Buying a House in Baguio Tax to pay ?

Many questions about that...

You are married, ok, is the child yours? Did you live in the Philippines in the past, assuming you are in UK now?

Did you marry in Philippines or UK?

How long together?

Have you seen the house and land to be bought?

Have you seen any documents pertaining to the house?

Do you have a joint bank account in PH with wife?

Essentially you would be sending money to yourself, since you are married, so no tax, but...

you will want to be there to buy the house with wife, so you can see the documents, and the property

I am not an accountant so take it for what its worth. I too bought (my wife did) land and a house build. Together for decades, and we were there in PH to handle the broker, documents, seller etc

Great questions Filamretire.

I think the payment side is easy, simply deposit it in the agents trust account for distribution as appropriate, find a reputable attorney etc.

Also as you mentioned sight unseen could be risky, best boots on the ground with your wife and child.

Good luck.

Cheers, Steve.

Many thanks for the replies .

@Filamretire

Apologies I should have added that we will be there in the Philippines yes at time of purchase . Permanently

The child is ours yes .  We did not live in the Philippines in the past but my wife did . Right now we live in Thailand . We married in Thailand 7 years ago .

We would have a joint account in the Philippines although possibly not straight away ( may have to wait for ACR card etc I will be arriving on a Balikbayan and converting to 13A later in the year )  , so Im trying to figure out if it would be best to send the money for the purchase from abroad direct to my own Philippines account in my name and then simply pay for the property from that account at time of sale , or transfer into a joint account and pay from that instead . Or if it simply doesnt make a difference and there would be no tax to pay . Anything which avoids any tax ( if any ) for the incoming foreign transfer . 

Im hoping it would be as you say , sending money to myself so no tax but just wondering taxwise if there would be any difference as to whos account the incoming foreign transfer would go to . I wonder if we  would have to pay a " donor " tax to receive the foreign remittance through a joint account or my wifes account as she is a Philippines national , even though its essentially for our own personal property to live in . I read that Philippines nationals have to pay tax on receiving foreign income so it may be better just to send it to myself and pay ?

When you bought , did you have to pay any tax on the foreign remittance into the country ?

Thanks .

@dknipes

I sent near 6M pesos to the agents trust account for a property purchase and no tax, I cleared that in Oz for tax reasons and money laundering with the broker in Oz but no problems here aside from the realtor asking for an extra 250 Pesos to cover his bank charge, told him go talk to your bank that is fleecing you not me, same happened when we purchased a new car, they asked for extra fees for the digital bank transfer, told them the same thing and both times we never paid,,,, here they try to take the piss (banks) well most that think they can on their customers. I stood up to my bank manager years ago and no problems since. Remove the fees or lose the accounts.

Tax implications here were zero always on large sums as those funds were vetted in Australia no different to any western country shifting large amounts of funds.

Building here We drop 30/40/50K AU to our joint account for wages and materials and never a tax nor a bank fee as it's all online and digital. All we get now and mentioned this before is the teller calling me or Ben saying "sir did you know that xyz was just deposited to your account?" Yes mam we transferred those  funds... "what's that for sir?" None of your business mam but I suppose they are watching and simply doing their job? Perhaps Tsismis?

Matters little as it works

Cheers, Steve.

I will ad dk that while there should be no taxes on funds from the UK be aware there will be taxes and charges here with purchasing a property though not too much, the big thing to watch for is the vendor trying to get you to pay the CGT in a/any contract, some 6/6.5%. This is the liability and responsibility of the property owner  by law and they will try it on, stay alert, renegotiate the price accordingly as we did as the vendor never had any cash/ he was asset rich but cash poor, owns 18 hectares of beach and riverfront land 5 klicks from San Juan, worth a fortune.

On revealing this no cash situation we renegotiated to give him an extra 200K extra deposit for taxes but dropped the sale price by the same amount, as said be alert and find a reputable attorney to conduct your transaction, in the scheme of things they are cheap for simple property exchange.

I wish you luck.

Cheers, Steve.

Good advice thanks will keep all that in mind .

So Im guessing for the incoming foreign transfer it will not matter whose account I transfer the money into from abroad , as long as it is for personal property purchase and it goes to either my sons account , my wifes account , a joint account , or my own account in the Philippines there shouldnt be any tax to pay .

@dk

I have as said never paid extra taxes from Australian funds "it's my money Ralph" as those earnt and saved funds were already taxed in Oz, never a tax here in PH aside from the banks having their hand out and you can nip that in the bud real quick, mentioned this before.

Good luck.

Cheers, Steve.

    Hello all ,
Uk national here . Wife and child both hold PL nationality . If I send money into The Philippines for the purpose of buying a house / land will the incoming remittance be taxed . I understand if I send money to myself it wont be .

But of course as a foreigner i wont be buying the house / land in my name so for my wife or child to purchase in their names they would need to receive the incoming funds so they can purchase it in their names . 

So you are both of Polish nationality. But I assume your wife was born here. Ex Filipinos can own land here. If you (she) is buying make sure seller doesn't convince you to pay capital gains tax. We have never paid tax on bank transfers since there are tax treaties with USA stating that you only pay tax in one country (in this case USA)

Would they have to pay tax ?

