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  • Essential Guide to Paying Professional Tax Annually

    “Professional is not a label you give yourself – it’s a description you hope others will apply to you.”

    – David Maister, Author and Former Harvard Business School Professor

    Sample Professional Tax Receipt (PTR) issued by a local government unit in the Philippines

    By Realttorney®

    Ti auguro un buon anno nuovo! It is the second day of the new year. For some, it is back to work. Others are still in vacation mode until Sunday, January 5 — which we Catholics in the Philippines celebrate as the Feast of the Epiphany. For the rest of the country, this coming Sunday is the final day of the Christmas season.

    Whether you are working now or still vacationing, a real estate service practitioner must be reminded of legal compliance that must be made at the beginning of every new year. Before the effectivity of the Ease of Paying Taxes Act, licensed real estate brokers and accredited real estate salespersons would visit the Bureau of Internal Revenue to pay the annual registration fee of Five Hundred Pesos, under BIR Form No. 0605. But that is no more today.

    In this article, we will focus on the payment of the professional fee to your Local Government Unit. What is it? Who pays it? And why do we need to pay an annual professional tax?

    Section 139 of Rep. Act No. 7160, otherwise known as the “Local Government Code of 1991”, provides the legal basis for provinces to impose and collect professional tax on each person engaged in the exercise or practice of his/her profession.

    Meanwhile, cities are also authorized to impose professional tax under Section 151 of the Local Government Code, which provides that a city may levy taxes, fees, and charges that a province or municipality may impose.

    So now, what is a professional tax, and who pays it? It is a tax imposed by the provincial or city government on each person engaged in the exercise or practice of his or her profession.

    The professional tax is paid by anyone who is legally authorized to practice a profession in the Philippines. This is interpreted to mean all professions that are supervised by the Professional Regulation Commission (PRC) and required to take and pass a licensure examination.

    Kindly note that any individual or corporation employing a person subject to professional tax shall require payment by that person of the tax on his profession before employment and annually thereafter, as may be provided under a duly enacted local ordinance.

    Furthermore, professionals exclusively employed in the government shall be exempt from the payment of this tax, unless he/she has been duly authorized to practice the profession outside of his/her official functions.

    When do you pay professional tax? The professional tax shall be payable annually, on or before the thirty-first (31st) day of January. Any person first beginning to practice a profession after the month of January must, however, pay the full tax before engaging therein. The Sanggunian concerned may, for a justifiable cause or reason, extend the time of payment of such taxes, fees, or charges, without surcharges or penalties, but only for a period not exceeding six (6) months.[1]

    Where do you pay the professional tax? The payment of the professional tax shall be made to the province or city where the professional practices his/her profession or has his/her principal office is maintained, in case one practices the profession in several places.

    Please remember that a professional who has paid the corresponding professional tax is entitled to practice his/her profession in any part of the Philippines without being subjected to any other national or local tax, license, or fee for the practice of such profession.

    In the case of Intestate Estate of Jose Uy v. Atty. Pacifico M. Maghari III (A.C. No. 10525, September 1, 2015), the Supreme Court stated that “with the professional tax receipt number, [authorities] can verify if the same person is qualified to engage in a profession in the place where he or she principally discharges his or her functions.”

    How much professional tax do we pay? Professionals shall pay an amount not to exceed PhP 300.00, Philippine currency, or the rate provided under a duly enacted local ordinance, subject to adjustment not exceeding ten percent (10%) every five (5) years.[2]

    What if I have several licenses from different professions? A line of profession does not become exempt even if conducted with some other profession for which the tax has been paid. Thus, an attorney who is also a licensed real estate broker must pay the professional tax imposed for each profession, if he/she is to practice both professions.

    What do I need to present before I pay the professional tax? To collect the tax, the provincial treasurer or his/her duly authorized representative shall require from such professionals their current annual registration cards issued by the competent authority before accepting payment of their professional tax for the current year.

    Finally, according to Local Finance Circular No. 001-2019 of the Department of Finance, the PRC shall likewise require the professionals to present proof of the annual payment of professional tax before registration of professionals or renewal of their licenses. This proof of payment is called the Professional Tax Receipt, or simply PTR.

    But is this being practiced by the PRC in its main office and in its regional offices? Share your experience in the comment section.

    After reading all the above, if you are an accredited real estate salesperson you may be wondering that since you are not required by Rep. Act No. 9646 to take and pass a licensure examination, do you still need to pay the professional tax?

