Documentary Stamp Tax (DST) is frequently misunderstood in real property transactions, particularly when homeowners or developers seek to cancel annotations or entire titles at the Registry of Deeds. The most common question that reaches lawyers, notaries, and BIR revenue officers is: “Do I still have to pay DST just to cancel the title or remove the mortgage annotation after full payment?”

The short and categorical answer, based on the Tax Code and consistent BIR rulings for over two decades, is:

No. The mere cancellation of a land title or the cancellation of an encumbrance annotated thereon is not subject to Documentary Stamp Tax unless the cancellation is effected through a document that itself falls under the enumerated taxable documents in Title VII of the National Internal Revenue Code (NIRC).

Legal Nature of Documentary Stamp Tax

DST is an excise tax imposed only on the specific documents, instruments, and transactions expressly enumerated in Sections 173 to 201 of the NIRC, as amended by the TRAIN Law (RA 10963), CREATE Law (RA 11534), and Ease of Paying Taxes Act (RA 11976).

Because the law is strictly enumerative, any document or transaction not listed therein is not subject to DST, even if it is notarized or registered with the Registry of Deeds.

Cancellation of a land title (or cancellation of an annotation on the title) is an act of the Register of Deeds pursuant to Presidential Decree No. 1529 (Property Registration Decree). It is not a privilege or transaction created by a private document; it is a ministerial consequence of presenting the proper enabling instrument or court order.

Therefore, the taxability depends entirely on whether the enabling instrument that causes the cancellation is one of those enumerated in the Tax Code.

Common Scenarios and the DST Treatment

1. Cancellation of Title Due to Transfer of Ownership (Sale, Donation, Succession, Dacion en Pago)

The enabling instrument is the Deed of Absolute Sale, Donation, Extrajudicial Settlement, Deed of Dacion en Pago, etc.

These are taxable under Section 196 NIRC (“Deeds of sale and any other mode of transfer of real property”) at P15.00 for every P1,000.00 or fractional part thereof of the consideration or zonal value, whichever is higher.

DST is paid on the deed of conveyance, not on the cancellation of the transferor’s title. The cancellation of the seller’s/donor’s title is merely the effect of registration of the taxable deed.

2. Cancellation of Mother Title Due to Subdivision or Consolidation-Subdivision

No change in ownership occurs. The owner simply segregates or consolidates the lots.

There is no deed of conveyance. The enabling document is the DAR/DENR/LGU-approved subdivision/consolidation plan and the technical descriptions.

BIR has repeatedly ruled (e.g., BIR Ruling No. DA-079-2005, reiterated in numerous subsequent rulings) that the cancellation of the mother title and issuance of new titles in subdivision/consolidation is not subject to DST because there is no taxable document involved.

Only registration fees, IT fees, and LRA assurance fund contributions are due.

3. Cancellation of Real Estate Mortgage Annotation After Full Payment

This is the most frequent scenario that causes confusion.

The enabling instrument is the Release of Real Estate Mortgage / Deed of Cancellation of Mortgage / Discharge of Mortgage executed by the mortgagee (bank, Pag-IBIG, private lender).

BIR position (consistently held since 2003 up to the present):

BIR Ruling No. DA-489-03 (2003)
BIR Ruling No. DA-491-04 (2004)
BIR Ruling No. DA-079-2005 (2005)
Revenue Memorandum Circular No. 74-2007 (expressly circularizing the rulings)
BIR Ruling No. DA-175-08 (2008)
BIR Ruling No. 395-2011 (2011)
Numerous unpublished rulings up to 2024

All uniformly hold that:

“The Deed of Release/Cancellation/Discharge/Quitclaim of Real Estate Mortgage is not subject to Documentary Stamp Tax under any provision of the Tax Code. The original mortgage was already subjected to DST under Section 195. The release merely extinguishes the accessory obligation; it does not create a new one nor does it transfer any property right.”

Therefore, no DST is due on the Release of REM.

However, the following distinctions must be remembered:

If the settlement is by way of dacion en pago (property conveyed in payment of the debt), the Deed of Dacion en Pago is taxable under Section 196 as a conveyance of real property.
If the release contains a reconveyance clause (common in pacto de retro sales or when title was transferred as security), the reconveyance portion is taxable under Section 196.
If the release is embodied in a court compromise agreement that transfers ownership, the compromise agreement is taxable under Section 196.

4. Cancellation of Adverse Claim, Lis Pendens, Notice of Levy, or Other Encumbrances

Adverse claim – cancelled by Affidavit of Non-Materialization or court order after 30 days (Sec. 70, PD 1529). No DST.

Lis pendens – cancelled by court order upon finality of judgment or motion to cancel. No DST.

Levy on execution/attachment – cancelled by Sheriff’s Certificate of Sale or final deed if redeemed, or court order. No DST unless the final deed is a conveyance.

Unilateral cancellation by the claimant (e.g., Affidavit of Withdrawal of Adverse Claim) – not taxable.

5. Judicial Cancellation of Title (Annulment of Title, Reconveyance, Reversion, Quieting of Title)

The enabling instrument is the final and executory court decision or the Deed of Reconveyance executed in compliance with the judgment.

Court decisions are not subject to DST.

If the judgment orders reconveyance and the defendant executes a Deed of Reconveyance, that deed is taxable under Section 196 (BIR Ruling No. 013-2013 and subsequent rulings).

If the court simply orders the Register of Deeds to cancel the fraudulent title and revive the previous valid title (common in double sale or forged deed cases), no private taxable document exists → no DST.

6. Administrative or Judicial Reconstitution of Lost/Destroyed Title

The reconstituted title bears the same number as the lost one, with “Reconstituted” annotation. The old title, if later found, is cancelled.

No DST. Only registration fees and legal research fund.

7. Cancellation Due to Escheat, Expropriation, or Forfeiture Proceedings

Effected by court order or final deed of conveyance to the government.

Government is exempt from DST under Section 131 of the Local Government Code and various rulings when it is the purchaser/grantee.

Practical Notes for Property Owners and Practitioners

Many Registers of Deeds still mistakenly require DST on Release of REM (some demand P200–P500 “nominal” DST). This practice is illegal and has been repeatedly declared erroneous by the BIR and LRA.
If the RD refuses to cancel the mortgage without DST, request a written explanation and elevate the matter to the LRA Regional Director or file a consulta with the BIR Law Division. Attach RMC 74-2007.
Pag-IBIG Fund, major banks (BPI, BDO, Metrobank, Security Bank, etc.), and even some rural banks now routinely indicate in their Release of REM: “This document is not subject to Documentary Stamp Tax per RMC 74-2007.”
Notarization of the Release of REM is still required for registration (P200–P500 notarial fee depending on the notary’s schedule).
After annotation of the release, the owner may request issuance of a new clean title (optional but recommended). The issuance of the new title in this case carries no DST.

Conclusion

Documentary Stamp Tax is never imposed on the act of cancellation of a land title itself nor on the ministerial act of the Register of Deeds in cancelling an annotation or an entire title.

The tax attaches only to the specific private document that triggers the cancellation, and only when that document is one of those expressly enumerated in the Tax Code.

In the overwhelming majority of cases — particularly the most common ones (full payment of loan leading to release of mortgage, subdivision, consolidation, cancellation of adverse claim/lis pendens) — no Documentary Stamp Tax is due.

Property owners are legally entitled to have their titles cleaned or cancelled without paying DST on the release or cancellation instrument. Any demand for such payment by the Registry of Deeds or even by some banks is contrary to law and may be refused with proper citation of the BIR rulings and RMC 74-2007.