The transfer of land ownership between family members in the Philippines is a common but legally meticulous process. It is primarily governed by the National Internal Revenue Code (NIRC) and the Property Registration Decree (P.D. 1529).
Depending on whether the transfer is a gift, a sale, or an inheritance, the legal requirements and tax implications vary significantly.
1. Modes of Transfer
There are three primary legal vehicles used to transfer title to a family member:
A. Deed of Donation
This is used when the property is given out of "liberality" (as a gift) without any monetary consideration. It is common for parents transferring land to children.
- Tax: Donor’s Tax.
- Rate: A flat rate of 6% on the total value of the gift in excess of ₱250,000 (as per the TRAIN Law).
B. Deed of Absolute Sale
Even between family members, a sale can be executed. This is often done to simplify the tax process or if the family member is actually purchasing the land.
- Tax: Capital Gains Tax (CGT).
- Rate: A flat rate of 6% based on the Gross Selling Price or the Fair Market Value (Zonal Value), whichever is higher.
C. Extrajudicial Settlement of Estate (EJS)
This occurs when the registered owner has passed away and the heirs (family members) wish to partition and transfer the title to their names.
- Tax: Estate Tax.
- Rate: A flat rate of 6% on the value of the net estate.
2. The Step-by-Step Process
Step 1: Documentation and Notarization
The parties must execute the relevant deed (Donation or Sale). The document must be notarized, as a public instrument is required for the Registry of Deeds to recognize the transfer.
Step 2: Securing Tax Clearances (BIR)
You must go to the Revenue District Office (RDO) where the property is located to pay the following:
- Donor’s Tax / Capital Gains Tax: 6%.
- Documentary Stamp Tax (DST): 1.5% of the property value. Once paid, the BIR will issue a Certificate Authorizing Registration (CAR). This document is the "green light" for the transfer of ownership.
Step 3: Payment of Transfer Tax
Proceed to the City or Provincial Treasurer’s Office.
- Cost: Approximately 0.50% to 0.75% of the property value, depending on the local government unit's (LGU) ordinance.
- The Treasurer will issue a Transfer Tax Receipt and a Tax Clearance.
Step 4: Updating the Tax Declaration (Assessor’s Office)
Before the title is changed, the Assessor’s Office must issue a new Tax Declaration in the name of the new owner (or a certification for transfer).
Step 5: Registration at the Registry of Deeds
Submit the CAR, Tax Clearance, Notarized Deed, and the original Owner’s Duplicate Copy of the Title to the Registry of Deeds.
- Registration Fee: Follows a graduated table of fees but usually hovers around 0.25% of the property value.
- The Registry will then cancel the old title and issue a new Transfer Certificate of Title (TCT) in the family member's name.
3. Estimated Cost Summary
| Item | Rate | Basis |
|---|---|---|
| Capital Gains / Donor’s Tax | 6% | Zonal Value or Selling Price (whichever is higher) |
| Documentary Stamp Tax | 1.5% | Zonal Value or Selling Price |
| Transfer Tax | 0.5% - 0.75% | Zonal Value or Selling Price |
| Registration Fees | ~0.25% | Graduated scale based on value |
| Notarial Fees | 1% - 2% | Negotiable with the Notary Public |
Note: The total cost typically ranges between 9% to 11% of the property's value.
4. Crucial Considerations
The "Zonal Value" Rule
The Bureau of Internal Revenue (BIR) does not necessarily care what price you tell them you sold or donated the land for. They will always compute taxes based on the Zonal Value (determined by the BIR) or the Fair Market Value (determined by the Provincial/City Assessor), whichever is higher.
The 30-Day Rule
For a Deed of Sale, the Capital Gains Tax must be paid within 30 days from the date of notarization. For a Deed of Donation, the Donor’s Tax return must be filed within 30 days. Failure to do so results in heavy surcharges (25%) and annual interest (12% under TRAIN Law).
Conjugal Properties
If the land is conjugal (owned by a married couple), both spouses must sign the Deed. If one spouse has passed away, an Extrajudicial Settlement must be processed first before the property can be donated or sold to a child or relative.