Seller Taxes and Fees in a Philippine Real-Estate Sale
(Everything a property seller needs to know as of 2025)
Scope. This article covers every national and local tax, fee, and incidental cost that—under current Philippine law and mainstream practice—may arise on the seller’s side when transferring ownership of real property (land, condominium unit, building, or mixed development). It assumes a standard private sale between unrelated parties, not a donation, exchange, or foreclosure. Statutes cited are the National Internal Revenue Code (NIRC, as amended), the Local Government Code (LGC), and later laws such as the TRAIN Law (RA 10963) and CREATE Act (RA 11534). Rates herein are those in force on 27 June 2025; always check for later issuances of the Bureau of Internal Revenue (BIR) or your local government unit (LGU).
1. Capital Gains Tax (CGT)
| Key points | Details |
|---|---|
| Legal basis | NIRC §24(D) & §27(D), as amended |
| Who pays | Seller of a capital asset (property not used in trade/business and not held for sale by a dealer) |
| Rate | 6 % of the higher of (a) gross selling price (GSP) or (b) fair market value (FMV) as per BIR zonal schedule or LGU assessor’s value |
| Deadline / form | Pay within 30 days of notarization via BIR Form 1706 (one return per deed) |
| Nature | Final tax—no further income-tax reporting on the gain |
| Common exemptions | • Principal-residence swap: once every 10 yrs; full proceeds must be spent on a new home within 18 mo (NIRC §24(D)(2)). • Sale to the government or its agencies (when subject to expropriation); option to choose 6 % CGT or graduated/normal income tax. |
Tip: The BIR will issue a Certificate Authorizing Registration (CAR) only after CGT (or its substitute tax) and all related fees are paid.
1.1. Ordinary vs. Capital Asset
If the property is an ordinary asset (e.g., inventory of a real-estate developer or property used in business), CGT does not apply. Instead:
- Creditable Withholding Tax (CWT) is withheld by the buyer at source (see §2), and
- The seller must declare the gain in its annual income-tax return (individuals: BIR Form 1701/1701A; corporations: 1702-RT/IC/EX) and pay the normal graduated or corporate rate.
2. Creditable Withholding Tax (CWT) on Sale of Ordinary Assets
| Seller type | CWT rate (withheld by buyer) |
|---|---|
| Individual not habitually engaged in real-estate business | 1.5 % of GSP or FMV, whichever is higher |
| Individual habitually engaged in real-estate business | Graduated: 3 %–6 % (varies with selling price bracket) |
| Corporation (non-developer) | 1.5 % |
| Corporation (developer) | 3 %–6 % bracketed |
Form: BIR Form 1606 (remittance) due on the 10th day of the month following the transaction; accompanied by BIR Form 2307 as the seller’s credit.
3. Value-Added Tax (VAT)
| Criterion | Applies if any is true |
|---|---|
| Seller is VAT-registered or required to be by turnover | Yes—12 % on the net selling price |
| Type of property | Non-residential property or residential lot/house-and-lot above the TRAIN thresholds (₱3,600,000 for lot only; ₱15,000,000 for house-and-lot/condo in 2025, subject to inflation adjustment) |
| Exemptions | Sale of residential dwellings below thresholds; sale by a non-VAT individual of a capital asset |
VAT is on top of CGT or CWT—because they tax different things (capital gain vs. value added).
4. Documentary Stamp Tax (DST)
| Legal basis | NIRC §196, TRAIN Law changes |
|---|---|
| Rate | ₱15 for every ₱1,000 (1.5 %) of the higher of GSP or FMV |
| Who customarily pays | Traditionally the seller, though the NIRC makes both parties liable. Share may be allocated by contract. |
| Form / deadline | BIR Form 2000-OT (one-time transaction); pay within 5 days after the month the deed is signed |
5. Local Transfer Tax (LTT)
| Authority | Local Government Code §135 (Provinces), §151 (Cities) |
|---|---|
| Rate cap | Provinces: up to 0.5 % of GSP or FMV (whichever higher). Cities & municipalities in Metro Manila: up to 0.75 %. (Check local ordinance; many charge the maximum.) |
| Deadline | Varies; typically 60 days from notarization |
| Where to pay | City/Municipal Treasurer’s Office where the property is located |
6. Registration Fees (Land Registration Authority / Register of Deeds)
- Basic registration fee – Graduated schedule (approx. 0.25 % of value for mid-range properties).
- More than one parcel or annotation – additional marginal fees.
- IT fee & entry fee – nominal.
Total LRA fees usually range from ₱8,000 to ₱30,000 for typical urban residential transactions, higher for large-value or multiple titles.
