Penalties and Taxes for a Deed of Sale Worth ₱350,000 (Philippine Context)

This guide explains every major tax, fee, deadline, and penalty involved when a Philippine real property is sold for ₱350,000. Laws and local rates can change, and LGUs (cities/municipalities) set some of their own charges—always verify with your BIR RDO, City/Provincial Treasurer, and Registry of Deeds for the property’s location. This is general information, not legal advice.

1) First principles: what actually gets taxed?

What transfer? A Deed of Absolute Sale (land, house & lot, condo, parking slot) triggers national and local taxes.
Who pays by default (customary practice):
- Seller: Capital Gains Tax (CGT) or income tax/CWT (if the property is an ordinary asset), plus any VAT if applicable.
- Buyer: Documentary Stamp Tax (DST), Local Transfer Tax, Registry of Deeds fees, and usually notarial and misc. fees.
Parties can agree otherwise, but BIR/LGU won’t release the title unless all taxes are paid.
Tax base (“whichever is higher” rule): Most taxes use the higher of:
1. the contract price (stated in the deed),
2. the BIR zonal value, or
3. the Assessor’s fair market value (FMV). If a mortgage is assumed, add the assumed mortgage to the contract price.
For our examples, we’ll show numbers when the tax base is ₱350,000 and when the zonal/FMV is higher.

2) National taxes

A) Capital Gains Tax (CGT) – 6%

When it applies: Sale of real property classified as a capital asset (typically by an individual or a corporation not in real-estate business).
Rate & base: 6% of the higher of contract price, zonal value, or Assessor’s FMV.
Deadline: Within 30 days from the date of notarization of the deed (date of sale).
Form & output: File BIR Form 1706; after BIR review and payment of all taxes (including DST), BIR issues the eCAR (electronic Certificate Authorizing Registration).

Special CGT notes

Principal residence exemption: A seller may avoid CGT if the entire proceeds are used to acquire/build a new principal residence within 18 months, subject to strict documentary compliance and the “once every 10 years” rule. DST and local taxes still apply.
Sale to the government: Sellers of capital assets to government may opt for CGT or normal income tax (whichever is lower), subject to rules.
Installment sales: For capital assets, the full 6% CGT is generally due upfront (on the whole base), even if the price will be paid in installments.

B) Income Tax & Creditable Withholding (CWT) – if the property is an ordinary asset

When it applies: Property held by real estate dealers/developers, or used in business (ordinary asset).
Instead of CGT, the seller reports regular income tax on net income; the buyer withholds CWT (rates historically vary by seller type and property—commonly around 1.5% / 3% / 5% of the “whichever is higher” base). File BIR Form 1606 for the one-time CWT.
VAT? See below.

C) VAT – only in limited cases

VAT (12%) can apply to the sale of ordinary assets by a VAT-registered seller (e.g., developers).
Many residential sales under the VAT-exempt threshold are VAT-exempt; a ₱350,000 sale is typically far below the threshold. (Thresholds are periodically adjusted; confirm the current values.)
Capital assets are not subject to VAT on sale.

D) Documentary Stamp Tax (DST) – ≈ 1.5%

When it applies: On every deed of sale of real property.
Rate & base: ₱15 for every ₱1,000 (≈ 1.5%) of the higher of contract price, zonal value, or Assessor’s FMV.
Deadline: On or before the 5th day following the end of the month in which the deed was notarized.
Form: BIR Form 2000-OT (one-time DST return).

3) Local taxes & fees

A) Local Transfer Tax (LGU)

When it applies: Transfer of real property ownership, collected by the City or Provincial Treasurer.
Rate: Commonly up to 0.5% of the base in provinces, and up to 0.75% in cities & Metro Manila. (Exact rate depends on the LGU.)
Base: Usually the same “whichever is higher” base.
Deadline: Often within 60 days from notarization (LGU-specific).

B) Registry of Deeds (LRA) fees

What: Registration fee (per LRA fee schedule based on value), entry fee, IT fees, annotation fees, etc.
Range for ₱350,000 base: Typically a few thousand pesos (varies by registry, pages/annotations).

C) Real Property Tax (RPT) arrears (if any)

Requirement: The property’s RPT must be current (present official receipts or tax clearance).
Interest if delinquent: 2% per month, capped at 36 months (max 72%). Penalties/surcharges may also apply per LGU.

D) Other typical costs

Notarial fee: Market-based; can be a flat fee or a percentage. Expect ₱1,000+; complex deals can be higher.
Assessor certifications: e.g., Tax Declaration, Certificate of No Improvement (if raw land), Zoning or Tax Clearance fees (nominal).
CENRO/Barangay clearances in some LGUs, if required.

4) Deadlines & penalties (national and local)

BIR (CGT, DST, CWT)

Late filing/payment surcharge: 25% of the basic tax (or 50% in cases of willful neglect/false return).
Interest: Double the legal interest rate set by the BSP (commonly ≈12% per annum, computed daily) on any unpaid tax from due date until fully paid.
Compromise penalties: May be assessed under BIR’s published matrix, depending on gravity/amount.

