1. Introduction

Buying land in the Philippines triggers a layered set of national taxes, local taxes, and registration and service fees. Some are imposed by the National Government through the Bureau of Internal Revenue (BIR), others by local government units (LGUs), and the rest by the Registry of Deeds (RD), the assessor’s office, and private service providers (notary, geodetic engineer, bank, broker, lawyer).

This article focuses on the taxes and fees commonly encountered in a land purchase (typically a sale covered by a Deed of Absolute Sale) and explains: (a) what each charge is, (b) who is legally liable, (c) how it is computed, (d) when it must be paid, and (e) how it affects the transfer of title.

General information only. Philippine tax and local fee rules change and can depend on property classification and the parties’ circumstances; the applicable BIR forms, rates, and thresholds may be updated by law or regulation.

2. The Big Picture: What Must Happen for Title to Transfer

A typical titled-land purchase becomes fully transferable (and registrable) only after the buyer obtains:

A notarized Deed of Absolute Sale (DOAS) (or other deed of conveyance);
BIR clearance for transfer (commonly via an electronic Certificate Authorizing Registration or eCAR), issued after payment of the appropriate BIR taxes;
Payment of the LGU transfer tax and securing local clearances (varies by LGU);
Registration of the deed with the Registry of Deeds, resulting in the issuance of a new Transfer Certificate of Title (TCT) (or Condominium Certificate of Title for condominium units);
Transfer of the Tax Declaration at the assessor’s office and updating Real Property Tax (RPT) records.

Because the RD generally requires the BIR eCAR and local tax clearances before it issues a new title, tax compliance is not just about avoiding penalties—it is a practical requirement for registration.

3. Core National Taxes Payable to the BIR

3.1 Capital Gains Tax (CGT) — the most common tax on sale of land by individuals

What it is: A final tax imposed on the sale, exchange, or disposition of real property located in the Philippines classified as a “capital asset.”

When it applies (typical case):

Seller is an individual (or corporation) selling land not used in business and not held primarily for sale in the ordinary course of business.

Rate and tax base (common rule):

6% of the higher of:
- the Gross Selling Price (GSP)/Total Contract Price, or
- the property’s Fair Market Value (FMV) as determined under BIR rules (commonly referencing BIR zonal value and/or assessor’s value, whichever is higher under the applicable framework).

Legal liability: Generally imposed on the seller as the taxpayer; however, contracts often shift the economic burden to the buyer. Shifting who “pays” contractually does not change the nature of the tax.

Deadline (commonly applied): Taxes on transfers are typically required to be filed/paid within a fixed period from notarization/date of sale (commonly treated as within 30 days under modern rules). Late payment triggers surcharges, interest, and penalties.

Key practical point: Even if parties agree that the buyer will shoulder CGT, the BIR process for issuance of eCAR still requires proof the tax has been paid.

3.2 When CGT does not apply: the land is an “ordinary asset”

A land sale can be taxed differently when the property is an ordinary asset, generally where it is:

Used in trade or business (e.g., used by a business as a warehouse site), or
Held primarily for sale to customers in the ordinary course of business (typical of developers/real estate dealers), or
Otherwise treated as ordinary under the taxpayer’s circumstances and tax rules.

Tax consequence (general):

Not subject to 6% CGT final tax.
Instead, the seller is generally subject to regular income tax (individual) or corporate income tax (corporation) on net taxable income/gain.

Creditable Withholding Tax (CWT) may apply: For certain sales of real property treated as ordinary assets, BIR rules may require the buyer (as withholding agent) to withhold a percentage of the selling price as CWT, with rates often tiered by value. The withheld tax is credited against the seller’s income tax.

Value-Added Tax (VAT) may apply (see next section).

3.3 Value-Added Tax (VAT) on sale of land (usually for developers/real estate businesses)

What it is: A consumption tax on sale of goods/properties in the course of trade or business by VAT-registered or VAT-liable sellers.

When it typically applies:

Seller is engaged in the real estate business and the sale is in the ordinary course of trade/business, and
The transaction is not VAT-exempt under applicable rules (which can depend on property type, use, and value thresholds).

Rate: Commonly 12% VAT on the tax base as determined by VAT rules.

Important: VAT applicability is highly fact-specific (seller’s VAT registration, nature of property, thresholds/exemptions, and classification). For raw land sales between private individuals (non-business), VAT usually is not the main issue; CGT/DST typically are.

3.4 Documentary Stamp Tax (DST) on the Deed of Sale

What it is: A tax on documents/instruments, including deeds transferring real property.

Common rate: 1.5% of the higher of:

selling price/consideration, or
FMV (as determined under DST rules, commonly aligning with zonal/assessed valuation approaches used for transfer taxation).

Legal liability: Typically on the buyer in practice, though the law taxes the document/instrument and parties can allocate by contract.

Where it matters: DST payment is a standard prerequisite for BIR clearance/eCAR and registration.

