Executing a Deed of Absolute Sale (DOAS) is the final step in transferring ownership of real property in the Philippines. However, the signed document alone does not transfer the title; a series of taxes and fees must be paid to the Bureau of Internal Revenue (BIR), the Local Government Unit (LGU), and the Registry of Deeds to legalize the transfer.
Below is a comprehensive guide to the financial obligations involved in this process.
1. National Taxes (Bureau of Internal Revenue)
These taxes must be settled with the BIR to secure a Certificate Authorizing Registration (CAR), which is the essential "go-signal" for the Registry of Deeds to issue a new title.
Capital Gains Tax (CGT)
- Rate: 6% of the Gross Selling Price, Fair Market Value, or Zonal Value, whichever is highest.
- Context: This applies if the property is classified as a capital asset (e.g., residential homes or lands not used in business).
- Responsibility: Traditionally paid by the Seller, though the parties may agree otherwise in the contract.
- Deadline: Within 30 days from the date of notarization of the DOAS.
Creditable Withholding Tax (CWT)
- Rate: Ranges from 1.5% to 6%, depending on the seller's business registration and property value.
- Context: This applies if the property is an ordinary asset (e.g., owned by a developer, a corporation, or used in trade/business).
- Responsibility: The Buyer withholds this amount from the purchase price and remits it to the BIR.
Documentary Stamp Tax (DST)
- Rate: 1.5% of the Gross Selling Price or Value (whichever is higher).
- Responsibility: Traditionally paid by the Buyer.
- Deadline: Within five days after the close of the month when the taxable document was signed and notarized.
Value Added Tax (VAT)
- Rate: 12% of the selling price.
- Context: Only applicable to properties classified as ordinary assets (business use) or those sold by real estate developers above a certain threshold.
- Exemption: Low-cost housing and residential lots/dwellings below specific price ceilings are generally VAT-exempt.
2. Local Government Taxes (City or Municipal Treasurer)
Once the BIR taxes are cleared, the buyer must settle local obligations at the City or Municipal Hall where the property is located.
Transfer Tax
- Rate: Generally 0.50% (for provinces) or 0.75% (for cities) of the total value or selling price.
- Responsibility: Typically paid by the Buyer.
- Deadline: Within 60 days from the date of notarization.
3. Administrative and Registration Fees
These fees cover the processing of the new land title and updated tax records.
Registration Fee
- Rate: Based on a graduated table provided by the Land Registration Authority (LRA). It generally totals roughly 0.25% of the selling price.
- Purpose: Paid to the Registry of Deeds to cancel the old title and issue the new Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT).
Notarial Fee
- Rate: Generally 1% to 2% of the selling price, though this is negotiable with the Notary Public.
- Purpose: To have the Deed of Absolute Sale notarized, making it a public document.
Summary Table of Responsibility
While the law designates certain parties for specific taxes, Philippine real estate practice allows for flexibility through "Net" or "Gross" sale agreements.
| Tax/Fee | Standard Rate | Usual Payer |
|---|---|---|
| Capital Gains Tax | 6% | Seller |
| Documentary Stamp Tax | 1.5% | Buyer |
| Transfer Tax | 0.5% – 0.75% | Buyer |
| Registration Fee | ~0.25% | Buyer |
| Notarial Fee | 1% – 2% | Negotiable |
| Agent’s Commission | 3% – 5% | Seller |
Critical Deadlines and Penalties
Failure to pay these taxes within the prescribed windows results in heavy surcharges (usually 25%), annual interest (12% under the TRAIN Law), and compromise penalties.
Important Note: The "date of notarization" is the trigger for most deadlines. It is vital to ensure that the funds for these taxes are ready as soon as the Deed of Absolute Sale is signed to avoid compounding interest and delays in the transfer of ownership.