Transfer Tax and Related Fees in a Philippine Deed of Absolute Sale of Real Property
(Everything you need to know, updated to 02 June 2025)
Scope – This article explains all statutory taxes, local imposts, registration fees, and incidental charges that arise when ownership of Philippine real property is transferred by a notarised Deed of Absolute Sale (“DOAS”). It synthesises the National Internal Revenue Code (“NIRC”), the Local Government Code (“LGC”) of 1991, relevant revenue regulations (RRs), BIR issuances, and long-standing practice. Where figures vary by city or province, ranges and statutory ceilings are given. Always confirm exact amounts with the local BIR Revenue District Office (“RDO”), the Register of Deeds (“RD”), and the City/Municipal Treasurer.
1. Key Players & Sequence of Payment
| Stage | Party primarily liable* | Tax/Fee | Pay-by deadline (from notarisation) | Where paid |
|---|---|---|---|---|
| ① | Seller | Capital Gains Tax (CGT) or Creditable Withholding Tax (CWT) | 30 days | BIR – Authorized Agent Bank (“AAB”) |
| ② | Buyer | Documentary Stamp Tax (DST) | Same day as CGT/CWT | BIR – AAB |
| ③ | Buyer | Provincial/City Transfer Tax | 60 days | City or Provincial Treasurer |
| ④ | Buyer | Registration Fee & IT Fees | Upon presentation of CAR | Register of Deeds |
| ⑤ | Either party (per agreement) | Notarial & Miscellaneous | At signing / when incurred | Notary Public, photocopy shops, etc. |
*Liability may be shifted by contract, but revenue offices will still collect from whomever presents the documents.
2. National Taxes Administered by the BIR
| Tax | Statutory Basis | Rate | Tax Base (“whichever is higher”) | Standard Form |
|---|---|---|---|---|
| 2.1 Capital Gains Tax (Sec. 24(D), NIRC) | 6 % | Zonal Value ↔ Fair Market Value (“FMV”) per latest Tax Declaration ↔ Gross Selling Price (“GSP”) | BIR Form 1706 | |
| 2.2 Creditable Withholding Tax (if the asset is ordinary, e.g., dealer’s inventory) | 1 %–6 % (Revenue Reg. 2-98 as amended) | Same three-way comparison | BIR Form 1606 | |
| 2.3 Documentary Stamp Tax (Sec. 196, NIRC) | ₱ 1.50 per ₱ 200 of value ≈ 0.75 % | Same three-way comparison | BIR Form 2000-OT |
2.1 When is CGT not due?
| Exemption | Key Conditions |
|---|---|
| Sale of Principal Residence (Sec. 24(D)(2)) | Entire proceeds are used to acquire/build another principal residence within 18 months; option availed once every 10 years; BIR sworn declaration filed within 30 days. |
| Sale to Government / GOCC | Real property is expropriated or sold to the national gov’t, LGU, or its instrumentalities. |
| Tax-Free Exchange (Sec. 40(C)(2)) | Transfer is for shares or another real property as part of a merger, consolidation, or business re-organisation. |
If CGT is exempt, CWT usually applies instead.
2.2 VAT Considerations
VAT (12 %) is in addition to the above if the seller is a VAT-registered person and the property is an “ordinary” asset and the residential threshold under the TRAIN Law (₱ 3 000 000 as of 01 Jan 2024, to be CPI-adjusted every three years) is breached. The buyer must withhold and remit 5 % final VAT creditable against the seller’s output VAT, per RR 11-2021.
3. Local Transfer Tax (Sec. 196, LGC 1991)
| Jurisdiction | Statutory Ceiling | Typical Working Rate |
|---|---|---|
| Provinces (incl. component cities) | 0.50 % of tax base | 0.25 % – 0.50 % |
| Highly Urbanised / Independent Component Cities | 0.75 % | 0.50 % – 0.75 % |
| Manila & Quezon City (special charters) | Up to 0.75 % | 0.75 % |
Tax Base = GSP, zonal value, or FMV (same principle as CGT). Pay within 60 days or surcharges of 25 % plus 2 % interest per month (max 36 months) apply.
4. Registration Fees (Land Registration Authority Schedule)
Registration fee is ad valorem with a diminishing-rate bracket:
| Assessed Value | Fee | Incremental |
|---|---|---|
| First ₱ 500 000 | ₱ 8 000 | Base |
| Over ₱ 500 000 up to ₱ 1 000 000 | ₱ 8 000 + ₱ 1 500 per ₱ 100 000 | – |
| Over ₱ 1 000 000 | Graduated, capping at ~0.25 % | – |
Add ₱ 50–₱ 200 each for entry fee, annotation, issuance of new TCT/CCT, Assurance Fund contribution, and IT fees. RDs post the exact matrix.
5. Incidental & Optional Costs
| Charge | Range / Basis | Notes |
|---|---|---|
| Notarial Fee | 1 % of GSP/Zonal (IBP suggested) but usually ₱ 1 000–₱ 5 000 | Depends on city & lawyer seniority. |
| Certification Fees | ₱ 200–₱ 500 per certified copy | Tax Declaration, TCT/CCT, tax clearances, etc. |
| Real Property Tax (RPT) Arrears | Varies | Seller must produce a Tax Clearance; buyer often shoulders advance current-year quarter. |
| Broker’s Commission | 3 %–5 % (private) / 2 % (Pag-IBIG) | Not a government charge but affects net proceeds. |
6. Step-by-Step Compliance Workflow
- Negotiate & Draft DOAS Identify which party shoulders each tax.
