Calculating Transfer Tax on a Deed of Sale in the Philippines

A practical legal guide for buyers, sellers, brokers, and in-house teams

1) What the “transfer tax” is (and isn’t)

Transfer tax on real property—often called the local transfer tax (LTT)—is a local government levy due upon the transfer of ownership or title to real property (land, buildings, condominium units). It is separate from:

Capital Gains Tax (CGT) or Creditable Withholding Tax (CWT) – national taxes falling under the BIR, depending on the seller.
Documentary Stamp Tax (DST) – a national stamp tax on the deed.
Registration fees – fees of the Register of Deeds (ROD).
Real Property Tax (RPT) – annual local property tax not tied to a sale.

Think of LTT as the LGU’s fee for allowing the change of ownership to be recognized and recorded.

2) Legal basis and who levies it

Provinces (and municipalities within them) and cities impose and collect transfer tax under the Local Government Code (LGC).
Typical statutory ceilings:
- Provinces: up to 0.50% of the tax base.
- Cities and municipalities in Metro Manila: up to 0.75% (cities may impose up to 50% more than provincial rates).
Actual rates are set by local ordinances, so check the property’s city/provincial treasurer for the precise figure. (When in doubt, compute at the ceiling for a conservative estimate.)

3) What transactions are covered

Sale, exchange/barter, donation, dación en pago, partition/assignment that transfers ownership, consolidation of ownership, and similar instruments.
Estate transfers (extrajudicial or judicial settlement) are commonly subject to LTT before title can be retitled to heirs.
Common carve-outs/exemptions occur by special laws or ordinances (e.g., certain transfers to the government or under special housing programs). Treat exemptions as documented, not assumed—you’ll need proof at the treasurer and ROD.

4) When it is due (deadline) and consequences of late payment

Deadline: within 60 days from the date of execution of the deed/instrument (not from BIR CAR release), unless a stricter local rule applies.
Penalties for late payment: LGUs generally impose a surcharge (commonly 25%) plus interest (up to 2% per month) of delay, often capped at 36 months. These can compound your costs quickly, so calendar the 60-day window.

5) Who pays

The LGC does not mandate which party must shoulder the LTT. Parties are free to allocate in the deed (common market practice: buyer pays LTT and registration fees; seller pays CGT/CWT and often shares DST). If the deed is silent, local custom and negotiation history typically prevail, but the ROD and treasurer will not police private allocation—only that the tax is paid.

6) The tax base (the “whichever is higher” rule)

The LTT is computed on the higher of:

The consideration stated in the deed (the selling price), or
The fair market value (FMV) of the property per the Assessor’s Schedule of Market Values (SMV).

Many LGUs will also look at the BIR’s zonal value for cross-checking; in practice, treasurers align with the highest defensible value to protect the revenue base and avoid under-declarations.

Tip: Before signing, request (a) the latest Assessor’s SMV printout and (b) the BIR zonal value for the barangay/condo. Price below these and you will still pay taxes based on the higher reference.

7) Formula

Determine the tax base

$$ \text{Tax Base} = \max(\text{Deed Price}, \text{Assessor FMV}, \text{(LGU-recognized) Zonal Value}) $$

Apply the rate (per LGU ordinance)

Province example: 0.50%
City/MM example: 0.75%

$$ \text{Transfer Tax Due} = \text{Tax Base} \times \text{Rate} $$

If late, add:

$$ \text{Surcharge} \ (\text{often } 25%) + \text{Interest (up to 2%/month, capped)} $$

8) Worked examples

Example A – Property in a Province

Deed price: ₱6,200,000
Assessor FMV (lot + improvements): ₱6,800,000
Zonal value check: ₱6,500,000
Tax base = ₱6,800,000 (highest)
Rate = 0.50%
LTT = ₱6,800,000 × 0.005 = ₱34,000

Example B – Property in a City / Metro Manila

Deed price: ₱4,000,000
Assessor FMV: ₱3,850,000
Zonal value: ₱4,300,000
Tax base = ₱4,300,000
Rate = 0.75%
LTT = ₱4,300,000 × 0.0075 = ₱32,250

Example C – Late payment (Province)

Base LTT (from Example A): ₱34,000
3 months late, LGU imposes 25% surcharge + 2%/month interest
- Surcharge: ₱34,000 × 25% = ₱8,500
- Interest: ₱34,000 × 2% × 3 = ₱2,040
- Total to pay = ₱34,000 + ₱8,500 + ₱2,040 = ₱44,540

