STARTING A REAL ESTATE BUSINESS IN THE PHILIPPINES: THE REASON WHY

By Ernesto C. Perez II

“Bakit ako magpaparehistro sa BIR? Eh, dati naman kahit nung nasa DTI pa lisensyado ang brokers hindi naman kailang iyan?”

That was the reaction of a fellow licensed real estate broker when I explained to her that under Republic Act No. 9646 – the Real Estate Service Act of the Philippines (RESA) – ALL licensed real estate service practitioners (brokers, appraiser/valuers, and consultants) are mandated to “establish and maintain a principal place of business and such other branch offices as may be necessary.”

I was in the middle of preparing to submit my documentary requirements for registering my real estate business at the Indang Municipal Hall. Thereafter, I was to proceed to the Revenue District Office of the BIR at Trece Martires City.

In order to refresh everyone’s memory, Section 33, RA 9646 states the following:

“Section 33. Display of License in the Place of Business. – Every registered and licensed real estate service practitioner shall establish and maintain a principal place of business and such other branch offices as may be necessary, and shall conspicuously display therein the original and/or certified true copies of his/her certificate of registration as well as the certificates of registration of all the real estate service practitioners employed in such office.”

Prior to the passage of RA 9646, any Tom, Dick and Harry – or for that matter any Anne, Jane or Matilda – can act as an agent of a party in a real estate transaction for the buying or selling of real properties for a “commission.” In such a transaction, “laway lang ang puhunan” as the saying goes.

Then you hear stories of so-called pseudo-brokers fight over the piece of the “commission” pie even before the sale is consummated. You also hear stories of unscrupulous pseudo-brokers defrauding their clients. There was no Code of Ethics being followed.

However, the passage of RA 9646 did not fully address this situation. But it was a step forward in the right direction – professionalize the practice, hold accountable erring licensed professionals and prosecute pseudo-brokers that still proliferate to this date.

RESA does not only require licensed professionals like us to establish a place of business, it also requires us “to indicate the certificate of registration, professional identification card, PTR number, and APO receipt number, and the date of issuance and the duration of validity on the documents he/she signs, uses or issues in connection with the practice of his/her profession.”[1]

In my previous blog (Reminders As 2012 Roll In), I reminded my fellow professionals to get their Professional Tax Receipt from the Office of the Treasurer of the local government unit where they reside, as a first step. The rest of the steps listed there are on how to register with the BIR. Do check it out for your reference to know the most important reason why we should register with the BIR.

RESA imposes on us the requirement to establish and maintain a principal place of business in order to legitimize our profession as a business and main source of livelihood for some. And, when we are required by law to establish our place of business then we should follow the regulatory processes of having our business registered with the appropriate government agencies.

In a 2008 report “Doing Business in the Philippines” the World Bank pointed to the need to improve the efficiency of local business and other regulatory processes —such as the issuance of business permits, licenses and the imposition and collection of business taxes—which currently serve as disincentives to many businesses. Typically, these processes involve numerous procedures that are not only inefficient but also create opportunities for corruption.

Notably, the Philippines ranks very low among East Asian countries in terms of ease of doing business; it only ranked higher than Cambodia, Lao PDR and Timor-Leste. Singapore followed by Hong Kong, Thailand, Malaysia, Taiwan, Mongolia, Brunei, Vietnam, and Indonesia ranked higher.

The Philippines also requires a much larger number of entry procedures (15) to start a business compared to other East Asia countries and consequently entails higher transaction costs.

This fact should not be a hindrance to us in trying to follow such regulatory procedures. As a group of professionals, we should suggest ways to improve and make efficient such regulatory process. But in the meantime, we follow what is required of us to do in registering our business – from procuring the Mayor’s (Business) Permit to registering with the BIR.

Tomorrow we shall discuss the steps to starting your real estate business.