Taxes to Pay After a Deed of Absolute Sale of Real Property in the Philippines

(CGT, DST, Local Transfer Tax, and Registration—plus key exceptions, deadlines, and practice tips)

Executive Overview

After a Deed of Absolute Sale (DOAS) of Philippine real property is executed and notarized, the transaction typically triggers four principal government imposts and several clearances:

Capital Gains Tax (CGT) – generally due from the seller when a capital asset (e.g., non-business property) is sold.
Documentary Stamp Tax (DST) – due on the instrument of sale.
Local Transfer Tax – imposed by the LGU (city/municipality/province).
Registration Fees – payable to the Registry of Deeds (and incidental fees with the Assessor).

Whether CGT applies—or instead, ordinary income tax/VAT with creditable withholding—depends on whether the property is a capital asset or an ordinary asset. The Certificate Authorizing Registration (eCAR) from the BIR is the pivotal clearance before title transfer at the Registry of Deeds.

Commercial practice (allocations): By law, the taxpayer for each levy is fixed (e.g., CGT is the seller’s tax), but parties may contractually agree on who bears the cost. Unless negotiated otherwise: seller pays CGT, buyer pays DST, transfer tax, and registration fees.

Step-by-Step Compliance Timeline

Execute & notarize the DOAS. Gather: TCT/CTC or CCT (condo), latest real property tax (RPT) receipts, tax declaration, IDs, corporate authorities (if any), and supporting documents (e.g., lot plan, condo certs).
BIR processing for eCAR.
- Determine applicable national tax regime (CGT vs. ordinary income/VAT and withholding).
- File and pay CGT (or creditable withholding if ordinary asset), and file DST.
- Secure eCAR once taxes are paid and documentation is complete.
LGU assessments and payment.
- Pay Local Transfer Tax at the City/Municipal Treasurer (or Provincial Treasurer, as applicable).
- Update Tax Declaration at the Assessor.
Registry of Deeds (ROD) registration.
- Present eCAR, proof of DST, Transfer Tax receipt, owner’s duplicate title, and other ROD requirements.
- Pay Registration Fees.
- ROD cancels the old title and issues a new one to the buyer; the Assessor issues a new tax declaration in buyer’s name.

Capital vs. Ordinary Asset: Why It Matters

Capital asset: Property not used in trade or business by the seller (typical for individuals selling their personal home/lot that is not held for business).
Ordinary asset: Property used in business, held for sale by real estate dealers/developers/lessors, or otherwise forming part of inventory or business assets.

Consequences:

Capital asset → CGT regime (final tax).
Ordinary asset → No CGT; instead the seller recognizes ordinary income subject to graduated income tax or corporate income tax, often with Creditable Expanded Withholding Tax (EWT) by the buyer, and VAT may apply if the seller is VAT-registered and the sale is VAT-taxable.

A. Capital Gains Tax (CGT) on Sale of Real Property (Capital Assets)

Who pays: Seller (as taxpayer). Rate & base: Final tax of 6% based on the higher of:

the Gross Selling Price (GSP) stated in the DOAS, or
the Fair Market Value (FMV) of the property (generally, BIR zonal value if available; otherwise the FMV per LGU tax declaration). Return/Form & deadline: File the CGT return and pay within 30 days from the date of notarized DOAS. Installment sales: For real property classified as capital asset, the 6% final CGT is computed on the higher of GSP or FMV and is not spread by installments (it is due based on the sale, not on cash collection timing).

One-Time CGT Exemption for Sale of Principal Residence

An individual seller may avail of a one-time exemption from the 6% CGT if:

the property sold is the seller’s principal residence;
the full proceeds are fully utilized in acquiring or constructing a new principal residence within 18 months from the date of sale; and
the seller notifies the BIR of his/her intention to avail within 30 days from sale and satisfies the documentary conditions. Any portion of the proceeds not used within the period becomes subject to CGT proportionately. This relief is available once every ten (10) years for individuals.

B. Documentary Stamp Tax (DST)

Who pays (practice): Usually the buyer, though the tax is imposed on the document and parties can agree otherwise. Rate & base: ₱15 for every ₱1,000 (or fractional part) of the consideration or FMV whichever is higher. This equates to 1.5% effectively. Return/Form & deadline: File the DST return and pay on or before the 5th day of the month following the date the DOAS was notarized.

C. Local Transfer Tax (LGU)

Who pays (practice): Usually the buyer. Rate & base: Imposed by the LGU where the property is located, computed on the higher of the consideration or FMV on the tax declaration/zonal value. Typical maxima:

Provinces: up to 0.5%
Cities & Metro Manila LGUs: up to 0.75% (Actual rates and surcharges vary by ordinance.) Deadline: Commonly within 60 days from the date of DOAS notarization (LGU-specific).

D. Registration Fees (Registry of Deeds) & Assessor Fees

Who pays (practice): Usually the buyer. What’s included:

ROD Registration Fee – based on a published schedule relative to the property value (bracketed schedule; not a flat percentage).
IT/entry/annotation fees (e.g., issuance of new title).
Assessor fees for issuance of new tax declaration.

Key rule: The Registry of Deeds will not register the DOAS and issue a new title without the BIR eCAR and proof of DST and Local Transfer Tax payment.

If the Property is an Ordinary Asset (No CGT)

When the seller is a real estate dealer/developer/lessor or the property is held/used in business:

Income Tax: The seller recognizes ordinary income.
- Individuals: graduated income tax rates.
- Corporations: corporate income tax.
- No 6% CGT.
VAT or Percentage Tax:
- VAT may apply if the seller is VAT-registered and the sale is VATable (certain residential sales may be VAT-exempt if within statutory thresholds/exempt categories).
- If not VAT-registered/liable, percentage tax may apply, depending on circumstances.
Creditable Expanded Withholding Tax (EWT):
- The buyer may be required to withhold and remit a creditable tax on the higher of GSP or FMV, at rates that depend on seller/buyer status and property type under prevailing withholding regulations.
- EWT is not a final tax; it is a credit against the seller’s income tax.
DST, Transfer Tax, and Registration Fees still apply (same bases and general timing).

