OFFER LETTER: PURCHASE PRICE

Let’s continue our breakdown of the key parts of an offer letter. Today’s focus: Purchase Price.

Sounds straightforward, right? Just state the number.

But in real estate, even the simplest details can get messy—and this is one of them.

If You’re the Buyer…

Always, always, always quote your offer as a gross price.

And more importantly, always include this clause (or a version of it):

“Inclusive of Capital Gains Tax or Value Added Tax, Creditable Withholding Tax, and Business/City Tax—whichever may apply—and Broker’s Professional Fee.”

Why? Because this one sentence protects you from unpleasant surprises.

From experience, most sellers don’t push back on this clause when it’s in an Offer Letter—since it's not submitted to the BIR or any government agency. It’s informal. No red flags.

But try inserting that same line into the Deed of Absolute Sale?

Suddenly, the seller’s mood shifts.

Their Concern?

That adding the phrase “inclusive of VAT” might catch the attention of the BIR and trigger a VAT audit.

So they push to simplify the language:

“Inclusive of Capital Gains Tax”—and that’s it.

But here’s the issue…

Most people assume VAT doesn’t apply to them. Until it does.

When Can VAT Be Triggered?

The following can put them at risk:

1.⁠ ⁠They’re unknowingly registered with the BIR as engaged in the real estate business. (Yes, this happens quite often.)

2.⁠ ⁠They own a commercial property like an office space. The BIR has a registry of all properties owned by sellers.

3.⁠ ⁠They’ve sold 6 or more properties within a calendar year.

Still, some sellers say things like,

“I sold a property before, and it wasn’t subject to VAT—so this one shouldn’t be either.”

That logic is dangerously flawed.

Just recently, a seller made the same argument. The BIR responded by reopening their past transactions—from 3 years ago—and reassessed all of them for VAT.

The Bottom Line?

Don’t leave tax assumptions open to interpretation.

Because if the BIR decides otherwise later on—you want that liability to be squarely on the seller.

A single sentence in your offer letter can save you millions in headaches.