    The answer is a resounding YES. Why? Because an accredited real estate salesperson is a type of Real Estate Service Practitioner (RESP) according to Section 3 of the Real Estate Service Act (RESA).

    Section 38 of RESA requires all real estate service practitioners 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.

    The penultimate question that needs to be addressed here is about the payment of business permits for those RESPs who operate a realty office – whether outside their place of residence or within their home office.

    As a professional who has already paid my professional tax, am I still required to pay business tax to the LGU?

    Section 6 of the Local Finance Circular No. 001-2019 of the Department of Finance states that a professional who has paid his/her professional tax shall be exempt from the payment of business permit fee in the operation of his/her office.

    However, a professional shall still be required to secure a business permit, at no cost, from the concerned LGU during the registration of office and renewal thereof, subject to a duly enacted local ordinance.

    Finally, if upon verification, a professional is actually engaged in selling, trading, or distributing any article of commerce of whatever kind, or involved in the function of trade, or undertakes any business activity that does not constitute the practice of profession, according to applicable law/s governing the practice of such profession, he/she shall be liable to pay the annual local business tax (LBT) to the city or municipality concerned, pursuant to the applicable rates provided under Sections 143 and 146 of the LGC, and as may be provided under a duly enacted local ordinance.

    Now that you know everything that you need to know about professional tax, when will you get yours? Remember, compliance with Section 38 of RESA is mandatory for all licensed real estate brokers and accredited real estate salespersons. Failure to do so will subject us to disciplinary sanctions by the PRBRES.

    Would you want to risk that?

    Hence, the final question here is, when will you pay your professional tax? I suggest that you do it on or before the end of next Friday. Don’t wait until the deadline. Be different. Comply as soon as you can.

    Have a successful and abundant year to everyone.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

    [1] Section 167 [Time of Payment] of the Local Government Code of 1991.

    [2] Section 191 [Authority of Local Government Units to Adjust Rates of Tax Ordinance] of the Local Government Code of 1991.

  • 5 Critical Things to Know About the Real Property Valuation and Assessment Reform Act

    “Per World Bank estimates, the Philippines’ real property taxes account for only 0.37% of the Gross Domestic Product (GDP) with an overall collection efficiency of 71%.”

    – OIC-Director Brenda L. Miranda, BLGF Local Fiscal Policy Service

    House approves the Real Property Valuation and Assessment Reform Bill (https://blgf.gov.ph)

    By Realttorney®

    Sometime on April 2-4, 2013, ranking officials of our Department of Finance (DOF) presented “Property Tax Reforms in the Philippines” during the Fourth IMF-Japan High-Level Tax Conference at Hotel Nikko, Tokyo, Japan. During this event, the Philippines identified eight (8) Issues and Challenges regarding our property-related tax administration system.

    The eight are as follows: (1) lack of uniform property valuation systems and methodology; (2) outdated real property values; (3) political interference in property valuation; (4) limited use of information technologies in the appraisal process; (5) multiple taxes on property ownership and transfers; (6) relatively high transfer taxes, which discourage formal transactions; (7) weak enforcement of property-related taxes; and (8) no provision for formal education and training of assessors/appraisers

    The promulgation and adoption of DOF Department Order No. 37-09 [Philippine Valuation Standards, 1st Edition] on October 19, 2009, continues to address the first item above, while the passage of Rep. Act No. 9646 addressed the last item on the list.

    Meanwhile, the various Joint Memoranda of the DOF and the DILG enjoined all Local Government Units (LGUs) regarding the regular preparation of Schedule of Market Values (SMV) and the conduct of general revision of property assessment in their respective jurisdictions.

    Way back on May 12, 2012, the House of Representatives passed the Valuation Reform Bill [House Bill No. 6044] to address most of the 8 Issues and Challenges mentioned above. However, the Senate of the Philippines failed to pass the counterpart bill at that time until recently.

    In the 2022 State of the Nation Address (SONA), Pres. Marcos, Jr. identified the Real Property Valuation and Assessment Reform Act (RPVARA) as one of his Administration’s priority legislations, and a key tax reform under the Comprehensive Tax Reform Program under the Duterte Administration.

    On December 12, 2022, the House of Representatives passed on third and final reading, the Real Property Valuation and Assessment Reform bill [House Bill No. 6558]. Thankfully, this time, the Senate of the Philippines had counterpart bills on hand.