Which is the best way .

Thanks
   

    -@dknipes

Thanks dk, no tax I think. For our land purchase, we went through the developer broker and paid to the seller via wire transfer from bank. Seller was Canadian so it was to a Canadian bank. No taxes. The taxes will be annual property tax, and if you ever sell it, a massive 6% capital gains tax, that is actually not a gains at all but 6% of the value of the property. I just added that bit in since I was incredulous when I read it!

Capitol gains tax was introduced in Oz by the Hawke/Keating government in 1985 on investment properties etc. Capitol gains on profit in Oz is not 6% but based on your income stream so say if your income put you into a 32% tax bracket then the profit will be taxed at that rate and a sliding tax scale.

In Oz capitol gains tax is not payable on primary place of residence unless a rental through the ownership and I think from memory they call that the 6/8 law and minimal CGT.

6% here is flat and while not sure the write back laws here, what happens is generally 2 contracts are drawn up, one for the purchaser (P 20M) and one for the vendor to present to BIR (P 10m) and while the BIR are well aware this goes on seem to turn a blind eye as long as they get revenue. So the original owner paid 5M for the property 10 years ago and made 5M profit and pays tax accordingly.

As we all know no matter the country the government always has its hand out.

A little off topic but a Great example. I have been with my superannuation company for some 35 years and have a sizable amount that I've not contributed to since retirement 4 years ago thinking rainy day funds leave it as I have enough cash,,,,, trouble is not touching it ever has led to it almost maxing out to government regulations, so I thought ok I will draw a pension from the fund and reduce the balance and simply stick the funds in my bank investment account and earn a simple 5% and use as needed.

Here's the crux, and only recently found this out, any all income derived from my super account was taxed at 15% before the balance went back to the fund so if I earnt 50K back to the fund in actuality it was 60K.

Drawing a pension? No tax on the income/dividends, and I am at the moment around 20K a year better off with taxes.

Rules apply, I have to at my age draw 4% and next year 5% and still the balance rises quicker than they deposit funds.

I'm sure the Australian Tax Office is looking at this as us baby boomers go into retirement and draw pensions. Next trick is to pull some funds out to reduce the balance and buy an EV.

Sorry for the yet again rant.

Cheers, Steve.

@danfinn

Hello there ,

No I am a UK national , my wife and child are both nationals of the Philippines ( Child is dual national ) .

From what I can understand so far there would be no tax to pay on the incoming transfer from abroad , I was just trying to get it through my head really whether or not it made a difference taxwise if the incoming foreign transfer was sent to my own account , my wifes account , my sons account or a joint account .

I believe there is a 6 % " donor " tax on anything sent in over 250 000 P for Philippines nationals to receive from abroad , although i am not sure if that applies to sending money to your own wife or child .  Hence why I was thinking it may be better to send the funds to myself and pay direct through the broker . I was wondering if this donor tax would be applied for example if I sent the money in to my wifes account from abroad or even a joint account , even though it would be for the purpose of purchasing our own personal property .

David .

David.

Is the property you want to purchase through a reputable real estate agent and if so simply send the funds to his/her trust account for disbursement thus creating a paper/digital trail. We have done this twice with property and car purchase and never any tax.

I recently sent AU 40K then 50K and most recently 35K over 12 months from my Westpac account in Oz direct to my better half's account with BDO here and no tax.

Not sure the UK laws but no tax from Oz none in PH.

Good luck.

Cheers, Steve.

@bigpearl

Yes it would be a reputable agent .

My wife also has a BDO account . Good to hear you did not have to pay any tax using your wifes account for incoming foreign transfers . If this is the case it should clear the way for sending the funds into the country to either my account , my sons account , my wifes account or a joint account for the purchase of the property , or indeed even just for sending in savings also .

I was concerned sending funds from abroad to my wife as a national would incur a donor tax of 6 % . Perhaps it does not  apply when sending funds to ones wife .

David

@David

http://tinyurl.com/3afjce25

I wasn't aware of this, an interesting read but very much doubt it relates to conjunctural property purchases etc.

I am not married, simply have a partner and never heard of that tax until you raised this in an earlier post and has never affected us at any level.

Search  "TRAIN law in the Philippines"

While I'm not a tax attorney I very much doubt this will concern what you are doing now or in the future.

I'm sure there are far smarter members here that can chime in on this topic and give their take.

Good luck.

Cheers, Steve.

@bigpearl

Right i was thinking the same . Just wouldnt want it to come back and bite me later as I would imagine if it had to be paid atall it would be based on an honour system of self declaration .

We have been living in Thailand for many years and they are making changes to the tax requirements for the incoming transfer of foreign funds beginning 2024 which have caused quite a stir in the expat community here .

Luckily we will be leaving soon hopefully so wanted to ensure the going over there would be as smooth as possible in advance .

Ultimately this is why I was thinking it may be best to send the money to myself and then purchase , to avoid any possibility of it being taxed in my wifes name as a gift .

David .

