OFFER LETTER: ACCOUNTABILITIES

When closing a deal, another source of friction is accountabilities—specifically, which party shoulders which taxes and fees. Here’s a breakdown from both sides.

SELLER’S ACCOUNT

1.⁠ ⁠Taxes on the Sale

Capital Gains Tax, VAT, Creditable Withholding Tax, and Business/City Tax—whichever applies.

Pro tip: Many forget the Business/City Tax, especially if the seller is engaged in real estate business or is a corporation. It’s a nasty surprise when it surfaces late in the transaction.

2.⁠ ⁠Professional Fee of the Brokers

Some brokers leave this out in writing—don’t. And refer to it as a “Professional Fee” rather than “commission” for a more professional tone.

3.⁠ ⁠Assoc. Dues/Utilities/Real Property Tax (RPT) Until Turnover

RPT, assoc. dues, and utilities up to the month the property is physically turned over—not when the Deed of Absolute Sale is signed.

Why? Signing and turnover don’t always happen together. A seller might request time to move out, and these costs keep running.

Bonus tip: Sellers should be reimbursed for the unused portion of the annual RPT or advance payments of the assoc. dues.

4.⁠ ⁠Back Taxes from Previous Transactions

Protects the buyer if the property is later assessed for taxes tied to past ownership.

Example: The BIR retroactively imposes additional taxes from when the seller first bought the property. In theory, the prior owner is liable, but the BIR may send Letters of Assessment to the new owner to pressure payment.

Another example: The local government discovers unreported improvements from a previous owner—potentially triggering decades of unpaid RPT plus penalties.

BUYER’S ACCOUNT

1.⁠ ⁠Documentary Stamp Tax, Transfer Tax, and Registration Fee

2.⁠ ⁠Notarization Fee

Can be significant—often around P1,000 per million of the contract price.

3.⁠ ⁠Title Transfer Service Fee

Sometimes, buyers try to pass these taxes and fees to the seller—but this is uncommon. Industry practice is for the buyer to shoulder them, just as when purchasing directly from developers. In primary market transactions, these are often referred to as “handover fees.”

This breakdown prevents those “I didn’t know” moments that can sour a deal.