    In the Explanatory Note of Senate Bill No. 897, filed by Sen. Pia S. Cayetano on July 26, 2022, she stated that “there are various agencies conducting or requiring property valuation, with each agency using their own system and methodology of valuation” of the economy, including the real estate industry. Understanding these implications is crucial for real estate professionals, investors, and policymakers.

    Senate Bill No. 2386 was passed on the third and final reading on March 11, 2024, via a unanimous vote by all 23 Senators present. Both Houses of Congress ratified the final version of the bill on March 20, 2024. The President approved the bill as Republic Act No. 12001 on June 13, 2024.

    As a real estate service practitioner (RESP), what do you need to know about this crucial tax reform program that was signed into law in June 2024?

    1. Updated and Fairer Property Valuation: According to RPVARA, it is the policy of the State to promote the development of a just, equitable, and efficient real property valuation system. Thus, it aims to establish uniform appraisal standards and procedures. This should lead to more accurate and consistent valuations across the country, reducing unfair tax burdens on property owners.

    According to Ma. Pamela Quizon, Director of the Bureau of Local Government Finance (BLGF), this reform bill will address the current inefficiencies in the system such as overlapping valuation. She stressed that there are currently 23 national government agencies requiring valuations of 1,715 LGUs.

    However, each government agency uses its own systems and methodologies which is causing wide disparities between zonal values, market values, and private appraisers’ values. Thus, leading to varying and multiple values for the same parcel of land or real property.

    RPVARA strengthened and expanded the powers and functions of the BLGF as the primary or lead implementing agency of this reform bill. The BLGF shall be the agency responsible for ensuring that valuations or revaluations are completed per standards outlined in the RPVARA.

    Finally, under the RPVARA, an updated schedule of market values (SMV) will be used as the basis for local and national land and property-related taxes. There shall be only one valuation for a specific real property.

    The SMV refers to a table of base unit market values for all kinds of real property, except machinery within an LGU, prepared by assessors according to existing laws, rules and regulations. LGUs are mandated to update SMV and its revision once every 3 years under Section 219 of the Local Government Code of 1991, as amended.

    2. Transparency and Efficiency: RPVARA shall develop and maintain the Real Property Information System (RPIS). This is an up-to-date electronic database of the sale, exchange, lease, mortgage, donation, transfer, and all other real property transactions and declarations in the country and on the cost of construction or renovation of buildings and other structures, and on prices of plant, machinery, and equipment.

    For this purpose, the BLGF shall require the mandatory submission of necessary documents from the concerned officials or employees of government agencies and instrumentalities, and LGUs. Towards this end, the BLGF shall establish mechanisms for the electronic submission of the required documents. Upon the creation of the RPIS, the private sector may access the database subject to the guidelines of the BLGF and the payment of a reasonable amount as an administration fee.

    This electronic database will centralize data on real estate transactions and shall be an important tool for all valuers – especially private appraisers who can now accurately prepare Appraisal Reports based on actual data of “comparables” in a given property location. No more educated guesses with the aid of Google and real estate listing sites.

    3. Streamlined Government Services: The RPVARA mandates all LGUs to automate their real property tax administration operations, such as but not limited to, tax mapping technology, maintaining software-enabled valuation systems, undertaking regular data cleansing, and computerized records management, with the guidance of the BLGF, in coordination with the Department of Information and Communications Technology (DICT). This could benefit the clients of RESPs involved in transactions requiring these services.

    Moreover, automating processes through the RPIS could expedite government activities related to property, such as right-of-way acquisition and land transfer tax administration which will redound to the benefit of its stakeholders.

    4. Taxpayer Relief: Republic Act No. 12001 grants a two-year amnesty on penalties, surcharges, and interest on real property taxes and special levies that were unpaid before the Act took effect (Section 30). The amnesty may be availed of within two years after the Act’s effectivity. A delinquent owner may pay the taxes in one lump sum or in installments. The amnesty does not apply to properties already sold at public auction for tax delinquency, properties whose delinquencies are covered by a compromise agreement, or properties subject to pending court cases on real property tax delinquencies. As noted above, this provision was not indicated in SBN 2386 or HBN 6558, but it appears in the enacted law, and it is a welcome addition to this important piece of legislation.

    This provides an opportunity for clients to settle outstanding tax obligations without extra charges and fend off the levy of the property and its public auction by the concerned LGU. It is a timely relief for landowners as they battle the effects of inflation and high-interest rates from 2021 up to the present. Because the window runs for two years from the Act’s effectivity, clients should confirm the exact deadline with the concerned LGU.