LGU (Transfer Tax & RPT)

Surcharge: LGUs may impose up to 25% surcharge for late local taxes.
Interest: 2% per month, up to 36 months (maximum 72%), for delinquent local taxes including RPT.
Practical effect: Late payments delay the eCAR (BIR) and title transfer (Registry), risking additional costs and even changes in local valuation.

5) Step-by-step process (typical)

Check the tax base: Get BIR zonal value and Assessor’s FMV; compare with contract price.
Ensure RPT is current: Secure RPT receipts/tax clearance.
Prepare documents:
- Notarized Deed of Absolute Sale
- TINs of both parties (secure one if none)
- IDs, Tax Declaration(s) for land/improvements, latest RPT receipts, Lot plan/condo cert. of project completion (if applicable), SPA/board resolution (if represented), and other BIR checklist items.
File and pay BIR taxes:
- CGT (Form 1706) within 30 days;
- DST (Form 2000-OT) by 5th day after the month of notarization;
- CWT (Form 1606) if ordinary asset.
Secure the eCAR from BIR.
Pay LGU Transfer Tax (usually within 60 days).
Register with the Registry of Deeds: Submit eCAR, Owner’s Duplicate Title, annotated documents, official receipts, IDs, and pay registration fees.
Update Tax Declaration at the Assessor to the buyer’s name.

6) Worked examples (for a ₱350,000 sale)

Assumptions for illustration only: No RPT arrears, capital asset (so CGT applies), no VAT, and the property is in a city that uses a 0.75% transfer tax. Replace the base if zonal/FMV is higher.

Scenario A — Tax base = ₱350,000 (the deed price is the highest value)

CGT (6%): 0.06 × 350,000 = ₱21,000
DST (~1.5%): 0.015 × 350,000 = ₱5,250
Local Transfer Tax (0.75%): 0.0075 × 350,000 = ₱2,625
Registry fees: commonly ₱X,XXX (varies; budget a few thousand)
Notarial & misc.: market-based

Indicative total of major taxes (ex-registry/notarial): ₱28,875

Scenario B — Zonal/FMV is higher, say ₱500,000

CGT (6%): 0.06 × 500,000 = ₱30,000
DST (~1.5%): 0.015 × 500,000 = ₱7,500
Local Transfer Tax (0.75%): 0.0075 × 500,000 = ₱3,750
Registry/notarial: as above

Indicative total of major taxes (ex-registry/notarial): ₱41,250

If the property is an ordinary asset (developer/in-business seller), CGT does not apply. Instead, the buyer withholds CWT (rate depends on seller/property) and the seller pays income tax on profits; VAT may apply depending on seller status and thresholds (a ₱350,000 sale is typically VAT-exempt for residential property).

7) Red flags & edge cases

Undervaluation / “deemed gift”: If you sell far below FMV, the difference may be treated as a donation (subject to donor’s tax, generally 6% on net gifts above the annual exemption).
Co-owned properties: All co-owners must sign; taxes follow the combined base, but parties’ income tax outcomes may differ.
With improvements: Land and building may have separate FMVs; BIR can tax using the sum of higher-of values for each component.
Assumed mortgages: Any assumed loan is part of the tax base.
Nonresident sellers: Still taxable if the property is in the Philippines; timelines and procedures can require special handling (e.g., by authorized representative).
Foreign currency price: Convert to PHP for tax returns using BIR rules.
Lost title or liens: Expect annotations/clearances and extra steps (and time) before registration.

8) Quick checklist (buyer & seller)

Buyer

Verify TIN, IDs, and seller’s authority to sell.
Budget for: DST, LGU transfer tax, registry fees, notarial, and incidentals.
Ensure RPT is current and obtain eCAR before lodging with the Registry.
Remember the “whichever is higher” rule could increase your taxes if zonal/FMV exceeds ₱350,000.

Seller

Determine whether the asset is capital (CGT) or ordinary (income tax/CWT, possible VAT).
File CGT within 30 days (if capital asset) to avoid 25% surcharge + interest.
If claiming principal residence CGT exemption, comply with notice and reinvestment rules.
Keep all receipts; eCAR won’t issue without complete payments.

9) FAQ

Q: Can we agree that the buyer pays everything? Yes—contractually, but BIR/LGU will simply require that all taxes are settled, regardless of who pays.

Q: Do we need TINs? Yes, both parties must have TINs to file and process taxes and obtain an eCAR.

Q: How long does title transfer take? Timelines vary by completeness, BIR/LGU load, and Registry queues. Delays are common if any tax is late or incomplete.

10) Bottom line for a ₱350,000 deal

Expect CGT at 6% and DST at ~1.5%, both on the highest value among deed price, zonal value, and Assessor’s FMV; add 0.5%–0.75% for LGU transfer tax, plus registry and notarial costs.
Missed deadlines trigger 25% surcharge (BIR), daily interest (~12% p.a.), and local surcharges/2% monthly interest (capped at 36 months)—small bases can still produce meaningful penalties over time.
Verify current LGU rates, VAT/CWT applicability, and BIR requirements before signing and notarizing the deed.