@David

If you are Married to a Filipino national you are considered the same entity under law. Sending money to your wife's account, your account matters little, it's not a gift, we are a same sex couple and no matter individual or joint accounts never any tax. I think probably over the last 7 years since we purchased property then 5 years ago buying a new car, extensions, renovations, fences and living we have probably sent 18/9 M pesos and prior to that living in Manila 12 years ago probably another 1 to 2 M pesos but that donor law came in with DU30 effective 2018, since the effective date we have sent around P10 M to PH and never a mention of extra taxes.

Look at it this way, it's not a donation but simple living costs.

I see you are over thinking. Get a good reputable real estate agent and more importantly and harder to find a switched on attorney.

Cheers, Steve.

@bigpearl

Yes probably right .

Thanks ,

David .

@David

If you settle in Baguio look us up once you settle, we are Bacnotan La Union some 2 odd hours away, sea change.

Cheers, Steve.

@dknipes No I am a UK national , my wife and child are both nationals of the Philippines ( Child is dual national ) .

Sorry, I had looked up PL in the ISO abbreviations list and it says Poland. A typo perhaps. Anyway I think UK probably has a tax treaty with PH and you would owe no tax here since the money was already taxed in UK. Twenty years ago I purchase (my wife) 1500m^2 for 1m.  Since we were just visiting at the time and did not have $20K with us, we agree to pay $2K down with two installments of $9K each when we returned to US. Those we bank to bank transfers from our US  bank topir Philippine bank (we used tohavea dollar account here but eventually cancelled it). The 9K would have been 450k php but nobody, certainly not the bank, mentioned a donor tax. If it exists it must be something enacted after 2004.

@ bigpearl

Yes will do really looking forward to the cooler climate and more natural surroundings . Living in Bangkok nearly 20 years does become tiresome as all of us are non - nationals / worsening air quality / heat / traffic etc complete lack of nature and possible tax issues come 2024 .

@danfinn

Thanks yes I believe this is a fairly recently introduced tax . Im probably over thinking it and there should be no tax to pay if we are married and incoming foreign remittances are for our own property and living costs etc it may not be seen as a gift . Perhaps some other posters will come along soon with their experiences too .

@David

Yes cooler climate in Baguio but can also be polluted and air quality central is not good, remember near 400K people living there. Pick your area well and not in town. Some fantastic areas to live in Baguio but do your research.

Cheers, Steve.

@bigpearl

Yes we plan to live in an outer area and just drive into the city when necessary .

Was looking at Dontogan and Irisan areas possibly .

David, we are buying a place in a subdivision off of Cypress Road, about 7 km out of town, not actually moving in until next October.  Stay in touch, have been writing about our experiences renting for 4 months in Baguio, Lower Rock Quarry.   The thread is called Baguio City.  Let me know if I can help in any way, we will be here until March.

@mugteck

Will do , have been reading some of that thread .

If buying also , do you have any concerns about any potential taxation issues over international funds being remitted into the country for property purchase etc .

David .

        No tax problems for me transferring money in, bought $80,000 worth of land in Manueva in 2019.  Also bought a $30,000 van, all was  from my wife's USA account to accounts in the Philippines.

@mugteck

Thats good to hear may i ask if your wife is a national of the Philippines and if you used accounts in her name to transfer the foreign remittances into th Philippines . Im trying to get a general idea whether or not the 6 % donor tax may potentially apply to such remittances if it is a wife or immediate family member holding Philippines nationality that the money is being sent to .

Off topic . Do you find that you need to use air conditioning atall in Baguio ?

David .

          Have not lived at a place, neither the bed and breakfast nor the apartment have air conditioning.  I cannot see the use for it, as it hits a high of 26C during the day, which is about where we set the air conditioning in Manueva.  At night it gets down to 15C, certainly no air conditioning needed, we sleep with a sheet and a blanket covering us. Not sure of the temperatures during the summer months, but from what I have read does not get very hot in the summer either.

            My wife did everything with bank accounts in her name only in both countries, she is a citizen of both the Philippines and the US.

Lived here 15 years and the tax and new title fees were standard rates but this time came a shock because the bir have added " zonal values to rhe equation and the resultant feed double !! Capital

Gains remains at 6% of the highest value between actual paid amount and what they call " fair market value. Every one puts the amount paid at just over the market value but now this zonal faction doubles it, same for the "doc stamp" we have 550,000 pesos to base things on although we paid 1.400,000. At 6% We would have paid around 33,000 phps but today we pay 75,000. On birs website they show zonal values for EVERY street in the Philippines. Doc stamp at 1.5% works out at double the straight amount. I said to the security lady on the door, " you must be on a high salary!"

@Peter Clark

You know it's interesting, weird even. 2 years ago we lodged our building and fencing permits on our property valued at XYZ and submitted we would spend around P4M on the works. (6M to date). The Municipal rates have been P4,200 pesos per year for the last 7 years we have owned the property and nothing has changed, Ben paid the rates a week ago and the same as 7 years ago, in fact from memory with searches the exact same for the whole 15 years from when the lot was originally sold after subdivision.

Not that I'm selling but given your scenario could be interesting upon my demise. Not that I will care.

Cheers, Steve.