House panel OKs tax break for first-time home buyers

MANILA, Philippines – Planning to settle into your own house?

The dream to have a home may be soon be easier to achieve after a House panel  approved tax relief provisions in a proposed measure seeking to make residential property purchase easier for first time buyers.

The House committee on ways and means approved two provisions that save first-time house buyers from costly charges of owning a home.

The first provision of a substitute bill to House Bill 414 or the First-Time Homebuyers Act, exempts first-time buyer of residential property from transfer tax payment.

A transfer tax is imposed when a property title is passed from one person or entity to another.

The other provision strengthens the housing industry by encouraging people to make their first property investment. First-time buyers will be entitled to a minimum of 5% discount from businesses directly engaged in buying, selling real estate, and construction materials.  

Dealers or suppliers granting the discount will also be given incentives such as tax relief and deduction in their taxable gross income for the year they issued the discount. 

These incentives may be availed for housing that falls under the low-cost and medium-cost categories set by the Housing and Urban Development Coordinating Council and the National Economic and Development Authority.

Contractors and real estate developers are given the responsibility to provide their clients a disclosure statement on the discount and the transfer tax exemption they are entitled to.

Economic benefit

According to the bill’s principal author, Bohol Third District Representative Arthur Yap, the measure will enable the government to achieve its goal of providing the basic need for shelter.

“It would make it easier and affordable, especially to low and middle income groups, to finally acquire the dream home they may call their own,” Yap said in a statement on Friday, December 4.

He also noted that encouraging people to own a house would “fuel the construction boom” and in turn, be a “catalyst of economic growth and development.”

“It would strengthen, promote, and support the component activities of housing production and finance. Finally, it would increase private sector participation in the investment of their funds into housing finance, construction, and development,” said Yap.

A fortune to own a house

According to property consultant Arvine Nuqui, the cost of owning an average house and lot falls between P1 million ($21,250) to P3 million ($63,743). While residences in prime locations have rates as high as P7 million ($148,731).

He also said that aside from the amount of the property itself, houses are also subjected to other taxes and charges.  

“There’s a 12% VAT (value-added tax) for residential lots over P3 million. Other than this, there are also charges imposed by local government unit such as miscellaenous fees and a transfer tax of 4% to 4.5%,” Nuqui told Rappler in a phone interview. 

Although owning a property may cost a fortune, he noted that first-time buyers should not be discouraged as developers currently provide easy payment terms. – Rappler.com