Seller’s Death & Philippine Real-Property Sales
How death changes the deed of sale, ownership transfer, and the capital gains tax (CGT)
(Philippine law and BIR practice as of 1 June 2025) This material is for general information only and is not a substitute for formal legal advice.
1. Core statutes & regulations
| Area | Key Sources |
|---|---|
| Civil Code | Art. 1311 (contracts bind heirs); Art. 774–783 (succession); Art. 1106 (transmissibility of obligations). |
| Property registration | Land Registration Act (Act 496) & Property Registration Decree (PD 1529). |
| National Internal Revenue Code (NIRC) | §§24(D)(1) & 27(D)(5) (6 % CGT); §§84–97 (estate tax); §196 (Documentary Stamp Tax, “DST”). |
| Rules of Court | Rule 74 (extrajudicial settlement); Rule 87 (powers of executors/administrators). |
| BIR issuances | RR 12-2018, RR 26-2022, RMC 62-2022 and related eCAR circulars. |
2. Two pivotal moments
| Moment | Taxpayer on the BIR system | Controlling law | Practical effect |
|---|---|---|---|
| A. Deed notarized (date of execution) | Still the seller (their TIN) | Contract perfected; ownership transfers upon registration but obligation to pay price and CGT arise on execution | If seller is alive at this point, CGT is computed in their name even if they die the next day. |
| B. Date of death | A distinct “Estate of the Late ___” is created (new TIN) | Succession opens; property becomes estate asset. | From this point, only the executor/administrator—or all heirs acting jointly—can validly dispose of real property. |
3. Three common scenarios
| Scenario | Is the deed of sale valid? | Who signs subsequent documents? | Taxes payable |
|---|---|---|---|
| 1. Seller dies before the deed is signed/notarized | No; would be void for lack of capacity. | Heirs or court-appointed administrator must execute a new deed—often “Extrajudicial Settlement with Sale” under Rule 74. | a) Estate tax within 1 year of death (Form 1801). b) CGT (6 %) on the sale, filed in the estate’s name. c) DST (1.5 %) and local transfer taxes. |
| 2. Seller signs the deed, then dies before registration/payment of taxes | Yes; contract perfected. | a) BIR: heirs/admn. file CGT & DST returns, attach death certificate, but use the decedent’s TIN. b) Registry of Deeds: annotate death; present eCAR, tax clearances. |
CGT (6 %) computed on the higher of gross selling price (GSP) or zonal/FMV; payable out of the estate, deductible for estate-tax purposes. |
| 3. Deed fully paid, notarized, taxes filed, but title not yet transferred when seller dies | Sale is complete; only ministerial act of registration remains. | Heirs must still cooperate by: • Signing the BIR “Notice of Death” and SPA for follow-through; • Executing an Affidavit of Non-Tenancy or SPA if required by the Registry. |
No additional CGT; only usual registration fees. Estate tax excludes the property (already alienated), but the sales proceeds form part of the estate. |
4. Tax mechanics in depth
| Tax | Trigger & base | Who files/pays when seller has died | Tips |
|---|---|---|---|
| Estate Tax (NIRC §§84-97) | Transmission of estate; base is net estate (FMV at date of death less deductions). | Executor/administrator or heirs within 1 year. Needed before BIR issues any eCAR relating to estate assets. | File estate tax before or simultaneously with CGT on sale of estate asset to avoid double trips to BIR. |
| Capital Gains Tax (6 %) | Signed deed of absolute sale of real property classified as capital asset. Base: higher of GSP or zonal/assessed FMV. | • If deed pre-death → CGT in decedent’s TIN. • If deed post-death → CGT in “Estate of the Late ___” TIN. |
BIR allows one-time transaction (ONETT) filing: CGT + DST on same day. Keep proof for eCAR issuance. |
| DST (1.5 % of GSP or FMV) | Same triggering event as CGT. | Filed together with CGT return (Form 2000-OT). | Pay within 5 days of the end of the month following notarization to avoid penalties. |
| Estate’s Income Tax | Estates are separate taxpayers (Sec. 56 B, NIRC). | If sale produces gain, estate must file Annual ITR (Form 1701-A) for the calendar year, unless CGT is final and no other income. | Remember: 6 % CGT is final; no further regular income tax on that gain. |
5. Administrative check-list when the seller has died
Secure Death Certificate – PSA copy is annexed to all filings.
Apply for Estate TIN – BIR Form 1904 in the RDO where decedent resided.