3.5 Other BIR-related costs and considerations

Penalties for late filing/payment: Common components include:
- Surcharge (often 25% for late payment; higher in cases treated as willful neglect/fraud),
- Interest (computed per annum based on statutory formula),
- Compromise penalties (depending on the nature of violation).
Withholding obligations (when applicable): If the sale is treated as ordinary asset and subject to CWT, failure to withhold can create exposure for the withholding agent (often the buyer if required to withhold).
One-time transaction (ONETT) process: The BIR typically treats real property transfers as “one-time transactions” requiring a documentary set (deed, title, tax declaration, IDs, TINs, proof of payment, etc.) before issuing eCAR.

4. Local Taxes Payable to LGUs

4.1 Local Transfer Tax

What it is: A tax imposed by provinces/cities (and, in specific cases, municipalities) on transfer of ownership of real property by sale, donation, barter, or any other mode.

Common maximum rates (general framework):

Up to 0.5% for provinces
Up to 0.75% for cities (and municipalities in Metro Manila commonly follow the higher ceiling)

Tax base: Typically the higher of:

selling price/consideration, or
FMV per local schedule/assessor’s valuation (local rules vary).

Deadline: Often required to be paid within a set period (commonly within 60 days from notarization/execution), but local ordinances and processes vary.

Practical note: LGUs typically require:

notarized deed,
BIR eCAR (or proof of BIR tax payment in some LGUs),
updated RPT payments/tax clearance.

4.2 Real Property Tax (RPT) and arrears

What it is: An annual tax on real property based on assessed value.

Why it matters to buyers: Unpaid RPT can:

delay issuance of local tax clearances,
create liens on the property,
become a negotiation point in closing (proration between buyer and seller is common).

Common closing practice: RPT is often prorated as of the date of transfer, but the parties’ agreement controls between them.

4.3 Special levies and local charges (case-dependent)

Depending on location and local ordinances, a buyer may encounter:

Special assessments (e.g., road improvements benefiting the property),
Barangay clearance fees or certification fees,
Local certification costs (tax clearance, certificates of no delinquency),
Environmental/administrative fees in special zones.

These are usually smaller than transfer taxes but can be required for processing.

5. Registration Fees and Government Processing Costs

5.1 Registry of Deeds (RD) fees

What they cover: Fees for registration of the deed, issuance of a new title, and annotations.

How computed: Registration fees follow a schedule (often tiered by value/consideration) and can include:

basic registration fee,
entry fees,
annotation fees,
issuance fees for the new owner’s duplicate title,
certified true copies.

Practical reality: RD fees vary based on:

property value,
number of pages/annotations,
whether mortgages, adverse claims, or other encumbrances must be cancelled or carried over.

5.2 Assessor’s Office: Transfer of Tax Declaration

After RD issuance of a new title, the buyer must transfer the Tax Declaration.

Common assessor-side requirements/fees:

application/processing fee (often minimal),
documentary fees (certifications, prints),
updated RPT payment proof.

6. Professional and Transactional Fees (Non-Tax but Commonly Paid)

6.1 Notarial fees

The Deed of Sale must be notarized to be registrable and generally to be accepted in transfer processes.

Cost: Varies widely by locality and notary; often computed as a percentage of the consideration/value or as a negotiated amount.

6.2 Broker’s commission (when a licensed broker is involved)

Cost: Commonly a percentage of the purchase price, often paid by the seller by custom, but it is negotiable.

6.3 Legal fees (optional but common for due diligence)

Legal review and due diligence can include:

title verification,
checking liens/encumbrances and RD annotations,
validating seller authority/heirship,
drafting/reviewing contract terms and closing mechanics.

6.4 Survey and technical fees

Frequently paid when:

boundaries are uncertain,
property is subdivided,
relocation survey is desired,
lot data verification is needed for risk control.

Costs may include geodetic engineer services and plan-related expenses.

6.5 Bank/financing fees (if purchase is loan-funded)

If the buyer uses a bank loan, additional taxes/fees can arise, such as:

Appraisal fee
Loan processing fees
Mortgage registration fees (RD)
DST on the mortgage/loan instruments (separate from DST on the deed of sale)
Annotation fees for the mortgage on the title
Insurance (mortgage redemption insurance, fire insurance) where required by the lender

These are often significant and should be budgeted separately from the sale transfer taxes.

7. Who Pays What? Legal Liability vs. Negotiated Allocation

7.1 Typical Philippine market allocation (common practice)

While everything is negotiable, a common arrangement is:

Seller often shoulders:

Capital Gains Tax (6%) (if CGT applies)
Costs to clear encumbrances (e.g., cancellation of mortgage) unless otherwise agreed

Buyer often shoulders:

Documentary Stamp Tax (DST)
Local transfer tax
RD registration fees
Tax declaration transfer costs
Notarial fees (varies; often buyer, sometimes shared)
Due diligence and survey costs (often buyer)
Loan and mortgage-related costs (buyer)

7.2 Why the contract must be explicit

Because the BIR and LGU processes are document-driven, the deed or a side agreement should clearly state:

who pays which tax/fee,
what happens if valuations differ (zonal/assessed vs contract price),
who bears penalties if payment is late,
whether the price is “net of taxes” or “gross.”