    5. Increase Collection of Real Property Taxes: The reform will broaden the tax base for local and national property and property-related taxes. With a wider tax base, the collection of real property taxes is expected to increase based on updated property values, which is most important to increase collection efficiency, and overall tax revenue by LGUs and the Bureau of Internal Revenue (BIR).

    Oftentimes, outdated property values result in unrealized revenues and socio-economic benefits from delayed projects, and conflicting land values which result in right-of-way (ROW) compensation problems, lengthy court litigations arising from valuation disputes, delayed projects, and cost overruns.

    With the increased collection efficiency, it is expected that LGUs will be able to translate this into better basic services for its constituents and critical infrastructure projects by the National Government based on the increased revenue-based national real property transfer taxes.

    With fairer valuations and a more transparent system, RPVARA would lead to a steady increase in market values of real properties in the Philippines at regular intervals without increasing the tax rates or introducing new taxes. Therefore, it is incumbent on RESPs to advise our clients as to the timing of such increases to take advantage of relatively low prices when they desire to purchase real properties.

    In conclusion, the Real Property Valuation and Assessment Reform Act brings several positive changes in the valuation system and the real estate sector in the Philippines in general. The reform bill shall implement a more efficient valuation system and will use a single valuation base, which will eliminate wide disparities caused by overlapping valuations.

    This would lead to consistency in real property valuation as well as the predictability of valuation. As such, the adoption of true market-based values for taxation purposes will increase revenues without necessarily adopting new tax measures.

    RPVARA endeavors to increase the capacity of the government to generate revenues from real property through the RPT, national government real property transfer taxes, and other related taxes. In addition, RPVARA aims to reduce government costs particularly unnecessary expenses incurred due to conflicting appraisals which lead to court litigations, project delays, and cost overruns.

    As RPVARA aims to implement uniform standards and efficient processes in the real property tax system, the government hopes that this will instill more confidence in the country’s real estate industry. In the end, the government desires to motivate and inspire real estate investors and public confidence because the valuation is done professionally, properly, and following current local and international standards.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

  • Reminders as 2024 Rolls In

    “Our goal is to set the gold standard when it comes to compliance.”

    – Cathy Engelberg, Commissioner of the WNBA

    By Realttorney®

    Happy New Year. We wish you all the best for the Year of the Dragon. May you all work synergistically with your teams or other REPs to have the most prosperous 2024 possible.

    Photo by fauxels on Pexels.com

    We hope that you have your yearly goals written and these goals broken down into quarterly, monthly, and weekly goals.  Since this is the first working day of 2024, we would like to remind all real estate service professionals (RESPs) of some regulatory compliances according to Republic Act No 9646 and its Implementing Rules and Regulations (IRR).

    First, in Section 38, Rule IV of the IRR “Real estate service practitioners shall be required to indicate the certificate of registration, professional identification card, Privilege Tax Receipt (PTR) number, AIPO membership and/or receipt number.”

    Now, the IRR says ”privilege tax receipt” but in reality, this is called the Professional Tax Receipt or PTR. Yet, despite the “misspelling”, the mandate is clear. All licensed RESPs should get a PTR.

    Here are my previous year’s Professional Tax Receipts as an attorney and real estate broker

    It costs around PhP 300.00 and you can get this at the Office of the Treasurer of your LGU. Just say that you will get a PTR when you stand in front of the transaction window of the Treasurer’s Office. Some LGUs may not have a PTR, but instead have an OTR – the Occupational Tax Receipt – which is the same thing.

    What must you bring with you when you apply for a PTR? For veteran RESPs, a photocopy, digital copy, or the original copy of the PTR of the previous year will suffice. For the new salespersons and brokers, you need to bring a photocopy of your Certificate of Registration and the PRC ID Card with you.

    Second, if you are already registered with the Bureau of Internal Revenue (BIR) then you should pay your annual registration fee of PhP 500.00 using the BIR Form 0605. You can remit the payment at the BIR Revenue District Office (RDO) that you registered in or at the Authorized Agent Banks of the concerned RDO.

    Third, and final reminder, concerns accredited real estate salespersons and licensed real estate brokers who engage in project selling. If it is your cup of tea to sell subdivision and condominium projects then you are mandated by Presidential Decree No. 957 to register with the Department of Human Settlements and Urban Development (DHSUD), according to existing rules and regulations.