9) Standard documentary checklist

Expect slight variations by LGU, but commonly required:

Notarized Deed of Absolute Sale (or relevant instrument).
BIR eCAR/CAR and CAR transmittal (obtained after paying CGT/CWT and DST).
Proof of DST payment (BIR Form 2000/2000OT).
Proof of CGT/CWT payment (BIR Form 1706/1606 or relevant).
Latest Real Property Tax (RPT) clearance and Tax Declaration(s) (land and improvements).
Certificate of No Improvement (if land only) or Building Tax Declaration (if improved).
IDs of parties and TINs (buyer and seller).
SPA/Secretary’s Certificate/Board Resolution for representatives or corporate parties.
Condominium: Master Deed details and Condo Dues clearance are sometimes requested.
If by succession: Death certificate, extrajudicial settlement or court order, proof of estate tax payment/CAR.

Keep two to three sets of photocopies; LGUs and the ROD often retain separate files.

10) Step-by-step process (practical sequence)

Draft and notarize the deed.
Pay BIR taxes first:
- CGT (6%) for individuals/corporations selling capital assets, or CWT (1%–6%) when seller is habitually engaged (ordinary assets) per BIR rules.
- DST (1.5%) on the deed.
- File the right BIR forms and comply with timelines (CGT filing typically within 30 days from sale; DST typically on/before the 5th day following the month of execution).
Secure BIR CAR/eCAR.
Within 60 days of deed execution, pay the Local Transfer Tax at the city/provincial treasurer where the property is located. Get the Official Receipt (OR).
Register at the ROD: submit the deed, BIR CAR, LTT OR, RPT clearance, tax declarations, and other required docs. Pay registration fees.
Post-registration: Obtain the new TCT/CCT and endorse updated Tax Declarations with the Assessor.

11) Special considerations & edge cases

Mixed properties (multiple parcels): If covered by one deed but located in different LGUs, you may face multiple LTT filings, each with its own base and rate. Check whether the deed should be split to simplify processing.
Improvements not on the title: The Assessor’s FMV for improvements may raise the base; get the latest building TD to avoid short-payment issues.
Installment sales: The execution date of the deed still drives the 60-day LTT clock unless the LGU recognizes a conditional transfer structure.
Judicial sales/foreclosures: LTT can apply upon consolidation of ownership; some LGUs compute on adjudicated value or highest bid.
Related-party or below-market transfers: Expect the treasurer to default to SMV/zonal if the deed price is low.
Exempt entities/transfers: Even if exempt, the ROD often requires proof of exemption and/or Zero LTT certification from the treasurer.
Condominiums: Treasurers treat condo units as real property; the tax base follows the same “whichever is higher” rule using the unit’s SMV/zonal.

12) Practical drafting tips for your deed and timeline

Allocate taxes and fees clearly (e.g., “Buyer shall shoulder LTT, registration fees; Seller shall shoulder CGT and DST”).
State the true consideration, but benchmark against SMV/zonal so stakeholders know the likely tax base.
Calendar the deadlines in the engagement letter or term sheet (30-day CGT filing, DST monthly cutoff, 60-day LTT).
Secure TINs early; missing TINs stall BIR and, in turn, LTT and registration.
Budget buffer: Add 10–15% contingency on transfer-related costs to accommodate valuation checks, surcharges, and incidental fees.

13) Quick computation worksheet (you can reuse)

Identify location (province vs city/MM) → rate (0.50% or up to 0.75%).
Determine three values: Deed price, Assessor FMV, Zonal value.
Tax Base = highest of the three.
LTT = Tax Base × Rate.
If past 60 days: Add surcharge (often 25%) + interest (up to 2%/month, max 36 months).
Prepare document set and pay at the treasurer → get OR.
Proceed to ROD registration with all receipts and clearances.

14) Bottom line

The local transfer tax is a mandatory LGU prerequisite for title transfer, due within 60 days of the deed.
Compute using the highest of price/SMV/zonal, then apply your LGU rate (commonly 0.50% for provinces, 0.75% for cities/MM).
Pay BIR first, then LTT, then register at the ROD.
Avoid surprises by checking valuations early, allocating taxes in the deed, and tracking deadlines to sidestep penalties.

This article is designed for practical use by transactors and counsel. For bespoke situations (complex structures, exemptions, or multiple-LGU transfers), review the local ordinance and coordinate directly with the relevant treasurer and Register of Deeds.