Roberto Dela Cruz
Philippine Tax & Finance Advisor
Taxes are an unavoidable reality of real estate investment everywhere in the world. For investors in Boracay, Palawan, Bohol, or any other Philippine island destination, understanding the applicable tax landscape is essential.
Acquisition Taxes
When purchasing a property in the Philippines, several taxes arise at the point of transaction: Capital Gains Tax (CGT) at 6% of the gross selling price or fair market value (whichever is higher) is levied on the seller. Documentary Stamp Tax (DST) at 1.5% of the selling price or fair market value is typically borne by the buyer. Transfer Tax at 0.5–0.75% (varying by local government unit) is assessed by the provincial or city government on the transfer of title. Registration Fee at approximately 0.25% of the transaction value is charged by the Registry of Deeds. Total buyer-side closing costs from these taxes and fees typically amount to 2.5–4% of the purchase price.
Annual Holding Taxes
Real Property Tax (RPT) is levied annually by the local government at 1–2% of the assessed value of the property. The assessed value is a fraction (typically 20–40%) of the property's market value, so the effective RPT rate on market value is typically 0.2–0.8% per year. RPT must be paid by January 31 of each year (with a discount for advance payment) or quarterly.
Capital Gains Tax on Resale
When an investor eventually sells their Boracay property, the 6% CGT applies to the gross selling price or zonal value, whichever is higher. This tax is levied on the seller. Note that the BIR's zonal values — which represent the government's assessment of minimum property values for tax purposes — may be lower than actual market prices in desirable Boracay locations. CGT is not based on profit (gain) but on gross selling price, which is an important distinction from capital gains taxes in many other countries.
Estate Tax Considerations
For investors with significant Philippine real estate holdings, estate tax planning is important. The TRAIN Law (RA 10963) simplified estate tax to a flat 6% of net estate value. Philippine real property held by both residents and non-residents is subject to Philippine estate tax. Proper estate planning — including preparation of wills, designation of beneficiaries for financial accounts, and structuring of corporate ownership — can minimize the administrative burden and cost of property transfer to heirs.
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