Transferring ownership of real property from a parent to a child is a common practice in the Philippines, often driven by estate planning or a desire to provide for a child's future. While the sentiment is personal, the process is strictly governed by the National Internal Revenue Code (NIRC) and the regulations of the Land Registration Authority (LRA).
In the Philippines, this transfer typically takes one of two legal forms: Donation (Inter Vivos) or Sale.
1. Choosing the Mode of Transfer
Before starting the paperwork, you must decide which legal vehicle to use. Each has different tax implications and legal requirements.
A. Deed of Donation (Transfer by Gift)
This is the most common method. The parent (Donor) voluntarily transfers the property to the child (Donee) out of "love and affection."
- Tax: Subject to a flat 6% Donor’s Tax based on the zonal value or the fair market value, whichever is higher.
- Legal Note: Under the Philippine Civil Code, a donation must be accepted by the child in the same public instrument or a separate one to be valid.
B. Deed of Absolute Sale (Transfer by Purchase)
Even if no money actually changes hands, some families opt for a simulated sale.
- Tax: Subject to 6% Capital Gains Tax (CGT) and 1.5% Documentary Stamp Tax (DST).
- Risk: If the Bureau of Internal Revenue (BIR) determines the price was grossy inadequate or the "sale" was intended to circumvent donor's tax or inheritance laws, it may be contested.
2. The Step-by-Step Procedure
The process involves multiple government agencies and can take several months to complete.
Step 1: Preparation and Notarization
The parties must execute either a Deed of Donation or a Deed of Absolute Sale. This document must be notarized. Notarization converts the private document into a public instrument, which is a requirement for registration.
Step 2: Securing Tax Clearances (BIR)
You must head to the Revenue District Office (RDO) that has jurisdiction over the property's location.
- Requirements:
- Original and photocopies of the Deed.
- Certified True Copy of the Original/Transfer Certificate of Title (OCT/TCT).
- Certified True Copy of the Tax Declaration (Land and Improvement).
- Tax ID Numbers (TIN) of both parent and child.
- Output: Once taxes (Donor’s Tax or CGT/DST) are paid, the BIR will issue a Certificate Authorizing Registration (CAR). This is the most critical document; without it, the Registry of Deeds cannot transfer the title.
Step 3: Payment of Local Transfer Tax (City/Provincial Treasurer)
After obtaining the CAR, go to the Treasurer’s Office of the Local Government Unit (LGU) where the property is located.
- You must pay the Transfer Tax (usually 0.50% to 0.75% of the property value).
- Ensure that the Real Property Tax (Amilyar) is paid up to date. You will need a Tax Clearance from this office.
Step 4: Registration of Transfer (Registry of Deeds)
Once you have the CAR and the Local Tax Clearance, submit the following to the Registry of Deeds (RD):
- Deed of Donation/Sale.
- The Owner’s Duplicate Copy of the Title.
- The CAR from the BIR.
- The Tax Clearance from the LGU.
- Receipts of all tax payments. The RD will cancel the old title in the parent's name and issue a new Transfer Certificate of Title (TCT) in the child's name.
Step 5: Updating the Tax Declaration (Assessor’s Office)
The final step is to bring the new TCT to the Municipal or City Assessor’s Office to request a new Tax Declaration. This ensures that the property taxes will henceforth be billed to the child.
3. Essential Documentary Checklist
| Document | Issuing Agency |
|---|---|
| Deed of Donation/Sale | Notary Public |
| Certificate Authorizing Registration (CAR) | Bureau of Internal Revenue (BIR) |
| Tax Clearance | City/Provincial Treasurer's Office |
| Certified True Copy of Title | Registry of Deeds |
| New Tax Declaration | Assessor’s Office |
4. Important Legal Considerations
- Legitime and Successional Rights: Under Philippine law, parents cannot easily disinherit other "compulsory heirs." If a parent donates all their land to only one child, the other siblings may contest the donation later if it impairs their legitime (the portion of the estate reserved for them by law).
- The "Double Sale" Trap: Always ensure the Owner’s Duplicate Copy is in your possession. If a title is lost, a court process for Reconstitution of Title must occur before any transfer can proceed.
- Conjugal Property: If the land was acquired during the marriage of the parents, both parents must sign the Deed of Donation or Sale, even if only one name appears on the title.