    Like securing a PTR, the Certificate of Registration must be renewed annually. You can apply at the Main office of DHSUD in Quezon City or at its Regional Offices nearest your place of residence.

    For licensed real estate brokers wanting to do project selling for the first time or those who are renewing their certificate of registration, kindly prepare for submission the following:

    (1) duly accomplished Application Form – which is specific per region. The application form you can download if you click here is only for Region IV-A [CALABARZON];

    (1) Photocopy of valid PRC-issued Certificate of Registration and PRC-issued Professional Identification Card (Originals thereof to be presented upon filing for comparison as faithful reproduction);

    (2) previous year’s Official Receipt;

    (3) Two recent 2 X 2 ID pictures; and

    (4) Surety/Cash Bond.

    If you are lucky to have been issued an ID Card issued by DHSUD then a copy of it can also be submitted. The registration fee is PhP 720.00 if renewed before expiration.

    Here is my DHSUD Identification Card for the year 2023

    Meanwhile, for newly accredited salespersons or those wanting to renew, you need to submit the following:

    (1) duly accomplished Application Form – which is specific per region. The application form you can download if you click here is only for Region IV-A [CALABARZON];

    (2) Two recent 2 X 2 ID pictures;

    (3) a copy of the PRC-issued accreditation card, or PRC-issued Official Receipt. or the PRC-issued claim stub;

    (4) Cash/Surety bond; and

    (5) the Letter of Engagement/Employment signed by a DHSUD registered Real Estate Broker with these attachments – copies of the PRC ID card of the broker, the DHSUD ID card, and the listing of accredited salespersons from PRC under the broker’s name. The registration fee is PhP 288.00 if renewed before expiration on December 31.

    Here is a sample of the Salesperson’s Letter of Engagement/Employment. Once again, notice that the Letter is region-specific. I secured this since I filed my requirements to the CALABARZON region in Brgy. Halang, Calamba City, Province of Laguna.

    Here is a final note. According to Section 4.7. of PRBRES Resolution No. 11, Series of 2021, “it is only after Mass Oath taking that the RES-Applicant can be considered Accredited and can already practice the real estate brokerage profession and may now register at DHSUD.”

    Let it be known that the Real Estate Salesperson-Applicant can only apply for registration at the DHSUD after attending the oathtaking ceremony – whether in person or online – NOT before. We hope this is clear.

    So kindly perform these regulatory compliances for you to work fully compliant with the requirements of the law that regulates our profession. Failure to comply is a violation of the law and the professional can be subjected to criminal and administrative sanctions.

    Start the year right. As professionals, these are the things we do. It is part of our identity as legal and fully compliant real estate service professionals.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

  • Strengthening Online Compliance: Can the New Internet Transactions Act End Colorum Practice?

    “Risk comes from not knowing what you’re doing.”

    – Warren Buffet, American Business Magnate, Investor and Philanthropist

    By Realttorney®

    In the Philippines, as with many other countries, the proliferation of online platforms has both facilitated legitimate real estate transactions and has provided avenues for fraudulent activities as well.

    Early last month, President Marcos, Jr. signed into law 2 of his priority bills he first mentioned during his first State of the Nation Address in July 2022. The first is Republic Act No. 11966 otherwise known as the Public-Private Partnership (PPP) Code of the Philippines.

    The second one is the focus of this article, which is Republic Act No. 11967, also known as the Internet Transactions Act of 2023. This piece of legislation aims to protect online consumers and merchants engaged in Internet transactions. It was enacted on December 5, 2023, and became effective 15 days after its publication in the Official Gazette according to Section 38 of Rep. Act No. 11967.

    What are the key provisions of the relatively new Republic Act?

    First, is the Establishment of the Electronic Commerce Bureau (ECB). The ECB is a new government agency tasked with implementing and enforcing the provisions of the Act. It has the power to investigate and resolve complaints, issue cease and desist orders, and impose fines on violators.

    Second, the Protection of Online Consumers. The law strengthens the protection of Filipino online consumers by (a) requiring online merchants to provide clear and accurate information about their products and services, including prices, payment terms, delivery schedules, and return policies; (b) prohibiting any misleading or deceptive advertising practices; (c) mandating that online merchants have a privacy policy in place that outlines how they collect, use, and protect consumer data; (d) giving consumers the right to cancel orders within seven days of purchase, with some exceptions; and (e) establishing a mechanism for consumers to file complaints and seek redress for any violations of their rights.

