Introduction

The transfer of land title in the Philippines involves a series of legal and administrative steps governed primarily by the Tax Code (Republic Act No. 8424, as amended), the Local Government Code (Republic Act No. 7160), and regulations from the Bureau of Internal Revenue (BIR), the Registry of Deeds (RD), and local government units (LGUs). This process ensures the proper conveyance of ownership from the seller to the buyer while imposing various taxes and fees to generate revenue for the government and prevent tax evasion. Taxes are levied based on the value of the property, typically the higher of the selling price, fair market value (FMV), or zonal value as determined by the BIR.

This article comprehensively outlines the taxes and related obligations for both buyers and sellers in land title transfers, including computation methods, payment responsibilities, exemptions, procedural requirements, and potential penalties. It focuses exclusively on real property transactions involving land, excluding special cases like foreclosures, inheritances, or corporate mergers, which may have distinct rules.

Key Concepts in Land Title Transfer

Before delving into specific taxes, it is essential to understand foundational elements:

Deed of Absolute Sale (DOAS): The primary document executed between buyer and seller, which must be notarized and serves as the basis for tax computations.
Valuation Basis: Taxes are computed using the highest among the contract price (selling price), BIR zonal value, or FMV as per the LGU's schedule of market values.
BIR Certification Authorizing Registration (CAR): Issued by the BIR after payment of national taxes, required for title transfer at the RD.
Electronic Certificate Authorizing Registration (eCAR): The digital version of the CAR, mandatory since 2015.
Timeline: The entire process typically takes 1-3 months, with taxes due within 30-60 days from the transaction date, depending on the tax type.
Parties Involved: Seller (transferor), Buyer (transferee), Notary Public, BIR, LGU (Assessor's Office and Treasurer's Office), and RD.

Non-compliance can result in surcharges (25-50%), interest (12% per annum), and penalties, potentially delaying or voiding the transfer.

Taxes and Fees Payable by the Seller

The seller bears the primary burden of national taxes, as these are considered costs of disposing of the property. However, practices may vary by agreement, though legally, the seller is responsible unless stipulated otherwise.

1. Capital Gains Tax (CGT)

Legal Basis: Section 24(D) of the National Internal Revenue Code (NIRC), as amended by the TRAIN Law (Republic Act No. 10963).
Rate: 6% of the gross selling price, zonal value, or FMV, whichever is highest. This is a final tax on the presumed gain from the sale.
Computation: CGT = 6% × Higher of (Selling Price, Zonal Value, FMV).
- Example: If a property sells for PHP 5,000,000, but zonal value is PHP 6,000,000, CGT = 6% × PHP 6,000,000 = PHP 360,000.
When Applicable: For all sales of real property classified as capital assets (not used in trade or business). If the property is an ordinary asset (e.g., held by a real estate dealer), it is subject to regular income tax instead (up to 30% for individuals or 25% for corporations under CREATE Law, Republic Act No. 11534).
Exemptions:
- Sale of principal residence: Exempt if proceeds are used to buy or build a new principal residence within 18 months (BIR Revenue Regulations No. 13-99). Requires escrow of CGT and BIR approval.
- Sales below PHP 100,000 or to government entities for public use.
- Exchanges under Section 40(C)(2) of the NIRC (tax-free exchanges).
Payment: Due within 30 days from notarization of the DOAS. Filed via BIR Form 1706 at the Revenue District Office (RDO) where the property is located.
Documentation: DOAS, Tax Declaration, Title, Zonal Value Certificate.

2. Documentary Stamp Tax (DST)

Legal Basis: Section 196 of the NIRC.
Rate: 1.5% (PHP 15 per PHP 1,000) of the consideration or value, using the highest of selling price, zonal value, or FMV.
Computation: DST = 1.5% × Higher of (Selling Price, Zonal Value, FMV).
- Example: For the above property, DST = 1.5% × PHP 6,000,000 = PHP 90,000.
When Applicable: On all conveyances, deeds, or instruments transferring real property rights.
Exemptions: Same as CGT exemptions, plus transfers by government or to non-stock, non-profit entities for charitable purposes.
Payment: Due within 5 days after the close of the month of execution. Filed via BIR Form 2000 at the RDO. Can be paid via loose stamps or electronic filing.
Note: If the seller is VAT-registered, additional VAT (12%) may apply if the property is an ordinary asset.

