(What you really pay when transferring real property, and who charges what)

This article provides general legal information in the Philippine context and is not legal advice. Rates and procedures can change through law, regulations, and local ordinances; always verify the current computation with the BIR, the local treasurer, and the Register of Deeds for your specific transaction.

1) First, Fix the Common Confusion: The Register of Deeds Does Not Levy “Transfer Tax”

In Philippine property transfers, people often say “Register of Deeds transfer tax,” but it’s actually a bundle of (a) national taxes, (b) local transfer tax, and (c) Register of Deeds (ROD) registration fees:

A. National taxes (paid to the BIR)

Usually include:

Capital Gains Tax (CGT) or Income Tax / Withholding Tax (depending on whether the property is a capital or ordinary asset)
Documentary Stamp Tax (DST)

B. Local transfer tax (paid to the LGU Treasurer)

Local Transfer Tax under the Local Government Code, imposed by provinces and cities (and Metro Manila LGUs under special arrangements)

C. Register of Deeds fees (paid at the ROD/LRA system)

Registration fees and related charges for recording the deed and issuing a new title (these are fees, not “tax rates”)

Practical rule: The ROD typically will not transfer/issue a new title unless you present proof that the required BIR taxes are settled (via the BIR’s authorizing certificate) and local transfer tax is paid, plus other clearances.

2) The “Big Three” Charges in a Typical Sale of Real Property

Most standard transfers (sale/absolute deed of sale) involve three core computations:

Capital Gains Tax (CGT) (or income tax/VAT regime if “ordinary asset”)
Documentary Stamp Tax (DST)
Local Transfer Tax

Then you pay ROD registration fees to record the transfer.

3) Capital Gains Tax (CGT): The 6% Rule (When It Applies)

A. The usual CGT rate for real property transfers

For many sales of real property in the Philippines treated as capital assets, the common rule is:

CGT = 6% of the tax base

B. What is the CGT tax base?

The tax base is typically the highest among:

the gross selling price/consideration in the deed, and
the fair market value (often tested against BIR zonal value and/or the assessor’s fair market value/market value reflected in local schedules, depending on BIR practice and requirements)

C. When CGT usually applies

CGT generally applies when the real property is a capital asset of the seller (common for individuals selling property not used in business).

D. When CGT does not apply (common scenarios)

If the property is an ordinary asset (e.g., held primarily for sale in the ordinary course of business, inventory of a real estate dealer/developer, or used in business in a manner treated as ordinary), then the tax treatment usually shifts to:

Income tax (regular income tax rules), and possibly
VAT (depending on circumstances), and
Creditable withholding tax obligations for the buyer (rates vary by classification and rules)

Because “capital vs ordinary asset” is a classification issue, it can dramatically change the tax cost.

E. Special CGT exemption concept: sale of principal residence (individuals)

Philippine tax rules have long recognized that a natural person’s sale of a principal residence may qualify for CGT exemption/relief under strict conditions (e.g., use of proceeds to acquire/build a new principal residence within a prescribed period, limitations on frequency, and documentary compliance). This is not automatic—paperwork and timing matter.

4) Documentary Stamp Tax (DST): The 1.5% Rule (Common for Deeds of Sale/Conveyance)

A. Typical DST rate for real property conveyance

For deeds of sale and similar conveyances of real property, a widely applied rule is:

DST = 1.5% of the tax base

B. DST tax base

Commonly the higher of:

the selling price/consideration, or
the fair market value (often aligned with the same valuation approach used for CGT computations)

C. DST applies even when the “price” is low or unusual

DST is not avoided by declaring an artificially low price; tax authorities test values against established benchmarks.

5) Local Transfer Tax (LGU): 0.5% vs 0.75% (Maximum Rates Framework)

Local transfer tax is imposed under the Local Government Code and collected by the Provincial/City Treasurer (or the relevant Metro Manila LGU treasurer).

A. Maximum rates (typical framework)

Provinces: up to 0.5%
Cities (and many Metro Manila LGUs): often up to 0.75% (cities generally have authority to impose higher rates than provinces under the LGC’s city taxing power framework)

Important: The exact rate depends on the local ordinance. Many places use 0.5% (provinces) and 0.75% (Metro Manila/cities), but you must confirm the rate where the property is located.

B. Local transfer tax base

Typically computed on the higher of:

selling price/consideration, or
fair market value used by the LGU/assessor’s office for transfer purposes

C. What transactions can trigger local transfer tax

It is not limited to “sale.” It generally applies to transfers such as:

sale
donation
barter/exchange
other modes of transferring ownership (often including transfers by succession, depending on the ordinance and documentation)

6) Register of Deeds (ROD) Registration Fees: Not a “Tax Rate,” but a Value-Based Fee Schedule

After paying BIR taxes and local transfer tax, you register the instrument (e.g., Deed of Sale) with the ROD to:

annotate the transaction,
cancel the old title and issue a new Transfer Certificate of Title (TCT) (or Condominium Certificate of Title, CCT) in the buyer’s name, and
update encumbrances/annotations.

A. How ROD fees are typically computed

ROD fees are generally:

value-based (based on consideration or property value used for registration purposes),
computed under an LRA-prescribed schedule, plus
fixed/administrative components (entry fees, certification fees, IT/system fees, annotation fees, etc., depending on the ROD’s collection structure)

Because the fee schedule is technical and subject to updated circulars and local implementation details, the safest approach is to request an official computation at the ROD cashier based on your instrument and declared/recognized value.