    Now, can real estate buyers who engage colorum practitioners be protected by this provision? In my opinion, the resounding answer is YES. It must be emphasized that the Internet Transactions Act of 2023 requires online merchants (colorum practitioners) to clear and accurate information about their products (house and lot, farm lots, condominium units, etc.) including price and payment terms.

    What clear and accurate information needs to be included in the social media posts of the colorum practitioners, apart from the details of the real properties, their prices, and their terms?

    1. Full name and designation;
    2. The PRC License Number or PRC Accreditation Number of a real estate salesperson;
    3. Validity of the license or accreditation number;
    4. The PRC Identification Card Number;
    5. The Current Professional Tax Receipt Number;
    6. The AIPO Number, if available; and
    7. The date of issuance of the PTR Number and the AIPO Official Receipt for the current year.

    But, if you are a project-seller then aside from the 7 information, the colorum practitioner should indicate each item in his social media posts:

    1. DHSUD Registration Number and date of issuance;
    2. Office Address;
    3. Contact Information and Email Address;
    4. Name of Project;
    5. Location of the Project
    6. Project Classification: PD 957 or BP 220
    7. State max. selling price if under BP 220
    8. Project Type: Subd/Condo/Memorial Park
    9. Name of Owner/Developer;
    10. License To Sell No.?
    11. Completion Date?

    These details are all required by HLURB Board Resolution No. 921, Series of 2014, in conjunction with Rep. Act No. 9646.

    Third, the Protection of Online Merchants. These are the new law that protects online merchants: (a) Prohibits unauthorized access to or use of electronic data and systems; (b) Provides for the protection of intellectual property rights in the online environment; (c) Establishes a dispute resolution mechanism for resolving conflicts between consumers and merchants.

    Fourth and final, Regulates online advertising and marketing practices. This is equally important as the provisions that protect online users discussed above: (a) Prohibit the sale of counterfeit goods online; (b) Require online platforms to take down illegal content upon notice; and (3) Encourage the development of self-regulatory mechanisms by the e-commerce industry.

    How can the real estate buyers be protected using these provisions of the law? The PRBRES in coordination with the PRC should now make representation with the Department of Trade and Industry to inform Facebook, YouTube, and other social media platforms to take down illegal content upon discovery of the lack of the mandated information listed in Section 38 of RA 9646 and HLURB Board Resolution No. 921, Series of 2014 in the posts of colorums as part of their marketing efforts using the internet.

    Rep. Act No. 11967 is a significant step towards building a more robust and trustworthy e-commerce environment in the Philippines. It is expected to promote consumer confidence, encourage more businesses to operate online and contribute to the growth of the digital economy. Hence, we can use the provisions of this new law to curb, if not totally stop the colorum practice in our midst.

    I call upon all licensed real estate brokers and accredited real estate salespersons to unite and make our voices heard by Facebook and other social media platforms, through the DTI, and ECB to stop once and for all the illegal practice of all colorum practitioners.

    What do you think? Do you share my views on the application of Rep. Act No 11967? Let me know in the comments section and let us start a conversation.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector

  • 7 Steps to Start a Successful Real Estate Brokerage in the Philippines

    “If you want to succeed in real estate, be persistent, be passionate, and never give up.”

    –  Barbara Corcoran, American businesswoman, investor, and television personality

    By Realttorney®

    Are you are licensed real estate broker in the Philippines who is a project seller and wants to go into general brokerage to maximize all the opportunities that the real estate service sector has to offer?

    Are you a private practitioner who belongs to a branded brokerage house but is dying to establish your own real estate brokerage business?

    Finally, are you a graduating student of the Bachelor of Science in Real Estate Management in 2024 and are confident to pass the real estate brokerage examination in April 2024?

    Photo by energepic.com on Pexels.com

    Embarking on the journey to establish a real estate brokerage in the Philippines is a significant endeavor that requires meticulous planning, industry knowledge, and a commitment to ethical conduct. It is a huge endeavor, but rewarding nonetheless.

    These aspiring entrepreneurs in the real estate sector must navigate through various regulatory requirements, market dynamics, and operational challenges to carve a niche in this competitive landscape. This article outlines the essential steps to initiate and grow a successful real estate brokerage in the Philippines, focusing on practical insights and strategic considerations.

    Step 1. Acquire the Necessary Qualifications and Licenses

    All Real Estate Service Practitioners (RESPs) know this as gospel truth. No one can practice the real estate service profession without being licensed or accredited by the Professional Regulatory Board of Real Estate Service (PRBRES) according to the provisions of Rep. Act No. 9646 or the Real Estate Service Act. This means that if you are not yet licensed, then this article may not be for you to read.

