Introduction

In the Philippines, the transfer of real property through sale, donation, inheritance, or other modes triggers various tax obligations, collectively referred to in practice as "real property transfer taxes." These primarily include the Capital Gains Tax (CGT), Documentary Stamp Tax (DST), Donor's Tax (for donations), Estate Tax (for inheritances), and local transfer taxes imposed by local government units (LGUs). The Bureau of Internal Revenue (BIR) administers national taxes, while LGUs handle local ones. A key aspect of compliance is the issuance of the Electronic Certificate Authorizing Registration (eCAR), which is mandatory for registering the transfer with the Registry of Deeds (RD).

Non-payment or underpayment of these taxes can lead to the imposition of interest, surcharges, and penalties. Interest serves as a compensatory charge for the government's loss of use of the funds. This article explores when interest begins to accrue on real property transfer taxes, with a focus on the role of eCAR and BIR assessment rules, drawing from the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 10963 (TRAIN Law), RA No. 11534 (CREATE Law), and relevant BIR regulations such as Revenue Regulations (RR) No. 7-2003, RR No. 13-2018, and Revenue Memorandum Orders (RMOs).

Legal Basis for Real Property Transfer Taxes

The NIRC imposes the following national taxes on real property transfers:

Capital Gains Tax (CGT): A final tax of 6% on the gross selling price, fair market value (FMV), or zonal value (whichever is highest) for sales or exchanges of real property classified as capital assets (Section 24(D), NIRC).
Documentary Stamp Tax (DST): 1.5% on the consideration or FMV (whichever is higher) for deeds of sale or conveyance (Section 196, NIRC).
Donor's Tax: 6% on the net value of gifts, including real property donations (Section 99, NIRC, as amended).
Estate Tax: 6% on the net estate, including real property (Section 84, NIRC, as amended).

Additionally, the Local Government Code (LGC) of 1991 (RA No. 7160) authorizes provinces and cities to impose a local transfer tax of up to 0.5% (for provinces) or 0.75% (for cities in Metro Manila) on the total consideration or FMV.

These taxes must be paid before the transfer can be registered. The eCAR, introduced under RMO No. 15-2003 and enhanced by RMO No. 34-2014, is the BIR's electronic authorization confirming payment of national taxes, replacing the manual CAR.

Due Dates for Payment of Real Property Transfer Taxes

Interest accrual is tied to the tax's due date. Missing this date triggers interest from the day following the deadline.

For CGT on Sales: Due within 30 days from the date of notarization of the Deed of Absolute Sale (DOAS) or equivalent document (RR No. 7-2003). If the sale is on installment, CGT on the initial payment is due within 30 days from receipt, with subsequent payments taxed accordingly.
For DST: Due on or before the 5th day of the month following the execution of the taxable document (Section 200, NIRC).
For Donor's Tax: Due within 30 days after the donation (Section 103, NIRC).
For Estate Tax: Due within one year from the decedent's death (Section 91, NIRC, as amended by TRAIN Law).
For Local Transfer Tax: Due within 60 days from the execution of the deed or from the decedent's death (Section 135, LGC).

In practice, taxpayers often pay all taxes simultaneously to secure the eCAR, which is required under Section 58(E) of the NIRC for RD registration.

When Does Interest Start to Accrue?

Under Section 249 of the NIRC (as amended), interest accrues at 12% per annum (reduced from 20% by the TRAIN Law effective January 1, 2018) on any unpaid tax amount from the due date until full payment. Key points include:

Starting Point: Interest begins on the day immediately following the due date. For example, if CGT is due on Day 30 after notarization, interest starts on Day 31.
Computation: Interest is calculated on the principal tax amount, compounded daily until payment. The formula is: Interest = Principal × 12% × (Number of Days Late / 365).
Deficiency Taxes: If a BIR assessment reveals underpayment (e.g., due to undervaluation), interest on the deficiency runs from the original due date, not the assessment date (Section 249(B), NIRC).
Extended Due Dates: If the BIR grants an extension (e.g., for estate tax under Section 91), interest starts after the extended deadline. However, extensions are discretionary and rare for transfer taxes.
Amnesty or Compromise: Availing of tax amnesties (e.g., under RA No. 11213 for estate tax) may waive interest, but only if applied within the prescribed period.
Local Transfer Tax Interest: The LGC does not specify a uniform rate; LGUs set their own, often mirroring the NIRC's 12% or imposing a 2% monthly penalty (e.g., Quezon City Ordinance SP-2556 imposes 2% interest per month).

