ONETT Trap

The ONETT is BIR's "one-time transaction" computation of taxes to be paid for selling a real estate asset. Take note: the BIR would only give the computation AFTER the Deed of Absolute Sale (DOAS) has been notarized.

Why is this a trap?

For capital assets (or those not used for business), everyone would assume the sale would be subjected to capital gains tax. No problem with this since this can easily be calculated (6% * DOAS price or zonal value, whichever is higher).

But what if the asset was classified as ordinary (used for business) and the sale was subjected to Creditable Withholding Tax and VAT instead?

For instance, what if the seller unknowingly registered himself as a "lessor" with the BIR for a property he leased out in the past? Or what if he was automatically tagged as a person engaged in RE business because he purchased seven properties the previous year?

The only time the seller would find that the sale would be subjected to CWT and VAT is when they submit the sale documents to the BIR–after the DOAS has been notarized. Once the DOAS is notarized, the deadlines for tax payments have begun their count.

Sellers would fight tooth and nail to prove why the sale shouldn't be subjected to CWT/VAT. They must get the final verdict on which tax to pay within the given tax deadlines. Otherwise, they would be subjected to high fines (25% surcharge) on the taxes payable.

In most cases, buyers are at the losing end of this debacle. While sellers had likely received the total amount of proceeds when they signed the DOAS, the buyers have yet to transfer the title to their names. Any penalties for late/non-payment of taxes will be their burden.

Hopefully, the BIR will reassess its protocol and allow ONETT computations before the notarization of the DOAS.