    But if you are persistent and you really want to become a licensed real estate broker or an accredited real estate salesperson, then you have to acquire the necessary qualifications. To become an accredited real estate salesperson then you need to undergo a 12-hour real estate training seminar for new-entry salespersons.

    But, please remember that you need to have a minimum of 72 units of college subjects as a minimum qualification to get accredited by PRBRES. Now, if you want to be a real estate broker — because someone told you that the earning capacity is limitless — then you need to obtain a Bachelor’s degree in Real Estate Management under Section 14 (b) of Rep. Act No. 9646.

    After graduating with a degree in Real Estate Management then you need to pass the licensure examination to be conducted by the PRBRES under the supervision of the Professional Regulation Commission (PRC). Familiarize yourself with Republic Act No. 9646 to ensure compliance with regulatory standards.

    Step 2. Develop a Comprehensive Business Plan

    What? Do I need to make a business plan? Yes, of course, if you want to succeed in your latest endeavor. Let me share with you a wonderful quote from Benjamin Franklin. He said, “By failing to plan, you are preparing to fail.” It is also similar to what Winston Churchill said: “He who fails to plan is planning to fail”.

    It does not need to be a complicated business plan. Keep it simple as far as practical. But you have to cover these three critical items that would become the foundation of your entire business plan.

    The first critical item is Market Analysis. Conduct thorough market research to identify target markets, assess competition, and analyze demand-supply dynamics. In my experience, I concentrate only on real estate transactions in the Metro Tagaytay area. I just want to specialize in a particular real estate market where I can operate comfortably. Or in a class of real estate that I can handle with ease, like farmland or raw land.

    The message here is don’t be a jack-of-all-trades and master of none. One cannot effectively service the entire real estate market in the Philippines, covering all 13 or 14 regions. You have to choose your niche, your area of expertise, where you can effectively operate.

    The second critical item is Financial Projections. Prepare detailed financial projections, including startup costs, operating expenses, and revenue forecasts. But, I don’t know how to do this? Do not despair. The greatest source of information regarding this matter is at your fingertips… and it is free. If you like to read, try Google Search. If you like to listen to instructions, try YouTube. Or, call a friend who has done this or has experience in making financial projections.

    The third critical item is Strategic Objectives. Define clear objectives for the incoming year or the current year. Create the mission and vision for your real estate brokerage. Then, outline the unique value proposition for the clients and stakeholders of the brokerage.

    Find a quiet place and time where you can do your planning without interruption from your kids, spouse, or co-workers. My suggestion is to wake up 30 minutes earlier than your usual time of waking up. Use that “extra” time you have to start planning.

    Step 3. Establish a Legal Entity and Compliance Framework

    As licensed real estate brokers, it is a given that we are already registered with the Bureau of Internal Revenue (BIR). As such, if you want to venture on your own, outside the structure of your current brokerage, then we are considered independent contractors. But remember that independent contractors are considered sole proprietors in their business endeavors.

    The critical and most important act for Step 3 is to determine your Business Structure. Decide on the most suitable legal structure for your brokerage, such as a sole proprietorship, partnership, or corporation. Know the tax deductions allowable for each kind of structure, as well as the monthly, quarterly, and annual regulatory compliance with the BIR.

    If the entity you chose is a partnership or a corporation, then you also have to know the different Legal Compliance requirements for your chosen business entity. Ensure adherence to regulatory requirements, including registration with the Securities and Exchange Commission (SEC) and compliance with local government rules and regulations.

    Can you set up a One-Person Corporation to conduct your real estate brokerage? In my opinion, the answer is YES. But it is a separate article where my views on it are fully discussed.

    Step 4. Build a Robust Network and Partnerships

    I have always said in all my lectures that the real estate service sector is a relationship-based endeavor. The more you grow your network, the longer and better your career will be. But, create a high-caliber network composed of licensed real estate service practitioners (RESPs), never with colorum or pseudo practitioners.

    Cultivate relationships with real estate developers, property owners, real estate investors, and other industry experts and stakeholders. Cultivating a relationship is quid pro quo. What value do you bring to the table? What value do you offer to the other party?

    Consider being a part of a Professional Association of your choice. Of course, Section 34, Rep. Act No. 9646 mandates that all real estate service practitioners duly registered with PRBRES shall automatically become members of the accredited and integrated professional organization (AIPO) of real estate service practitioners.

