a bank foreclosed asset but unfortunately the lis pendens filed(2006) by the previous owners was still attached to the title, the title was consolidated by the bank. Can the owners prevent the sale? How can this lis pendens be removed?
Another concern: About commission on rent: CompanyA property was leased a 2 years(1 month com was paid),renewal with increase for another 2 years, how much legal commission should we charge?
CompanyB, property was leased for 1 year(1 month com was paid), renewal with increase for 2 years, How much legal com should we charge?
Do we have to write the owners reminding them about the commission? Both owners are aware that we know the renewal as we are communicating with them? Please reply the soonest, the renewal will be on September.
You are of great help to us. Thank you and God bless….lyde
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It was helpful information.
@bee, at 7K, its just 6% below 7.5K, not a bargain. If it was lower by 40%, that would be a good buy! =)
Thank you! That was helpful. Therefore, a foreclosed lot @7k is not a good buy if others in the area sell @7,500 to 9k, right? Thanks again.
@bee hi! I just want to share lang 🙂 7k/sqm is still a good buy compare to 7,500 to 9k per sqm. foreclosed properties are much cheaper compared to preowned properties. And you can sell the 7k/sqm lot at the market value which is higher. For example in betterliving paranaque, zonal value of lot is 5k but the market value is 10k to 12k. Seller are selling the properties base on the MV of course not the ZV. 🙂
@Noli, you can get the zonal values in BIR’s website through this link: http://www.bir.gov.ph/zonalvalues/zonalvalues.htm. I’ll also post this along with other links in the sidebar for easy access to all readers. Thanks for helping me come up with the idea!
@bee, thanks for visiting and I admire you for making the most of your summer vacation!
With regards to Zonal Value, in my opinion it is really just for tax purposes and has nothing to do with the market value of a property. In essence, Market Value refers to the estimated price a willing buyer would pay a willing seller if neither was under any compulsion to buy or sell that property. This is often dictated by market forces and you would really have to confirm this by checking for how much a comparable property (same specs and location) was sold for recently.
Jay, stumbling on your website is the best thing that happened to me this summer vacation. I work in the academe and have been looking for ways on how to generate passive income.
My question is too elementary. Sorry, i am just a newbie in real state. What is the difference between a market value and zonal value? A foreclosed QC lot is valued at 7k/sqm. The bank told us (my husband and i)that the zonal value is 10k/sqm. Is this a good buy for an end user? In case we decide to resell, can our asking price be the zonal value?
God bless and more power.
Jay, thanks for the info. Do you know where to get ZV of different area in metro manila in particular for house and lot? More power to you
Noli