Interest does not accrue if the tax is paid on time, even if the eCAR is delayed due to BIR processing.

Role of eCAR in Interest Accrual

The eCAR is pivotal in ensuring tax compliance before property registration. Issued via the BIR's eCAR System (under RMO No. 24-2013), it confirms payment of CGT, DST, and other national taxes. Without eCAR, the RD cannot register the transfer (BIR Revenue Memorandum Circular (RMC) No. 18-2013).

eCAR Issuance Timeline: Taxpayers file returns (e.g., BIR Form 1706 for CGT) and pay at an Authorized Agent Bank (AAB). The BIR then issues eCAR within 5 working days if documents are complete (RMO No. 34-2014). Delays in eCAR do not extend tax due dates or halt interest if taxes are unpaid.
Impact on Interest: If taxes are paid late to obtain eCAR, interest accrues from the original due date. For instance, if a seller delays filing to avoid tax but later pays to get eCAR for registration, interest is backdated.
Provisional eCAR: In cases of disputed valuations, a provisional eCAR may be issued upon posting a bond (RR No. 13-2018), but interest on any final deficiency still starts from the due date.
eCAR and Assessments: If the BIR audits and finds discrepancies post-eCAR issuance, interest on deficiencies accrues from the original due date, emphasizing the need for accurate initial declarations.

BIR Assessment Rules and Interest

BIR assessments ensure correct tax payment and can trigger additional interest.

Types of Assessments:
- Preliminary Assessment Notice (PAN): Issued if discrepancies are found (e.g., via third-party matching or audits under Section 228, NIRC). The taxpayer has 15 days to respond.
- Final Assessment Notice (FAN): If unresolved, includes the basic tax, surcharge (25% for simple neglect, 50% for willful), and interest from the due date.
Prescription Period: The BIR has 3 years from the due date or filing (whichever is later) to assess, extendable to 10 years for fraud (Section 222, NIRC). Interest accrues regardless of prescription if assessment is timely.
Jeopardy Assessments: For imminent tax evasion (e.g., property transfer without tax payment), immediate assessment with interest from due date (Section 229, NIRC).
Post-Transfer Audits: Common in real property transfers; if zonal value was understated, deficiency CGT plus interest is assessed. eCAR issuance does not bar audits.

Penalties Associated with Interest

Beyond interest, late payments incur:

Surcharge: 25% for non-filing or late payment, 50% for willful neglect or fraud (Section 248, NIRC).
Compromise Penalties: Negotiable for minor violations (RR No. 7-2018).
Criminal Penalties: For tax evasion, imprisonment and fines under Section 255, NIRC.
Administrative Sanctions: RD may refuse registration without eCAR, leading to civil liabilities for non-transfer.

Practical Considerations and Remedies

Installment Payments: Allowed for estate tax (up to 5 years) with interest only on unpaid balance (Section 91, NIRC).
Protests and Appeals: Taxpayers can protest a FAN within 30 days, potentially suspending collection but not interest accrual (Section 228, NIRC). Appeals go to the Court of Tax Appeals (CTA).
Abatement: The BIR Commissioner may abate interest for reasonable cause (e.g., force majeure) under Section 204, NIRC.
Best Practices: Engage a tax professional for valuation, file promptly, and retain records. Use the BIR's eServices for faster eCAR processing.

Conclusion

Interest on real property transfer taxes in the Philippines starts immediately after the statutory due date, ensuring prompt compliance. The eCAR system reinforces this by gating registration, while assessment rules allow the BIR to enforce deficiencies with backdated interest. Taxpayers must prioritize accurate and timely payments to avoid escalating costs, as interest compounds and combines with surcharges. Understanding these mechanisms is crucial for real estate transactions, promoting fiscal responsibility in the Philippine tax landscape.