Q. Dear Atty. Wong, I always read your column in the Balita newspaper. I really find your column very informative. May I please seek your advice regarding my land in the Philippines? For quite sometime I have become Canadian citizen way back in 1978. I have a house in Bulacan, which is constructed adjacent to a parcel of land, measuring about a 9,000 square meters. This property is under the name of my brother. However, my sibling immigrated also to Canada and is now also a Canadian citizen.
I wish to transfer my said property to my nephews who are in the Philippines, and also to my niece who is living in Toronto. I understand that the transfer of this property will also mean taxes on my part. By the way, for your information, I have already prepared my Will transferring the ownership of my said property in the event of death. Could you please advise me about this matter? Thank you and more power to you. Juana.
1. Hi Juana. Hereunder are the answers to your queries:
1. You can legally transfer your property in the Philippines to your niece and nephews. However, in order for your niece to qualify as transferee, she should be a Filipino citizen or a former natural-born Filipino citizen. And in case of the latter, there is a limit on the land that she can legally owned in the Philippines.
Under the law, the aggregate land ownership of former-natural born Filipino citizen that can be owned, should not exceed 1,000 square meters in urban centers and not to exceed 10,000 square meters in rural areas. And provided that the same should be used for residential purposes only.
2. You can do the transfer either by donation while your are still alive, by straight sale or by donation Mortis Causa, meaning a donation that will take effect upon the death of the donor. You may also transfer it by means of a will, subject to the condition mentioned in Par. 1 above as regards your niece in Canada.
3. Whether you transfer the property by sale or by donation or through testamentary succession (by will) the issue of taxation, particularly the amount or tax rate thereof, are almost the same.
If by Donation, you have to pay Donor’s Tax. If by Sale, you have pay Capital Gains Tax or if by Will Estate tax. At any rate, the rates of taxes are practically the same or there is a variance, it is very negligible.
The issue of tax payments above-mentioned may also be agreed between you and the transferees (your nephew and nieces). Should they agree to shoulder the tax payments, and then you will be relieved of having to bother with the funds for tax purposes.
Please take note that there are more formalities required in the transfer of a property by way of Donation and by WILL.
Thus, the simplest form is by straight Deed of Sale, which means that the transfer of ownership is being effected by sale. This implies that a consideration or payment thereof was made for the value of the property being transferred. Of course, this is only on paper.
In straight sale, the capital gains are 6% of the market value, or Zonal Valuation or Selling Price, whichever is higher. The Seller will pay this. The buyer on the other hand has to pay the Documentary Stamp a and transfer taxes and other incidental fees.
4. I suggest you transfer the property to your niece and nephews now while you are still alive. In this way you will have a say in the manner your property will have to be subdivided. Besides if you transfer the said property during your lifetime, the possible bickering amongst them over their shares of the property will be avoided. And if there is any disagreement, you are still around to resolve the conflict.
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