Case Study - Proper Wording on Deed of Absolute Sale

CASE STUDY :

A property was recently sold and SELLER opted for a NET DEAL ( net of all expenses … i.e. Capital Gains Tax or Creditable Withholding Tax, VAT and Broker’s Professional fees ) which the BUYER agreed to.

The Deed of Absolute Sale was drafted and showed that the Sale was Net of All Expenses.  The BUYER had it reviewed by their lawyer who doesn’t specialize in Real Estate thus isn’t familiar with the latest BIR regulations.  The BUYER’S lawyer approved the Deed of Absolute Sale and the deal was consummated. When getting a lawyer, you have to get someone who specialize on the specific issue involved.

Now this is where the issue arose :

Upon reviewing the Deed of Absolute Sale, the BIR examiner noticed that the Sale was a Net deal and that the BUYER paid for the corresponding taxes ( Capital Gains Tax, in this case ).  The Bureau of Internal Revenue ALWAYS want to see that the SELLER pays Capital Gains Tax / Creditable

Withhold Tax / VAT, period !

So BIR based the sale on the Net amount plus the Capital Gains Tax, so after adding both amounts, that became the basis of the Capital Gains Tax !!!  NOW WHO PAYS THIS ?

Take note that BIR procedures aren’t systematic so each municipality and Revenue District Officer have their own system and interpretation of the law.  That has been an issue for quite sometime when we process transactions and we don’t foresee any change coming. We have to follow the specific procedure of municipality where the property is located.

Moral Lesson :

Best to have a Memorandum of Agreement between Seller and Buyer to provide terms and conditions of the Sale to avoid any unforeseen issues because once the documents are entered into the BIR system, it will be difficult to retrieve and the problem has to be addressed.

There are so many cases involving this kind of issue !  CAVEAT !

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robert
Robert G. Sarmiento Properties
Professional Affiliation :
Philippine Association of Real Estate Boards
Member, City of Taguig Real Estate Board 2016 - 2019
Real Estate Broker’s Association of the Philippines 2000 - 2015
President, San Juan 2008, 2009
Philippine Association of Real Estate Boards
San Juan Mandaluyong Chapter 1998, 1999
PRC # 6569
PRC Lecturer’s License # 0294
+ 632 5536051 ( trunkline )
+ 632 4781316 ( telefax )
+ 632 8561365 ( line 3 )
+ 632 8041701 ( line 4 )
+ 63 917 5364829 ( globe )
 
 
 
 

 

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Robert G. Sarmiento Properties
Professional Affiliation :
Philippine Association of Real Estate Boards
Member, City of Taguig Real Estate Board 2016 - 2019
Real Estate Broker’s Association of the Philippines 2000 - 2015
President, San Juan 2008, 2009
Philippine Association of Real Estate Boards
San Juan Mandaluyong Chapter 1998, 1999
PRC # 6569
PRC Lecturer’s License # 0294
+ 632 5536051 ( trunkline )
+ 632 4781316 ( telefax )
+ 632 8561365 ( line 3 )
+ 632 8041701 ( line 4 )
+ 6325148481 ( mobile landline )
+ 63 917 5364829 ( globe )
 

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+ 632 5536051 ( trunkline )
+ 632 4781316 ( telefax )
+ 632 8561365 ( line 3 )
+ 632 8041701 ( line 4 )
+ 6325148481 ( mobile landline )
+ 63 917 5364829 ( globe )
 

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