Acquiring real estate through a bank—often referred to as Foreclosed Properties or Real and Other Properties Acquired (ROPA)—presents a unique set of legal and financial considerations. While these properties are often sold below market value, the buyer must navigate a specific set of taxes and fees to consolidate ownership.
In the Philippine jurisdiction, the transfer of title from a banking institution to an individual or entity is governed primarily by the National Internal Revenue Code (NIRC), as amended by the TRAIN Law, and local government ordinances.
1. Internal Revenue Taxes (National Level)
The most significant financial component of a title transfer involves the taxes paid to the Bureau of Internal Revenue (BIR). The classification of the property dictates which tax applies.
Capital Gains Tax (CGT) vs. Creditable Withholding Tax (CWT)
- Capital Gains Tax (6%): This applies if the property is classified as a capital asset. However, because banks are in the business of lending and frequently acquire property through foreclosure, these assets are often classified as ordinary assets.
- Creditable Withholding Tax (1.5% to 6%): If the property is an ordinary asset, CWT is applied based on the selling price or the fair market value. For banks, the rate is generally higher (6%) as they are considered habitually engaged in real estate transactions.
Documentary Stamp Tax (DST)
The DST is a tax on the documents, instruments, and papers evidencing the sale.
- Rate: 1.5% of the selling price, zonal value, or fair market value, whichever is highest.
- Deadline: Paid within five days after the close of the month when the taxable document was signed.
Value Added Tax (VAT)
Properties sold by banks are generally subject to a 12% VAT if the selling price exceeds the threshold set by the BIR (currently ₱3,600,000 for residential dwellings). If the property is a lot only, the threshold is lower (₱1,919,500). If the bank is VAT-registered and the asset is "ordinary," this tax is mandatory.
2. Local Government and Registration Fees
Once the national taxes are settled and a Certificate Authorizing Registration (CAR) is issued by the BIR, the buyer must settle obligations at the local level.
Transfer Tax
This is paid to the City or Provincial Treasurer’s Office where the property is located.
- Rate: Generally 0.50% to 0.75% of the total consideration or the fair market value, depending on the local government unit's (LGU) ordinance.
Registration Fee
Paid to the Registry of Deeds (Land Registration Authority) to trigger the issuance of a new Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT).
- Rate: This follows a graduated table of fees based on the consideration, but roughly equates to 0.25% of the property value.
3. Summary of Costs
| Expense Type | Percentage (Approx.) | Basis |
|---|---|---|
| Creditable Withholding Tax (CWT) | 6% | Selling Price / Zonal Value / FMV |
| Documentary Stamp Tax (DST) | 1.5% | Selling Price / Zonal Value / FMV |
| Value Added Tax (VAT) | 12% | If applicable (above threshold) |
| Transfer Tax | 0.5% – 0.75% | Selling Price / Zonal Value / FMV |
| Registration Fee | ~0.25% | Graduated Scale |
| Notarial Fees | 1% – 2% | Negotiable |
4. Key Procedural Considerations
The "As-Is, Where-Is" Clause
Banks almost exclusively sell ROPA on an "As-Is, Where-Is" basis. Legally, this means the buyer assumes the risk of the property’s physical condition and, crucially, any hidden administrative encumbrances.
Responsibility for Payment
While the law generally presumes the seller (the Bank) pays the CWT/CGT and the buyer pays the DST and transfer fees, this is highly negotiable. In bank sales, the Letter of Approval (LOA) or the Deed of Absolute Sale (DOAS) will explicitly state which party shoulders which tax. It is common for banks to pass all taxes, including the CWT, to the buyer to net a specific price.
Real Property Tax (RPT) Arrears
Before a title can be transferred, the buyer must ensure that the Real Property Tax (Amilyar) is updated. Banks usually clear these arrears up to the date of the sale, but any delays in the transfer process after the sale date will result in penalties that the buyer must shoulder.
Clearance Requirements
To successfully transfer the title, the following documents are mandatory:
- Deed of Absolute Sale (DOAS) duly notarized.
- Certificate Authorizing Registration (CAR) from the BIR.
- Tax Clearance from the LGU.
- Official Receipts for all aforementioned taxes.
- Latest Tax Declaration (Land and Improvement).