3. Creditable Withholding Tax (CWT) or Expanded Withholding Tax (EWT)

Legal Basis: Revenue Regulations No. 2-98, as amended.
Rate: Varies:
- 1.5% to 6% for ordinary assets, depending on seller type (e.g., 6% if seller is habitually engaged in real estate).
- Not applicable for capital assets, where CGT suffices.
Computation: Withheld by the buyer (as withholding agent) and remitted to BIR.
When Applicable: If the seller is in the business of selling properties.
Payment: Buyer withholds and remits via BIR Form 2307 within 10 days after the end of the month.

4. Other Seller Obligations

Donor's Tax: If the transfer is gratuitous (gift), 6% on the FMV (Section 99, NIRC). Not applicable to sales.
Estate Tax: For transfers upon death, but separate from sales.
BIR Clearance: Seller must secure Tax Clearance Certificate if required for large transactions.

Taxes and Fees Payable by the Buyer

The buyer primarily handles local taxes and registration, ensuring the title is transferred cleanly.

1. Local Transfer Tax (LTT)

Legal Basis: Section 135 of the Local Government Code.
Rate: Maximum 0.50% in provinces or 0.75% in cities/Metro Manila, based on the higher of selling price, zonal value, or FMV.
Computation: LTT = Rate × Higher Value.
- Example: In Quezon City (0.75%), for PHP 6,000,000 property: PHP 45,000.
When Applicable: On all transfers of real property.
Exemptions: Transfers to government, inheritances, or foreclosures.
Payment: Due within 60 days from execution of DOAS. Paid at the LGU Treasurer's Office.
Documentation: DOAS, CGT/DST receipts, Tax Declaration.

2. Registration Fees

Legal Basis: Administrative fees under the Land Registration Authority (LRA).
Rate: Typically 0.25% of the property value, plus fixed fees (e.g., PHP 30 entry fee, PHP 36 annotation fee).
Computation: Variable, but often around 0.25% × Value.
When Applicable: For registering the DOAS and issuing new title.
Payment: At the RD after securing CAR and LTT receipt.
Additional Fees: IT fees, legal research fees (1% of registration fee).

3. Other Buyer Obligations

Real Property Tax (RPT) Clearance: Buyer must ensure seller has paid all back RPT; otherwise, liable for arrears.
Value-Added Tax (VAT): If seller is VAT-registered and property is ordinary asset, buyer pays 12% VAT, but seller remits.
Notarial Fees: Shared or per agreement, typically 1-2% of value.

Shared or Negotiable Costs

Broker's Commission: 3-5% of selling price, usually paid by seller.
Notarial and Legal Fees: Negotiable, often split.
Survey and Subdivision Fees: If needed for lot division.
Title Insurance: Optional, buyer-paid.

Procedural Steps for Title Transfer

Execute DOAS: Notarize the deed.
Pay National Taxes (Seller): File CGT and DST at BIR, obtain eCAR (5-10 days).
Pay Local Taxes (Buyer): Settle LTT at LGU, get Certificate of Payment.
Update Tax Declaration: At Assessor's Office.
Register at RD: Submit documents, pay fees, receive new Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT) in buyer's name (2-4 weeks).
Annotate Mortgage: If financed.

Special Considerations

Installment Sales: CGT prorated if payments span years (Revenue Regulations No. 16-2005).
Corporate Sellers: Subject to corporate income tax if ordinary asset; minimum corporate income tax may apply.
Non-Resident Sellers: Higher withholding rates (up to 25%).
Foreclosed Properties: Different rules under Republic Act No. 8791.
Agricultural Lands: Additional clearances from DAR under CARP (Republic Act No. 6657).
Condominium Units: Similar taxes, but with Condominium Certificate of Title.
Penalties for Delay: BIR imposes 25% surcharge for late filing, plus interest.
Anti-Money Laundering: Transactions over PHP 500,000 require reporting under Republic Act No. 9160.
Tax Treaties: For foreign sellers, may reduce rates via double taxation agreements.
Recent Reforms: Under the CREATE Law, corporate tax reduced to 20-25%; TRAIN Law unified CGT at 6%.
Digitalization: eCAR, eBIRForms, and online payments mandatory in many areas.

Conclusion

Navigating taxes in land title transfers requires meticulous compliance to avoid legal pitfalls and financial losses. Sellers must prioritize national taxes to facilitate the CAR, while buyers focus on local clearances for smooth registration. Consulting a lawyer, accountant, or the BIR/LGU is advisable for complex cases, as valuations and exemptions can vary. Proper handling ensures a valid transfer, protecting both parties' interests under Philippine law.