Inventory Assets & Debts – Needed for estate-tax return; include appraisal report.
File Estate-Tax Return (BIR 1801) – Even if the only asset is the property being sold.
Prepare Extrajudicial Settlement (if intestate & uncontested) – Heirs execute + publish in a newspaper of general circulation once a week for 3 consecutive weeks.
Notarize Deed of Sale by Heirs/Estate – Attach SPA if any heir is abroad/minor (through guardian ad litem).
One-Time Transaction (ONETT) at BIR – Present covering docs, pay CGT & DST, secure eCAR(s):
- Two-eCAR route: (a) Decedent → Heirs; (b) Heirs → Buyer.
- Straight-to-Buyer eCAR: possible if heirs and buyer request consolidated transfer (fewer fees, but some RDOs deny).
Pay Local Transfer Taxes – LGU Treasurer: Transfer Tax (0.5 %–0.75 %) + updated Real-Property Tax (RPT).
Register with Registry of Deeds – Submit title, deed, tax clearances, eCAR, and annotated estate documents.
Secure New Tax Declaration – With City/Municipal Assessor in buyer’s name.
6. Doctrinal guideposts
Contracts survive the seller. Under Art. 1311, obligations in rem (like delivery of title) bind heirs except where the contract is “personal” to the obligor. A sale of land is not personal.
No conveyance until estate tax settled. Land Registration Authorities routinely refuse transfers unless an estate-tax eCAR is on record, following BIR-LRA Joint Circular No. 1-2023.
CGT is a transaction tax, not an estate tax. Even though it may be settled together with estate tax, CGT attaches to the act of sale, not to death. The estate merely steps into the decedent’s shoes as taxpayer.
Heirs’ liability is pro-rata and secondary. Art. 1311 & Art. 1101: heirs answer only up to the value of what they inherit. In practice, BIR collects from sale proceeds before release, so buyer rarely suffers.
7. Practical safeguards for buyers
- Require proof of seller’s life or estate authority on signing (valid IDs dated within 3 months, or SPA from estate executor).
- Ask for certified true copy of title issued no earlier than 2 weeks before signing; check for annotations (lis pendens, adverse claims, heirs’ affidavit).
- Insist on a single-day ONETT filing so taxes are paid before any party changes its mind.
- Escrow arrangement if paying in full; release balance only upon BIR receipt & eCAR issuance.
- If seller is elderly or ill, verify heir consent ahead of time; consider provisional Option to Purchase or Contract to Sell to lock in rights without immediate transfer.
8. Common pitfalls
| Pitfall | Consequence | Remedy |
|---|---|---|
| Heirs sign deed but skip estate-tax return | eCAR denied; transfer stalls; 25 % surcharge + 12 % interest p.a. | File estate tax with late-payment surcharges; apply for Compromise Penalties if first offense. |
| Deed back-dated to show seller “alive” | Void for simulation/forgery; criminal liability for falsification; buyer may lose consideration. | Ratify a new deed through estate; pay correct taxes. |
| Minor heir not represented | Deed voidable; buyer can be forced to reconvey. | Petition for guardianship; execute deed anew after court approval. |
| Estate sells within 2 years of decedent’s death but uses old FMV schedule | BIR will recompute using FMV at death OR at sale (whichever higher) under Sec. 98, NIRC. | Always attach sworn zonal valuation or appraisal as of death and as of sale. |
9. Recent reform highlights
- TRAIN Law (RA 10963, 2018) – Unified estate-tax rate at 6 % and extended installment payment; made estate settlement cheaper and faster.
- RR 26-2022 – Digitized eCAR; estates may now apply online in pilot RDOs.
- Estate Tax Amnesty (RA 11569, extended to June 14 2025) – Does not cover CGT; but settling backlogged estate taxes first can unlock blocked transfers.
10. Key take-aways
- Date of death divides the tax world: before death, the individual pays CGT; after death, the estate does—but the tax itself never disappears.
- No estate tax, no eCAR; no eCAR, no title transfer.
- Contracts live on: a properly notarized deed remains binding even if the seller dies, but you must coordinate with the heirs for compliance.
- For a sale after death, think “settle estate first, then sell”—trying to shortcut usually leads to higher surcharges and double paperwork.
Disclaimer
This article summarizes Philippine rules current to 1 June 2025. While drawn from statutes, regulations, and administrative practice, it omits nuances such as agrarian-reform restrictions, ancestral land rules, and corporate sellers. Always confirm with competent counsel and the revenue district office handling the property.