Pay Real Property Tax Before Extra-Judicial Settlement Completion in the Philippines
A practitioner-oriented guide (updated to June 2025)
1. Why this topic matters
An extra-judicial settlement (EJS) is the most common way Filipino heirs transfer a decedent’s real‐estate when:
- The decedent left no will, or left a will but it is not probated; †and
- All heirs are of age (or duly represented) and in full agreement.
Even where all of those conditions are present, an EJS will stall unless every real-property tax (RPT) due on the affected parcels is fully paid. Treasurers, the Bureau of Internal Revenue (BIR) and the Register of Deeds (RD) all cross-check RPT. Neglecting it delays the Certificate Authorizing Registration (CAR), blocks issuance of new Transfer Certificates of Title (TCTs) and exposes heirs to surcharges, interest, and even auction of the land by the local government unit (LGU).
2. Statutory bases you must know
| Legal source | Key sections | Relevance to RPT before EJS |
|---|---|---|
| Local Government Code (LGC), R.A. 7160 | §§198–283; esp. §258 (interest), §260 (levy), §263 (auction sale) | Imposes the tax, sets penalties, empowers LGU to sell property for unpaid RPT |
| National Internal Revenue Code (NIRC), as amended | §§84–97 (Estate tax) | BIR will not issue a CAR unless it sees an RPT clearance for each parcel |
| Civil Code (Arts. 777-783); Rules of Court, Rule 74 | Art. 774 et seq.; Rule 74 §1 | Authorizes extra-judicial settlement by heirs |
| BIR Revenue Regulations & Memoranda | Current: RR 12-2022 (Estate tax implementing rules); RMO 15-2021 (checklists) | List RPT clearance as a documentary requirement |
| Local ordinances / Provincial revenue codes | Vary by LGU | Often grant discounts for early, advance, or lump-sum RPT payment |
(Statutes cited are in force as of 11 June 2025.)
3. How real-property tax meshes with the EJS workflow
graph LR
A[Death of owner] --> B[Heirs agree to use EJS]
B --> C[Gather documents]
C --> D[Pay/Update all RPT]
D --> E[Pay Estate Tax<br>(File BIR Form 1801)]
E --> F[Receive CAR]
F --> G[Register EJS & CAR<br>with RD]
G --> H[New TCTs issued<br>in heirs’ names]Take-away: RPT payment is a gating item that must be completed before BIR processing.
4. Practical step-by-step
| Step | What you do | Why it matters | Hints |
|---|---|---|---|
| 1 • Get latest Statement of Account | Go to the City/Municipal Treasurer’s Office (CTO/MTO) or the Provincial Treasurer for un-subdivided provincial lots. | Confirms all tax years owed; many titles still carry archaic tax declarations. | Check if the tax declaration number in the CTO matches the TCT/OCT. |
| 2 • Compute and pay | Settle principal tax + up to 2 % interest per month (LGC §258) capped at 36 months. | Clears the ledger; generates an Official Receipt (OR). | If the decedent died mid-year, heirs can pay pro-rated RPT for the current year to avoid another clearance later. |
| 3 • Secure RPT Clearance/Tax Clearance Certificate | Usually issued by the LGU assessor or treasurer once the OR is presented. | This document will be stapled to the BIR estate-tax docket. | Some LGUs take 1–3 days; factor this in. |
| 4 • Continue with estate-tax filing | File BIR Form 1801 + EJS deed, OR, RPT clearance, TCT/OCT, zonal valuation, etc. | CAR cannot move without the RPT clearance ticked off. | The current estate-tax rate is a flat 6 % of net estate. |
| 5 • Register EJS with RD | Present notarized EJS deed + CAR + RPT clearance. Pay RD fees. | RD will annotate “Cancelled” on old title and issue new TCTs. | Under the Property Registration Decree, RD may still refuse if there is an LGU annotation of levy due to older RPT delinquencies—double-check. |
5. Timing insights
| Deadline | Legal basis | Notes |
|---|---|---|
| Pay estate tax – within one year from death (extendable for cause) | NIRC §90 (A) (as amended by TRAIN Law) | Interest at 6 % per annum on unpaid estate tax. |
| Pay RPT each year – on/before 31 January; quarterly installments allowed | LGC §250 | Many LGUs give up to 20 % discount if paid in January. |
| RPT interest – 2 % per month capped at 36 months | LGC §258 | After 36 months the interest stops but the levy process starts. |
If the decedent died years ago, make sure to pay: (i) all back RPT plus interest up to the last three years only, and (ii) the current year in full to satisfy most treasurers.
6. Consequences of skipping RPT before completing EJS
| Risk | Mechanism |
|---|---|
| No CAR | BIR checklist requires RPT clearance; docket will be tagged “incomplete.” |
| Register of Deeds refusal | RD will not register the deed or issue new titles without CAR and RPT clearance. |
| Administrative levy and auction | LGU may issue a warrant of levy after one year of delinquency (LGC §260) and auction the property after public notice (LGC §263). |
| Civil disputes among heirs | Heirs who advance RPT can later sue for reimbursement with legal interest. |
| Lost discount opportunities | In LGUs granting early-bird rebates, heirs forfeit 10 – 20 % savings if they wait until after RPT delinquency. |
7. Frequently asked questions
Q 1 – Can we pay estate tax first and worry about RPT later?
Technically, BIR will not accept the estate-tax return without an RPT clearance. In practice, you must at least present proof of filing of updated RPT or a provisional RPT ledger showing “balance ₱0.00.”
Q 2 – The land is agricultural but idle; do we still pay the idle-land tax?
Idle-land tax is separate from RPT (§236, LGC). LGUs rarely withhold an RPT clearance on that ground, but they can. Check the local revenue code.
Q 3 – The property is subject to a levy from years ago—what now?
Pay redemption price (tax, interest, costs of sale) within one year from auction to redeem. If the redemption period lapsed and a final bill of sale issued, the heirs can no longer include the parcel in the EJS; it already belongs to the purchaser.
Q 4 – The heirs live abroad; can a representative pay RPT?
Yes. Execute a Special Power of Attorney (SPA) naming an attorney-in-fact; attach photocopies of heirs’ passports or IDs. Treasurers routinely honor SPAs.
8. Tips for practitioners and heirs
- Bundle payments. If the decedent owned multiple parcels in one LGU, request a consolidated SOA; you’ll save on bank charges if paying through electronic collection partners.
- Ask for e-receipts. Many LGUs already issue QR-coded e-ORs—these speed up BIR validation.
- Leverage early-bird discounts. Even if the estate tax process will take months, pay RPT in January to lock in discounts, then secure clearance later.
- Retain certified copies. BIR sometimes misfiles originals. Keep at least two CTCs of the RPT clearance and OR.
- Synchronize with assessor’s office. If improvements (buildings) were unassessed, update the tax declaration before paying RPT; otherwise BIR may recompute estate values causing CAR delays.
9. Key take-aways
- Paying real-property tax before completing an extra-judicial settlement is non-negotiable in the Philippines.
- The legal chain—LGU treasurer → BIR CAR → Register of Deeds—locks you out if any RPT is outstanding.
- Clear the tax, secure the clearance, and everything else flows.
Need a checklist or template? Feel free to ask—happy to draft one tailored to your LGU.