Overview

When real property located within a Philippine province or city (except Manila and Quezon City) changes hands—by sale, barter, donation, succession, exchange, or any other mode—the Local Government Code of 1991 (LGC, Republic Act No. 7160) authorises the province (or highly-urbanised/independent component city) to impose a Local Transfer Tax (LTT). Failure to pay the LTT on time triggers statutory surcharges and interest, and may lead to administrative or judicial enforcement. This guide lays out—in one place—the full legal framework, formulas, illustrative computations, and practical tips for calculating penalties on unpaid LTT.

1. Legal Basis

Provision	Key Contents
LGC, Sec. 135	Gives provincial sanggunian power to levy an LTT “on the sale, donation, barter, or any other mode of transferring ownership or title of real property.”
LGC, Sec. 151	Extends the same power to highly-urbanised/independent component cities.
LGC, Sec. 167(b)	Fixes the payment deadline—within 60 days from execution of the transfer instrument or from issuance of the deed of adjudication.
LGC, Sec. 168	Authorises the treasurer to impose: * a surcharge ≤ 25 % of the tax if not paid on time; and * interest ≤ 2 % per month on the unpaid amount until fully paid, but not exceeding 36 months (total interest cap = 72 %).
LGC, Secs. 255-258	Enforcement tools: distraint of personalty, levy on realty, civil/criminal action, compromise/condonation.

Important: Each province/city must enact an ordinance that (a) adopts the maximum tax rate or a lower one, (b) sets the surcharge/interest within the LGC ceilings, and (c) designates the local treasurer as collecting officer. Always consult the specific ordinance for local nuances.

2. Standard Tax Base and Rate

Base – Higher of:
1. Total consideration stated in the deed, or
2. Fair Market Value (FMV) based on the schedule of values approved by the sanggunian (often called the “zonal value” for provincial assessors).
Maximum rate – 50 % of 1 % (i.e., 0.5 %) of the tax base.
- Many LGUs simply adopt the ceiling of ½ of 1 %, but some lower the rate (e.g., Cebu Province: 0.25 %).

3. When the Tax Becomes Due

Scenario	Deadline
Ordinary sale/donation	60 days from date of notarised deed
Judicial/extra-judicial settlement of estate	60 days from date of deed of adjudication or partition
Foreclosure (certificate of sale)	60 days from issuance of certificate
Dacion en pago / barter	60 days from instrument date

Effect of Delay: Day 61 counts as the first day of delinquency for surcharge and the first month for interest is counted after the first 30 days of delinquency (LGC practice, mirroring Section 249 of the NIRC).

4. Statutory Penalty Framework

4.1 Surcharge

Rate: set by ordinance, not above 25 % of the basic tax.
One-time, lump-sum—it does not compound.

4.2 Interest

Parameter	Statutory Limit
Monthly rate	≤ 2 % of the unpaid tax
Imposition	Applies for every month or fraction thereof after the 60-day deadline.
Maximum period	36 months ⇒ Total cap = 72 % of basic tax (2 % × 36).
Nature	Simple, not compounded. Interest stops running once the 72 % cap is hit.

5. Formula for Computing Total Amount Due

$$ \begin{aligned} \text{Basic LTT} &= \text{Tax Base} \times \text{LTT Rate} \[4pt] \text{Surcharge} &= \text{Basic LTT} \times \text{Surcharge %} \[4pt] \text{Interest} &= \text{Basic LTT} \times (\text{Monthly Interest %}) \times \text{Number of Months Late}\[4pt] \text{(subject to 72 % cap)}\[6pt] \textbf{Total Due} &= \text{Basic LTT} + \text{Surcharge} + \text{Interest} \end{aligned} $$

6. Illustrative Examples

Example 1 – One-year Delinquency

Deed of sale dated 1 April 2024
Tax base (higher of price vs FMV): ₱1,000,000
LTT rate (province uses max): 0.5 % ⇒ Basic LTT = ₱5,000
Paid on 30 April 2025 (one year & 29 days late)

Component	Computation	Amount
Basic LTT	₱1,000,000 × 0.5 %	₱5,000
Surcharge (25 %)	₱5,000 × 25 %	₱1,250
Interest	₱5,000 × 2 % × 12 mo	₱1,200
Total Due		₱7,450

Example 2 – Four-year Delinquency (Interest Cap Applies)

Estate settlement deed dated 15 June 2020
Tax base: ₱2,500,000 → Basic LTT = ₱12,500
Paid on 20 August 2025 (over 5 years late)

7. Administrative Consequences & Remedies

Issuance of Notice of Delinquency (Sec. 254, LGC).
Distraint of personal property or levy on real property.
Civil action before the proper court if still unpaid.
Criminal action (fine or imprisonment) for willful refusal (Sec. 187).
Compromise or Condonation – sanggunian may, by ordinance, condone surcharges/interest for meritorious cases (e.g., calamity).
Protest & Appeal – Taxpayer may (a) pay under protest then (b) file written protest within 30 days; appeal adverse rulings to the Secretary of Justice, then to the courts.

8. Interaction with National Taxes & Registry of Deeds

BIR Requirements – Prior clearance for Capital Gains Tax / Creditable Withholding, Documentary Stamp Tax, Estate or Donor’s Taxes is separate and precedes LTT payment.
Registry of Deeds will not register transfer without the provincial treasurer’s LTT Tax Clearance Certificate (Sec. 209, Property Registration Decree).
Order of Payment – National internal taxes first, then LTT, then registration fees.

9. Prescription

Assessment – LGU must assess LTT within 5 years from date the tax became due (10 years if fraud/intent to evade).
Collection – Once assessed within prescriptive period, LGU has 5 years to collect (Sec. 194, LGC).
Acknowledged payments, written agreement, or partial settlement interrupts prescription.

10. Compliance Checklist & Best Practices

Step	Action
1	Verify actual rate in the provincial/city revenue code.
2	Confirm FMV vs. consideration; attach assessor’s certification if FMV higher than declared price.
3	Compute basic LTT immediately upon notarisation to avoid interest.
4	Pay within 60 days at the Provincial/City Treasurer’s Office; secure Official Receipt & Tax Clearance.
5	If already late, use formulas above; consider requesting condonation of surcharges/interest if ordinance allows (e.g., taxpayer relief programs).
6	Keep all proofs of payment—needed for title transfer and future tax claims.

11. Key Take-aways

Surcharge is a one-time penalty up to 25 %.
Interest accrues at up to 2 % per month but stops after 36 months (max 72 %).
Failure to pay exposes the taxpayer to distraint, levy, and even criminal liability.
Each LGU’s ordinance may fine-tune the rate and administrative procedure—always consult the local code.
Pay within 60 days of the deed to avoid penalties; if already delinquent, calculate accurately and settle before enforcement begins.

This article is for general information only and should not be taken as formal legal advice. For specific transactions, consult the provincial/city revenue ordinance and seek counsel from a Philippine tax lawyer or the local treasurer’s office.