8. Common Bases of Valuation Used in Tax Computations

Tax computations often use the higher of:

contract price/selling price, or
FMV metrics used by government:
- BIR zonal value (area-based valuation),
- assessor’s fair market value / assessed value (local valuation system).

Key consequence: Even if the deed states a low price, taxes may still be computed on the higher government valuation. Under-declaration can also create fraud risk and penalties.

9. Practical Closing Timeline (Typical Sequence)

Pre-signing due diligence
- Verify title authenticity and status (encumbrances, liens, adverse claims, court orders).
- Confirm seller identity, marital status, authority to sell (SPA if representative), and tax compliance.
Signing and notarization
- Execute DOAS; ensure technical description matches title.
BIR tax filing and payment
- Pay CGT or applicable income tax/CWT/VAT (as applicable).
- Pay DST.
Secure BIR eCAR
Pay LGU transfer tax
- Secure local tax clearances/certifications.
Register deed with RD
- Receive new title issued in buyer’s name.
Transfer tax declaration with assessor
Update RPT records and secure updated receipts

Delays usually occur at: (a) incomplete documents, (b) unpaid RPT, (c) mismatched names/technical descriptions, (d) estate/heirship issues, (e) classification disputes (CGT vs VAT/ordinary asset), or (f) valuation issues.

10. Illustrative Cost Computation (Simplified Example)

Assume:

Contract price: ₱5,000,000
Higher government valuation (zonal/assessor basis used): ₱5,500,000
Property is a capital asset sale (CGT applies)
Local transfer tax rate (example): 0.75%

CGT (6%) = 6% × ₱5,500,000 = ₱330,000 DST (1.5%) = 1.5% × ₱5,500,000 = ₱82,500 Local transfer tax (0.75%) = 0.75% × ₱5,500,000 = ₱41,250 Plus: RD registration fees + notarial + certifications + incidental costs (variable)

This simplified illustration excludes possible RPT arrears, loan/mortgage DST and registration, and professional fees.

11. Special and Edge Cases Buyers Should Know

11.1 Sale of a principal residence (individual seller) and CGT exemption concept

Philippine rules have recognized situations where sale of an individual’s principal residence may qualify for CGT relief if proceeds are used to acquire/build a new principal residence within a prescribed period and under specific conditions (including timely notice/filing and limits on frequency). This is highly documentation-driven and must be handled carefully in the BIR process.

11.2 Installment sales and “contract to sell”

Tax treatment can differ depending on whether ownership transfers immediately (sale) or later upon full payment (contract to sell). For transfer taxes, the BIR and RD typically look at the deed/instrument presented and the point at which ownership is conveyed.

11.3 Estate or heirship properties

If land is being sold by heirs, confirm:

estate tax compliance (estate tax is a separate tax regime),
authority of the signatories,
whether extra-judicial settlement has been completed and registered,
whether titles and tax declarations reflect the correct owners.

11.4 Donations, swaps, and other modes of transfer

Transfers by donation are generally subject to donor’s tax (distinct from CGT), plus DST and local transfer tax and registration fees, subject to applicable rules.

11.5 Agrarian reform restrictions / special lands

Some agricultural lands or agrarian reform-awarded lands may face restrictions or require clearances. Even where taxes are payable, the ability to validly transfer may depend on compliance with special laws and administrative requirements.

11.6 Encumbered property (mortgage, liens)

If the title has a mortgage:

cancellation requires bank documentation and RD annotation fees,
loan payoff and release must be coordinated,
if buyer borrows to purchase, expect additional mortgage DST and registration fees.

12. Summary of Typical Taxes and Fees (Checklist View)

National (BIR)

Capital Gains Tax (CGT) (often 6% if capital asset)
OR income tax regime + possible CWT (if ordinary asset)
VAT (often 12% in business-context sales, subject to exemptions/thresholds)
DST on deed of sale (commonly 1.5%)
Penalties if late

Local (LGU)

Transfer tax (commonly up to 0.5%–0.75%)
RPT payments/clearances; possible arrears/penalties
Local certifications/processing fees

Registration / Administrative

Registry of Deeds registration and issuance fees
Annotation and certified copy fees
Assessor’s office fees for tax declaration transfer

Transactional / Private

Notarial fees
Broker’s commission (if any)
Legal and due diligence fees
Survey/geodetic fees (case-dependent)
Bank loan and mortgage-related DST/fees (if financed)

13. Key Legal Sources Commonly Implicated

National Internal Revenue Code (Tax Code), as amended (CGT, DST, VAT, withholding, penalties)
Tax reform laws and amendments affecting rates, deadlines, and procedures
Local Government Code (authority for LGU transfer tax and local procedures)
Property Registration Decree and land registration rules (registration mechanics and RD processes)
Civil Code and related property laws (contracts, obligations, conveyancing principles)