Practical pointer: For ordinary assets, BIR requires proof of withholding (if applicable) and VAT/percentage tax compliance (if applicable) before issuing the eCAR.

Real Property Tax (RPT) & Other Clearances

RPT arrears/penalties (city/municipal) must be settled; the LGU issues a Tax Clearance. Unpaid RPT constitutes a lien on the property and can impair transfer.
Homeowners’ association/condo dues are not taxes but are typically cleared at closing.
Special cases may require additional clearances (e.g., sale of agricultural land, heritage/PEZA zones).

Computation Snapshot (Illustrative Only)

Assume a residential lot (capital asset) sold for ₱6,000,000; BIR zonal value is ₱6,500,000; FMV on tax declaration is ₱5,800,000. Higher of the three relevant figures is ₱6,500,000.

CGT (6%) – Seller’s tax: ₱6,500,000 × 6% = ₱390,000
DST (1.5%) – Usually buyer: ₱6,500,000 × 1.5% = ₱97,500
Local Transfer Tax – Usually buyer:
- If in a city at 0.75%: ₱6,500,000 × 0.75% = ₱48,750
- If in a province at 0.5%: ₱6,500,000 × 0.5% = ₱32,500
ROD & Assessor Fees – According to fee schedules (bracketed; not shown here).

Note: Parties may reallocate contractually, but CGT remains the seller’s legal tax and DST is on the instrument (with compliance expected regardless of cost-sharing).

Filing Mechanics & Core Documents

For BIR (eCAR processing):

Notarized DOAS and pages;
TINs of buyer and seller;
Original Owner’s duplicate title (TCT/CTC/CCT) and latest Tax Declaration;
RPT receipts/Tax Clearance;
BIR forms for CGT/DST (or EWT/WHT/VAT docs if ordinary asset);
Valid IDs, marriage documents (if conjugal), SPA/board resolutions (if represented/corporate);
Other BIR-prescribed attachments (zonal valuation printout, location plan, etc.).

For LGU (Transfer Tax & Assessor):

eCAR;
Proof of DST;
DOAS;
Title and tax declaration;
RPT receipts/clearance;
ID/authorities.

For ROD:

eCAR;
Original title and supporting docs;
Proof of DST and Transfer Tax;
ORs for fees;
ID/authorities;
Other ROD forms (as required).

Deadlines & Penalties (Common Rules of Thumb)

CGT: Within 30 days from the date of notarized sale. Surcharges, interest, and compromise penalties apply for late filing/payment.
DST: On or before the 5th day of the month following the month of the DOAS. Late filings incur surcharges/interest.
Local Transfer Tax: Typically within 60 days from the DOAS date; LGUs may impose surcharges/interest for late payment.
Registration: No fixed national deadline to present to ROD, but practical urgency exists because title cannot be transferred without eCAR and proof of DST/Transfer Tax; delays risk fee adjustments, interest, and changes in requirements.

Frequently Encountered Special Situations

Sale of Principal Residence (individuals): Consider the one-time CGT exemption; ensure timely notice to BIR and full reinvestment within 18 months.
Sales to or by the Government: Special withholding or documentation rules may apply; analyze early.
Installment/Deferred Payment Sales: CGT on capital assets is based on sale, not cash collections; for ordinary assets, align EWT/VAT with contract structure and issuances.
Corporate Sellers:
- Capital asset held by a corporation can still fall under 6% CGT when not used in business.
- Ordinary asset sales are subject to normal corporate income tax, and often EWT by the buyer and possibly VAT.
Estate or Heir Sales: If the registered owner is deceased, settle estate tax and obtain estate eCAR first, then proceed to sale (or the heirs first transfer title to themselves, then sell).
Condominiums & Subdivisions: Expect extra certificates (e.g., Condo/HOA clearance) and developers’ documentation for first transfers.
Foreign Sellers/Buyers: Ensure TINs and compliance steps; possible special withholding considerations.

Practical Tips & Risk Mitigation

Check classification early: The capital vs. ordinary asset determination drives the entire tax pathway.
Triangulate values: Compare GSP, zonal value, and tax declaration FMV—taxes use the highest applicable figure.
Align contract allocations with law: Even if the buyer agrees to shoulder CGT in the contract, the seller remains the taxpayer for CGT in the eyes of the BIR.
Maintain a clean RPT history: RPT liens follow the land; clear arrears before submission to BIR/ROD.
Docket completeness saves weeks: Missing IDs, TINs, or corporate authorities are frequent bottlenecks.
Plan ahead for principal-residence rollover: Serve the 30-day notice and track the 18-month reinvestment window meticulously.
Expect local variations: LGU rates, forms, and cut-off times differ; allow for these in your closing timeline.
Retain originals and certified copies: ROD and BIR typically require original specimens and keep certain originals on file.

Bottom Line

For most individual sellers of non-business property, expect 6% CGT, 1.5% DST, 0.5–0.75% Local Transfer Tax, and ROD/Assessor fees—all computed on the highest of price or official values. For business-related property (ordinary assets), substitute ordinary income tax (with buyer’s EWT) and consider VAT/percentage tax consequences, but DST, local transfer tax, and registration still apply. The eCAR is your non-negotiable gateway to title transfer, so sequence your filings to secure it promptly.