    But apart from joining the AIPO, you may still want to consider joining reputable real estate associations and organizations, such as the Real Estate Brokers Association of the Philippines (REBAP), to enhance credibility and access to resources. Eventually, these current real estate service organizations will transform themselves into specialty real estate organizations to create specialized RESPs.

    If you ask: What areas of specialization are being proposed by PRBRES? At this early stage, here are the three proposed areas: (1) General brokerage, Titling, and Documentation; (2) Residential Project Selling; and (3) Foreclosed Properties. PRBRES said that these are the initial areas that may or may not be expanded.

    Step 5. Invest in Marketing and Branding

    What makes you different from all the other real estate brokers and salespersons working in your area of operation? What sets you apart from the others? Why would a seller or a buyer contact you for assistance in their real estate transaction?

    At this stage of your planning process, you need to embrace the wisdom of having a Brand Identity. Another critical component of your business plan should include developing a compelling brand identity. This includes creating a logo, website, and marketing materials that resonate with your target audience.

    How much Digital Presence do you need? Leverage online platforms, social media, and digital marketing strategies to enhance visibility and attract potential clients. Wow!! Are there a lot of things to consider? Yes, that is why planning on how to best use these strategies and implement them well is paramount.

    These are part of your marketing plan, which is a part of your overall business plan. Why is this a critical part of the plan? It is so because to put these into action, you will spend a little or more than a little financial resource. Hence, you need a plan to know how much to allocate per month to execute these important marketing tools at your disposal.

    Why do all these? As a licensed real estate broker or accredited real estate salesperson, you are considered a professional. And what sets you apart from the colorum or pseudo-practitioners who continue to dominate the market? Aside from your license or accreditation, it is a well-crafted business plan composed of the items we have so far discussed.

    Step 6. Implement Effective Operational Systems

    Now that you have your marketing strategies all planned out, you need to consider what technology you will use to streamline and automate your day-to-day operations. You have to determine how to systematize and manage your listings, site visits or orientations, client follow-ups, and transaction facilitation. There are a number and advanced real estate software and technology solutions that you (as a professional) can adopt. But, of course, this has a cost. So it is important to list this as a necessary cost of your operations.

    Team Development: Have you considered creating your own team? Recruit and train your own team of accredited real estate salespersons, ensuring alignment with your brokerage’s values and customer service standards.

    Make a handbook that will explicitly outline the mission and vision of your brokerage, the values of your organization, and the standard of service that will be experienced by your clients and/or customers.

    In the alternative, have you considered forming a super-team with other RESPs? I know of a super-team, who are members of our organization, which decided to form a corporation to synergize their efforts and resources — financial and manpower — that make their earning opportunities and capacities more efficient.

    If two brains are better than one, then probably five brains are far superior to one, correct? So, consider this carefully. It does not hurt if you find like-minded professionals who are aligned with your goals and values. This creates leverage that benefits the entire group in the end.

    Step 7. Prioritize Ethical Conduct and Professionalism

    The final step is to remind yourself that money is not the end-all and be-all of our profession. In a previous article, I argued that INTEGRITY is the most important personal quality a licensed real estate broker needs to be successful in the real estate service sector.

    Hence, it is the same thing when you want to start your own real estate brokerage. Keep your eye on our Code of Ethics. All RESPs should uphold the highest standards of ethical conduct, adhering to the Code of Ethics for Real Estate Service Practitioners to build trust and credibility. This is non-negotiable. Our long-term success is dependent on the reputation we build as a real estate service professional.

    Client-Centric Approach: We should keep in mind the needs of our clients before our own. Of course, there are exceptions to the rule, like difficult or obnoxious clients. But we should always prioritize client satisfaction, transparency, and integrity in all interactions, so we can foster long-term relationships and secure referrals for future opportunities.

    Conclusion

    Embarking on the entrepreneurial journey to establish a real estate brokerage in the Philippines requires a strategic approach, an unwavering commitment to ethical conduct, and a deep understanding of the industry landscape. By following these essential steps and continuously adapting to market trends and regulatory changes, aspiring real estate brokers can lay a solid foundation for success, driving growth, and making a meaningful impact in the dynamic Philippine real estate market.

    By adhering to the principles of integrity, professionalism, and client-centric service, real estate brokerages can navigate challenges, capitalize on opportunities, and build a reputation as trusted advisors and industry leaders.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.