- Notarise the DOAS (Date of notarisation starts all statutory clocks).
- Secure Tax Identification Numbers for both parties if needed.
- CGT/CWT & DST Payment – Submit DOAS, TCT/CCT, Tax Declaration, IDs, BIR Forms 1706 & 2000-OT. – Pay at an AAB or Revenue Collection Officer; obtain BIR-validated forms.
- BIR Examination & Certificate Authorizing Registration (CAR) Issued 5–20 working days after complete submission.
- Pay Local Transfer Tax within 60 days; secure Tax Clearance and Transfer Tax Receipt.
- Register with Register of Deeds Present CAR, DOAS, Owner’s Duplicate TCT/CCT, new Tax Declaration, ID & Transfer Tax Receipt; pay registration fees.
- Secure New Tax Declaration from the Assessor’s Office reflecting the new owner.
- Update BIR Records (optional but recommended) by filing Information Statement on Newly Acquired Property (BIR Form 1905).
7. Penalties for Late Filing
| Tax | Surcharge | Interest | Compromise (minimum) |
|---|---|---|---|
| CGT / CWT / DST | 25 % of basic tax | 12 % p.a. (or prevailing rate) | ₱ 1 000–₱ 50 000 |
| Transfer Tax | 25 % of basic tax | 2 % per month (max 36 months) | N/A |
| Registration | No deed registered until taxes settled; property cannot be mortgaged or resold. |
8. Special Situations
| Scenario | Key Variations |
|---|---|
| Foreclosure Sale (Sheriff’s Auction) | CGT is computed on bid price; DST & Transfer Tax follow; no VAT. |
| Pacto de Retro / Conditional Sale | Taxes are still due at execution; possible double taxation if equity of redemption is exercised. |
| Extra-Judicial Settlement with Sale (Estate) | Estate Tax (6 % of net estate) first; CGT exempt because heirs step into decedent’s basis and “partition” is not a sale; DST still due on subsequent sale to third party. |
| Donation | Donor’s Tax (6 % of FMV > ₱ 250 000 yearly exemption); DST of ₱ 15.00 fixed. |
| Condominium Units | Same taxes; zonal values published per BIR RDO. Association dues may need clearance before transfer. |
| Agricultural Lands under CARP | Transfers to qualified beneficiaries exempt from CGT, DST, and Transfer Tax under RA 6657. |
9. Who Ultimately Pays?
| Item | Default Industry Practice |
|---|---|
| CGT / CWT | Seller |
| DST | Buyer |
| Transfer Tax & Registration | Buyer |
| VAT (if any) | Seller (but may be passed on) |
| Notarial & Misc. | Split or as agreed |
These are negotiable; state clearly in the DOAS to avoid dispute.
10. Practical Tips & Common Pitfalls
- Match the property description in the DOAS exactly with the title; even a typographical error causes CAR rejection.
- Compare the BIR’s zonal value vs. Assessor’s FMV before fixing the price; if the contract price is lower, taxes will still be computed on the higher statutory base.
- Pay Transfer Tax promptly; buyers often overlook the 60-day LGU deadline and incur steep interest.
- Sign all pages of the DOAS and have parties plus two witnesses appear before the notary to avoid later authenticity challenges.
- Keep certified true copies of the old and new titles, CAR, and receipts; banks require them for future mortgages.
- Plan around VAT thresholds when buying from developers; splitting contracts to evade VAT (“contract splitting”) is disallowed and penalised.
- For principal-residence exemption, keep proof of reinvestment (e.g., new DOAS, construction contracts) for BIR audit.
- Estate planning – lifetime donation or living trust may, in some cases, minimise the eventual 6 % CGT on heirs.
11. Statutory References
- National Internal Revenue Code of 1997, as last amended by the CREATE Law (RA 11534) and TRAIN Law (RA 10963).
- Local Government Code of 1991 (RA 7160), Title II, Chap. II, Sec. 196.
- Executive Order 153 (2021) – Implements electronic CAR issuance.
- BIR Revenue Regulations 13-99, 6-2001, 11-2018, 7-2022, 8-2023, et al.
- Land Registration Authority Circular 35-2019 – Standard schedule of fees.
- Supreme Court A.C. No. 1132-2020 – Updated IBP Notarial Fees schedule.
Conclusion
Transferring Philippine real property is not simply a matter of signing and paying the headline price. At least five distinct taxes and fees, administered by three different government offices, are triggered the moment the Deed of Absolute Sale is notarised. Missing any deadline leads to automatic surcharges and interest, and the Register of Deeds will refuse registration without a valid CAR and proof of LGU transfer tax payment. With careful planning—particularly on the choice between CGT and CWT, qualifying for principal-residence exemption, and timing around VAT thresholds—both sellers and buyers can legally minimise costs while ensuring a clean, marketable title. Always consult a Philippine tax or real-estate lawyer for transaction-specific advice.
(This article is for general information only and does not constitute legal advice or create a lawyer-client relationship.)