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

(Capital Gains Tax, Documentary Stamp Tax, Local Transfer Tax, and Registration)

Selling or buying real property in the Philippines doesn’t end with signing a notarized Deed of Absolute Sale. The transfer must pass through the Bureau of Internal Revenue (BIR), the local government (province/city/municipality), and the Registry of Deeds (RD). Each step involves taxes and fees with specific deadlines. Below is a practical, end-to-end guide—written in the Philippine legal context—covering what to pay, who pays, how to compute, what to file, key exemptions, and common pitfalls.

The 4 core payments

1) Capital Gains Tax (CGT) – BIR

What it is. A final tax on the presumed gain from the sale of real property located in the Philippines classified as a capital asset (i.e., not used in the seller’s trade or business).

Rate and tax base. 6% of the higher of:

the gross selling price in the Deed,
the BIR zonal value, or
the fair market value per latest Tax Declaration from the Assessor.

The highest of the three becomes the tax base.

Who pays. Seller (by law). Parties may agree otherwise, but the seller remains the taxpayer for CGT.

When due. Within 30 days from the date of notarization of the Deed of Absolute Sale.

Form & documentary flow.

File BIR Form 1706 (Capital Gains Tax Return – One-Time Transactions).
Submit the deed (original + copies), IDs/TINs, title (TCT/CCT) copy, latest real property tax (RPT) clearance, tax declaration (land & improvements), and proof of zonal value check.
Pay at an Authorized Agent Bank (AAB) or via BIR ePayment channels, then process for eCAR (electronic Certificate Authorizing Registration). The eCAR is mandatory to register the transfer.

Special cases & exemptions.

Principal residence rollover. A resident individual who sells their principal residence and fully uses the proceeds to buy/build a new principal residence within 18 months may apply to exempt the sale from CGT (once every 10 years). A sworn notice must be filed within 30 days from sale, and the 6% CGT is placed in escrow and later released/refunded to the seller to the extent of full utilization (any unutilized portion becomes subject to CGT).
Ordinary asset (no CGT). If the property is an ordinary asset in the hands of the seller (e.g., real estate dealer or property used in business), CGT does not apply. Instead, the seller is subject to regular income tax (on net income) and, if applicable, VAT; withholding tax rules also differ (see “Ordinary-asset sales” below).

Penalties for late filing/payment.

Surcharge: generally 25% of the basic tax (or 50% for willful neglect/false return).
Interest: per annum at double the legal interest rate (currently 12% p.a.) on the unpaid amount, computed from the statutory due date until full payment.
Compromise penalties: per BIR table, depending on deficiency/infraction.

2) Documentary Stamp Tax (DST) – BIR

What it is. A tax on the instrument (the deed).

Rate and base. ₱15 for every ₱1,000 (or fraction) of the higher of the selling price, zonal value, or fair market value (≈ 1.5% effective rate).

Who pays. By statute, parties to the instrument are liable; in practice, the buyer usually shoulders DST (check your contract).

When due. File and pay on or before the 5th day following the close of the month when the deed was notarized.

Form. BIR Form 2000-OT (Documentary Stamp Tax – One-Time Transactions).

Tip. DST and CGT use the same “whichever is higher” base; compute both from the same value benchmark.

3) Local Transfer Tax – LGU (Province/City/Municipality)

What it is. A local tax on the transfer of real property ownership authorized by the Local Government Code.

Rate and base.

Provinces: up to 0.5% of the higher of the consideration or fair market value.
Cities/Metro Manila: up to 0.75%, per local ordinance.

Who pays. Typically buyer (check your contract).

When due. Commonly within 60 days from the date of the deed (verify your LGU ordinance for exact deadline and surcharges).

Where/how. Pay at the City/Municipal/Provincial Treasurer after securing the eCAR. The Treasurer’s receipt is required for RD registration and for issuance of a new Tax Declaration by the Assessor.

4) Registration Fees – Register of Deeds (RD)

What it is. Statutory fees to enter and register the deed and issue a new TCT/CCT in the buyer’s name.

Amount. Based on the Land Registration Authority (LRA) fee schedule, which is ad valorem (rising with property value), plus minor IT/documentary fees. Bring cash proof of payments (CGT, DST, Transfer Tax) and the eCAR.

Who pays. Typically buyer.

Output. New TCT/CCT (title) to the buyer; annotated encumbrances carry over unless cancelled.

Step-by-step: The standard transfer workflow

Notarize the Deed of Absolute Sale.
BIR (One-Time Transactions):
- Compute and pay CGT (if applicable) using BIR Form 1706 within 30 days.
- Compute and pay DST using BIR Form 2000-OT by the 5th day after the month-end.
- Submit requirements and secure the eCAR.
LGU Treasurer: Pay Local Transfer Tax (bring eCAR, deed, title copy, tax declarations, IDs, RPT clearance).
Register of Deeds: Register the deed (bring eCAR, Treasurer’s receipt for transfer tax, DAR/LGU clearances if rural/agri where required, owner’s duplicate title, IDs/TINs, etc.) and pay RD fees to obtain the new title.
Assessor: Apply for issuance of a new Tax Declaration (land and improvements) in the buyer’s name.
Treasurer (Real Property Tax): Ensure RPT is updated; arrange billing for the next period to the new owner.

