In the Philippine real estate market, the "Pasalo" scheme—legally known as a Deed of Sale with Assumption of Mortgage—is a common transaction where a buyer purchases a property with an existing mortgage. The buyer pays the seller an agreed-upon "equity" or "down payment" and takes over the remaining monthly amortizations with the financing institution (e.g., Pag-IBIG, a commercial bank, or an in-house developer).
While financially attractive, this transaction involves a specific set of taxes and fees mandated by the Bureau of Internal Revenue (BIR) and the Land Registration Authority (LRA).
1. Capital Gains Tax (CGT)
The primary tax on the sale of real property classified as a capital asset is the Capital Gains Tax.
- Rate: 6% of the Gross Selling Price or the Current Fair Market Value (Zonal Value), whichever is higher.
- Basis in "Pasalo": In an assumption of mortgage, the "Selling Price" for CGT purposes is the total value of the property (the cash paid to the seller plus the outstanding mortgage balance being assumed).
- Responsibility: Traditionally, the Seller pays the CGT, though parties may contractually agree otherwise.
- Deadline: Must be filed and paid within 30 days from the date of notarization of the Deed of Sale.
2. Documentary Stamp Tax (DST)
The DST is an excise tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale, or transfer of an obligation, right, or property.
- Rate: 1.5% of the Gross Selling Price or the Zonal Value, whichever is higher.
- Responsibility: Usually borne by the Buyer.
- Deadline: Must be filed and paid by the 5th day of the month following the date of notarization.
3. Transfer Tax
This is a local government tax imposed on the sale, donation, barter, or any other mode of transferring real property ownership.
- Rate: Roughly 0.50% to 0.75% of the total value (Selling Price or Zonal Value, whichever is higher), depending on the city or province where the property is located.
- Responsibility: Usually paid by the Buyer to the Treasurer’s Office of the local government unit (LGU).
4. Registration Fees
To issue a new Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT) in the buyer's name, fees must be paid to the Registry of Deeds.
- Rate: Based on a graduated table provided by the Land Registration Authority (LRA), generally hovering around 0.25% of the property value.
- Responsibility: Borne by the Buyer.
5. Bank/Lender Processing Fees
Because "Pasalo" involves a change in the debtor, the financing institution must formally approve the assumption of mortgage.
- Assumption Fee: Banks or Pag-IBIG charge an administrative fee to process the "Transfer of Rights" or "Assumption of Mortgage." This can range from ₱3,000 to ₱10,000 or more, depending on the lender.
- Amendment of Mortgage: There may be additional documentary stamp taxes on the new loan agreement or the amended mortgage contract (calculated at ₱1.50 per ₱200 of the assumed loan amount).
6. Notarial Fees
The Deed of Sale with Assumption of Mortgage must be notarized to be a public document and a valid registrable deed.
- Rate: Usually 1% to 2% of the total contract price, though it is often negotiable with the Notary Public.
Summary Table of Costs
| Tax / Fee | Rate (Approx.) | Responsible Party (Typical) |
|---|---|---|
| Capital Gains Tax | 6% of higher value | Seller |
| Documentary Stamp Tax | 1.5% of higher value | Buyer |
| Transfer Tax | 0.5% – 0.75% | Buyer |
| Registration Fee | ~0.25% | Buyer |
| Assumption/Admin Fee | Fixed amount | Buyer |
| Notarial Fee | 1% – 2% | Buyer |
Crucial Legal Considerations
- "Deed of Assignment" vs. "Assumption": In many Pag-IBIG or developer-financed cases, the transfer is documented as a Deed of Assignment and Transfer of Rights. The tax implications remain largely the same.
- The "Consent" Requirement: Most mortgage contracts have a "Due on Sale" clause. This means the property cannot be sold or the mortgage assumed without the written consent of the lender. Transferring the property without this consent may trigger a default, making the entire loan balance immediately due and demandable.
- Zonal Value: Always verify the latest Zonal Value via the BIR website, as this often exceeds the actual cash "Pasalo" price, significantly impacting the total tax due.