In the Philippines, the Transfer Certificate of Title (TCT) is the "gold standard" of land ownership. However, the wheels of bureaucracy often turn slowly, and many taxpayers find themselves in a position where they have fully paid for a property and assumed possession, but the actual title has not yet been issued in their name.

The question then arises: Can you legally declare this land as a fixed asset in your Income Tax Return (ITR) and financial statements despite the absence of a TCT?

The short answer is yes, provided specific legal and accounting criteria are met to prove "beneficial ownership" and "control."

1. The Principle of Substance Over Form

In both Philippine accounting standards (PFRS/PAS) and tax jurisprudence, the principle of substance over form prevails. This means that the economic reality of a transaction takes precedence over its legal technicality.

If you have acquired all the risks and rewards of ownership—even if the administrative act of titling is pending—the land is considered an asset of your business or personal estate.

2. Legal Basis for Declaration

While a TCT is the best evidence of ownership under the Torrens System, it is not the only evidence for tax purposes. To declare land as a fixed asset without a TCT, you must possess the following documents:

Deed of Absolute Sale (DOAS): This is the primary contract that transfers ownership. Once notarized and the price is paid, the sale is perfected.
Tax Declaration (TD): In the Philippines, the Tax Declaration (issued by the Assessor's Office) is often updated faster than the TCT. If the Tax Declaration is already in your name, it serves as strong evidence for the Bureau of Internal Revenue (BIR) that you are the party responsible for the asset.
Proof of Payment of Taxes: Evidence that you have paid the Capital Gains Tax (CGT) or Creditable Withholding Tax (CWT) and the Documentary Stamp Tax (DST) is crucial. This shows the BIR that the government has already recognized the transfer of the property's value.

3. Accounting Requirements (PAS 16)

Under Philippine Accounting Standard (PAS) 16: Property, Plant, and Equipment, an item is recognized as an asset if:

It is probable that future economic benefits associated with the item will flow to the entity; and
The cost of the item can be measured reliably.

If you are using the land for your business (e.g., as a factory site or office location), you are gaining economic benefit from it. The absence of a TCT does not negate these facts, as long as your right to the property is "legally enforceable."

4. Risks and Considerations

While you can declare the land, you must be aware of the following nuances:

No Depreciation: Remember that land is a non-depreciable asset. Declaring it will increase your total assets on the balance sheet but will not provide a depreciation expense to lower your taxable income.
Audit Risk: If the BIR audits your financial statements, they will look for the "source of right." If you lack even a notarized Deed of Sale or a Tax Declaration, the BIR may disqualify the asset and question the source of the funds used to purchase it.
LGU Compliance: Ensure that the Real Property Tax (RPT) or "Amilyar" is being paid in your name (or on your behalf) to the Local Government Unit.

5. Practical Steps for the Taxpayer

If you are preparing your ITR and wish to include the land as a fixed asset without the TCT in hand, follow these steps:

Secure the Notarized Deed of Sale: This is your primary shield.
Process the Tax Declaration: Visit the City or Municipal Assessor’s Office to have the Tax Declaration transferred to your name. This is often possible even while the TCT is still being processed at the Registry of Deeds.
Book the Entry: In your books of accounts, debit "Land" and credit "Cash" (or "Liability" if partially paid).
Disclosures: In the Notes to Financial Statements, it is good practice to disclose that the title is "currently under process for transfer."

Summary: The BIR and the SEC (for corporations) prioritize the right to control and the transfer of risks/rewards over the physical possession of the TCT. As long as the transaction is legitimate, documented by a Deed of Sale, and the relevant transfer taxes have been settled, you are not only allowed but required to report the asset accurately to reflect your true financial position.

Would you like me to draft a sample disclosure note for your financial statements regarding a property with a pending title transfer?