7. Real Property Tax (RPT) & Special Education Fund (SEF)
Although not imposed by the sale itself, all delinquent RPT (and penalties) must be settled before the Register of Deeds will process the transfer. Sellers often pay the “current year + any arrears” to secure a Tax Clearance Certificate.
8. Incidental & Professional Fees
| Fee | Typical Philippine practice (negotiable) |
|---|---|
| Notarial fee on Deed of Absolute Sale | 1 %–2 % of price for high-value, or fixed scale (e.g., ₱1,000–₱10,000) |
| Real-estate broker’s commission | 3 %–5 % of gross price, often shouldered by seller |
| Lawyer’s / consultant’s drafting fee | If separate from notarial fee |
| Association / condominium clearance | Issuance fee & unpaid dues |
| BIR certification & documentary fees | ₱100–₱200 per certificate |
| Certification from LGU (zoning, tax clearances) | Minimal (₱200–₱1,000 each) |
9. Procedural Roadmap for Sellers
Secure due-diligence docs
- Certified true copy of Title (CTC)
- Latest Real Property Tax receipt & tax clearance
- Certificate of No Improvement (if land only) or zoning certificate (as required)
Draft & notarize the Deed of Absolute Sale (DOAS).
Pay national taxes at BIR (CGT/CWT, DST, VAT if applicable) → Receive Electronic CAR.
Pay Local Transfer Tax at Treasurer’s Office → Receive tax payment confirmation.
Present CAR + LTT receipt + original title & DOAS to Register of Deeds → Pay registration fees → New owner’s title is issued.
Turn over possession and prorate utilities/association dues as agreed in the contract.
10. Penalties for Late Payment
| Tax | Surcharge | Interest |
|---|---|---|
| CGT / DST / VAT / CWT | 25 % of basic tax (or 50 % for willful neglect) | 12 % p.a. on unpaid amount (interest rate subject to change by BIR) |
| Local Transfer Tax | Up to 25 % surcharge + 2 % per month interest (max 36 months) |
Missing the 30-day CGT window is the most common trap; it halts CAR issuance and cascades to registration delays.
11. Special Situations
11.1. Sale of Principal Residence
- 6 % CGT exemption requires filing BIR Form 2119 (intent to avail) within 30 days of sale and BIR Form 2120 (proof of full reinvestment) within 18 months.
11.2. Sale of Inherited Property
- Estate Tax (flat 6 % of net estate) must be paid before heirs can sell; otherwise the estate remains the “seller” and titles cannot transfer.
11.3. Exchange or Dacion en Pago
- Treated as a sale—same taxes apply, but valuation may differ (usually FMV).
11.4. Seller is a Non-Resident
- CGT still due.
Additional: 10 % final withholding on proceeds if paid to a non-resident alien individual. Seek tax-treaty relief if available.
11.5. Corporate reorganizations
- Certain transfers may qualify for tax-free exchange under NIRC §40(C)(2). Must secure prior BIR ruling.
12. Recordkeeping and Audit Risk
- Retain official receipts, CAR, stamped DOAS, tax clearance, and new title for at least 10 years (BIR’s prescriptive period).
- The BIR routinely audits large real-estate sales to test reported value vs. zonal/FMVs. Undervaluation can trigger deficiency CGT/DST/VAT plus penalties.
13. Summary Checklist (Seller)
- ☐ Classify the asset (capital vs. ordinary) & VAT status.
- ☐ Compute and earmark: 6 % CGT or CWT + income tax, 1.5 % DST, 0.5 %–0.75 % LTT, possible 12 % VAT, RPT arrears, registration, notarial, broker’s commission.
- ☐ Prepare BIR forms 1706, 1606 or VAT invoice, and 2000-OT.
- ☐ Set reminders for the 30-day and 5-day BIR deadlines, and the 60-day LTT deadline.
- ☐ Gather clearances (RPT, HOA, zoning).
- ☐ File, pay, obtain CAR, then register.
- ☐ Keep all proofs of payment for future audits.
14. Final Notes & Best Practices
Always cross-check zonal values—they change per Revenue District Office and may be higher than your contract price.
Negotiate tax allocation early; while custom assigns most taxes to the seller, this can be modified contractually.
Avoid post-dated payments in the deed; BIR treats the taxable event at notarization regardless of when you actually get paid.
Use official bank instruments (manager’s checks, PESONet) to document proceeds for anti-money-laundering compliance.
Consult a tax lawyer or CPA if:
- the seller is a corporation or trust,
- the property has mixed uses,
- the transaction is part of an estate settlement, or
- any exemption or VAT threshold is borderline.
Disclaimer
This article is for general information only and does not constitute legal advice. Tax rules change through new legislation, BIR revenue regulations, LGU ordinances, and court decisions. Always verify current rates and procedural requirements, or seek professional counsel, before closing a Philippine real-estate sale.