B. Why these fees matter

Even when taxes are fully paid, registration is what makes the transfer effective against third persons in the Torrens system context and is required to get a new title issued.

7) Other Charges That Often Appear in Real Property Transfers

A. Notarial fees

Deeds must be notarized. Notarial cost varies widely by area, property value, and complexity.

B. Assessor’s fees / tax declaration transfer

Separate from title transfer, you usually must transfer the Tax Declaration at the local assessor’s office (with its own requirements and minor fees).

C. Real Property Tax (RPT) clearance and arrears

LGUs commonly require:

proof that RPT is updated, and/or
a tax clearance before processing transfer tax or tax declaration changes.

D. If there is bank financing: mortgage-related taxes and fees

If the buyer takes a housing loan, additional instruments arise:

Real Estate Mortgage (REM)
Chattel mortgage (for some loan structures)
Loan documents that may be subject to DST under different schedules
ROD fees for mortgage registration and later mortgage cancellation

These can add substantial cost beyond sale-transfer taxes.

8) Donation and Inheritance Transfers: Different “Main Tax,” Same Local/ROD Steps

A. Donation (Deed of Donation)

Common structure:

Donor’s Tax: commonly 6% of the net gift (above the annual exemption threshold traditionally recognized for gifts), subject to deductions and documentary requirements
DST: may still apply to the conveyance instrument
Local Transfer Tax: often imposed by ordinance even for donation
ROD registration fees: required to issue title in the donee’s name

B. Inheritance / Estate transfers (Extrajudicial settlement or court settlement)

Common structure:

Estate Tax: commonly 6% of the net estate, after allowable deductions, upon settlement/transfer documentation
Potential DST on settlement/transfer instruments depending on the document used and BIR treatment
Local Transfer Tax: often collected for transfer by succession depending on ordinance and requirements
ROD registration fees: to transfer title to heirs (or to an adjudicated owner)

Estate transfers are documentation-heavy (proof of death, heirship, publication where required for extrajudicial settlement, etc.), and tax authorities require a complete paper trail before issuing the authorizing certificate for transfer.

9) The Tax Base Problem: “Selling Price” vs “Fair Market Value” vs “Zonal Value”

A major source of surprise costs is that taxes are frequently not computed on the “price you wrote” alone.

A. Three values often compared

Selling price/consideration stated in the deed
BIR zonal value (a BIR valuation benchmark per area/classification)
Assessor’s fair market value/market value used by the LGU

B. Common valuation principle in transfers

For many transfer taxes, the base is effectively the highest among relevant benchmarks. Under-declaring the selling price often does not reduce tax and can create delays, reassessments, or penalties.

10) Who Pays Which Tax? (Default Practice vs Legal Allocation)

There is a difference between:

who is legally liable for the tax, and
who actually pays by agreement.

Common market practice (often, but negotiable)

Seller pays CGT (when CGT applies)
Buyer pays DST, local transfer tax, and ROD fees But parties can agree otherwise, and contracts often specify allocations.

Warning: Some fees and taxes are required before the transfer can be registered; if one party fails to pay what they promised, the title transfer can stall.

11) Typical End-to-End Transfer Flow (Sale)

Notarize the Deed of Absolute Sale (or other conveyance document)
Pay BIR taxes (CGT/income tax regime + DST) and obtain the BIR’s authorizing certificate required for transfer
Pay local transfer tax at the LGU Treasurer and secure local receipts/clearance
Process tax declaration transfer at the local assessor (often requires RPT clearance)
Submit requirements to the Register of Deeds and pay registration fees
Receive the new title (TCT/CCT) in the buyer’s name

12) Quick Reference: Common Rates You Will Hear (with context)

Sale (capital asset scenario — the most commonly cited “transfer tax” package)

CGT: 6%
DST: 1.5%
Local Transfer Tax: commonly 0.5% (province) or 0.75% (many cities/Metro Manila), subject to ordinance
ROD registration fees: value-based fee schedule (not a tax rate), plus fixed charges

Donation / Estate (headline rates)

Donor’s Tax: commonly 6% (net gifts, subject to exemptions/deductions)
Estate Tax: commonly 6% (net estate, subject to deductions)
DST + Local Transfer Tax + ROD fees: often still part of the transfer pipeline depending on documents and ordinances

13) Illustrative Computation (Simple Example)

Assume a property is sold for ₱3,000,000, but the recognized fair market benchmark used for tax purposes is ₱3,500,000 (tax base = ₱3,500,000).

CGT (6%) = ₱3,500,000 × 0.06 = ₱210,000
DST (1.5%) = ₱3,500,000 × 0.015 = ₱52,500
Local Transfer Tax:
- at 0.5% = ₱3,500,000 × 0.005 = ₱17,500
- at 0.75% = ₱3,500,000 × 0.0075 = ₱26,250
ROD fees: computed under the ROD/LRA fee schedule based on the recognized value and the instrument(s) filed, plus fixed charges (varies by ROD and transaction details)

This example excludes notarial fees, assessor-related fees, RPT arrears, and any mortgage-related DST/registration fees if financed.

14) Key Takeaways

“Transfer tax” in practice is a package: BIR taxes + LGU transfer tax + ROD registration fees.
The most cited rates for a typical capital-asset sale are 6% CGT and 1.5% DST, plus 0.5% / 0.75% local transfer tax depending on LGU ordinance.
The ROD does not levy a “transfer tax rate”; it collects registration fees under an LRA schedule and requires proof that transfer-related taxes have been paid.
The tax base is often driven by the highest relevant valuation benchmark, not just the declared price.