Worked example (for intuition)

Selling price in Deed: ₱5,000,000
BIR zonal value: ₱5,200,000
Assessor FMV: ₱4,800,000
Location: City with 0.75% transfer tax

Tax base (whichever is highest): ₱5,200,000

CGT (6%): ₱312,000 — seller’s tax
DST (~1.5%): ₱78,000 — usually buyer’s cost
Local Transfer Tax (0.75%): ₱39,000 — buyer’s cost
RD Registration Fees: per LRA schedule (ad valorem; separate from the above)

(Contract can reallocate who shoulders which cost, but the taxpayer of record for CGT remains the seller.)

Ordinary-asset sales (important carve-out)

If the real property is an ordinary asset in the seller’s hands (e.g., held for sale by a real estate developer, or property used in business), the transaction generally follows a different tax regime:

No CGT. Instead, the seller recognizes ordinary income and is subject to the regular income tax (individual graduated rates or corporate income tax), net of allowable costs/expenses.
Withholding tax. The buyer may be required to withhold creditable income tax at source (rates depend on the seller’s status and BIR rules).
VAT. The sale may be VAT-able if the seller is VAT-registered and the property is not VAT-exempt (e.g., certain residential sales below statutory thresholds may be VAT-exempt; thresholds are adjusted from time to time).
DST still applies (rate and base as above).
Local Transfer Tax and RD fees still apply.

Because the classification hinges on the seller’s use and books, buyers should confirm the asset classification early; it changes the tax set, timing, and who files what.

Key documentary requirements (typical set)

Notarized Deed of Absolute Sale (complete property description; tin IDs of parties).
Valid government IDs and TINs of seller and buyer.
Owner’s duplicate title (TCT/CCT) and Certified True Copy from the RD.
Latest Tax Declaration(s) for land and improvements (house/building).
Real Property Tax (RPT) clearance (no arrears).
Lot plan / vicinity map (sometimes requested); Certificate of No Improvement or as-built plan where relevant.
BIR forms & proofs of payment: 1706 (CGT, if applicable), 2000-OT (DST), payment receipts, and eCAR.
Treasurer’s receipt for Local Transfer Tax.
SPA/Board Resolution/Secretary’s Certificate if represented or if party is a corporation.
Marriage Certificate and spousal consent if property is conjugal/CPG; extrajudicial settlement documents if inherited.
Clearances required by special laws (e.g., DAR clearance for agricultural lands, HLURB/HSAC/condo docs for condos).

(Exact checklists vary by RDO, LGU, and RD; always align with the office handling your property.)

Timing anchors & sequencing traps

Compute from notarization date. CGT’s 30-day clock starts on notarization, not on full payment or turnover.
Monthly DST deadline. File DST by the 5th day after the close of the month of notarization—even if CGT/eCAR are still processing.
eCAR gating. You cannot register at the RD without the eCAR.
Use the same “highest value” for both CGT and DST computations; mismatches trigger queries.
Improvements matter. If there’s a building/house, obtain a Tax Declaration for Improvements; otherwise, BIR/LGU may assess additional amounts or ask for a No-Improvement Certification.

Who typically pays what (contract may vary)

Item	Default taxpayer in law/practice
CGT (6%)	Seller (final tax on seller)
DST (~1.5%)	Legally on the instrument; usually Buyer by practice
Local Transfer Tax	Buyer
RD Registration Fees	Buyer

Always check your deed or separate cost-sharing agreement.

Red flags, audits, and practical defenses

Understated price vs. zonal value. If the deed price is below zonal/assessor value, BIR will use the higher value.
Wrong classification. Claiming capital-asset treatment when your books/use show ordinary asset status is a common audit trigger.
Missing improvements. A house shown in listings but absent in the tax declaration invites queries and back assessments.
Late filing. Surcharges and 12% p.a. interest add up quickly; pay on time even if registration will follow later.
Installment sales. CGT is generally computed on the entire tax base at sale (not as installments are paid) for capital assets; structure carefully if financing is involved.
Related-party sales / less than adequate consideration. Expect fair-value benchmarks; donative intent elements can trigger Donor’s Tax on the difference.

Quick compliance checklist

Notarized deed with complete technical/property details and TINs
Compute highest of price, zonal value, FMV (Assessor)
File/pay CGT (1706) within 30 days (if capital asset)
File/pay DST (2000-OT) by 5th day after month-end
Secure eCAR from BIR
Pay Local Transfer Tax at Treasurer
Register at RD; pay RD fees; get new TCT/CCT
Update Tax Declarations with Assessor
Ensure RPT will be billed to the new owner

Final notes

Contracts can reallocate costs but cannot change who the taxpayer is for a particular tax under law (e.g., CGT remains a seller’s final tax when applicable).
Local ordinances (rates, deadlines, surcharges) and BIR administrative rules evolve. For significant transactions, coordinate with the relevant BIR RDO, LGU Treasurer/Assessor, and the Register of Deeds where the property sits, and consider engaging a Philippine tax counsel or conveyancing professional to pre-clear classification, valuation, and timing.
Keep complete files (scanned and physical): deed, IDs, title copies, tax declarations, RPT receipts, BIR returns and proofs of payment, eCAR, Treasurer’s receipt, and RD receipts. These will be crucial for any future sale, mortgage, or audit.