TAX ON TRANSFER OF REAL PROPERTIES

Definition/Nature
Transfer tax is levied on real properties which are subject to sale, donation,
barter or any mode of transfer of ownership or title of real property. This is pursuant to
Section 135 of the Local Government Code of 1991 (LGC). This kind of tax
distinguishes it from real properties which are classified as capital asset subject to a
capital gains tax (final tax) of 6%.
Payment of transfer tax is necessary because the evidence of its payment is
required by the Register of Deeds of the province concerned before registering any
deed. This is also required by the provincial assessor before cancelling an old tax
declaration and issuing a new one in its place. Furthermore, it should not be confused
with the transfer tax which is paid to the local government and the transfer taxes due to
the BIR (which may either be donors or estate taxes).
Real property,as used in the Code shall refer to Land, Building, and Machineries
intended by the owner of the land or building for industry or work which may be carried
on in a building/s or a piece of land which tend directly to meet the needs of the said
industry or work. Buildings shall refer to structures more or less permanently attached to
a place of land excluding those that are merely superimposed on the soil.

When to pay, Who should pay, and Where to pay

It is the seller, donor, trasferor, executor or administrators duty to pay the tax
imposed on the transfer of real property within sixty (60) days from the date of the
execution of the deeds as regards to sale, barter, donation or any other mode of
transferring ownership, or from the date of the decedents or property owners death in
the case of transfer by succession.
For the barangay level, the person involved in this transaction could be called a
real estate dealer. A real estate dealer is someone engaged in the business of buying,
selling, exchanging, leasing, or renting property as principal and holding himself out as
a full or part-time dealer in real estate or as owner of rental property/properties rented or
offered to rent for an aggregate amount of Five Thousand Pesos (Php 5,000.00).
The transfer tax is to be paid at the Treasurers Office of the city or municipality
where the property is located. However, collection fees that are due to be paid in the
barangay is the responsibility of the Barangay Treasurer or his duly authorized deputies.
It is also the the treasurers duty to issue official receipts after payment of the
transfer tax, fees, and other charges of the taxpayer indicating the date, amount, name
of person/s paying and the account for which it is paid.

Tax Base & Tax Rate

TAX BASE
Total consideration
involved in acquisition of
property

RATE

or

50% of 1%

Fair market value of

property

WHICHEVER IS HIGHER

Generally, transfer tax on real properties has a maximum rate of 50% of 1%

(75% of 1% in the case of cities and municipalities within Metro Manila) of the total
consideration involved in the acquisition of the property or of the fair market value in
case the monetary consideration involved in the transfer is not substantial, whichever is
higher. However, for Iloilo City, it was raised to 82.5% of 1%.
Considering the chosen barangay does not belong to a first-class municipality
where standard of living is not as luxurious than that of the city, it is therefore
reasonable enough to collect transfer tax on real properties at a rate of 50% of 1%.
From the tax collected above, the barangay has the right to claim 25% of the
transfer tax paid by the taxpayer and thus, is included in the barangays income.
The fair market value prevailing this matter would be as reflected in the prevailing
schedule of fair market values enacted by the Sanggunian concerned.

Exemptions

Transfers under RA 6657 Disposition of real property under CARP

CARP, or the Comprehensive Agrarian Reform Program, is the redistribution of

public and private agricultural lands to farmers and farmworkers who are landless,
irrespective of tenurial arrangement. CARPs vision is to have an equitable land
ownership with empowered agrarian reform beneficiaries who can effectively manage
their economic and social development to have a better quality of life.

Documentary requirements
Tax Clearance
Before registering any deed, the Register of Deeds of the City shall
require presentation of the evidence of payment of this tax. Likewise, the City
Assessors office makes the same requirement before cancelling an old tax
declaration and issuing a new one.
Notary Public
A notary public shall furnish the City Treasurer with a copy of the deed of
transfer of the real property within thirty (30) days from the date of notarization.

Filing Requirements and Procedures

Before transfer tax be paid by a taxpayer, it must be made sure that the property
is registered. Table 2 shows the steps on how to register the properties in Iloilo City
together with its costs.

Step

1
Prepare the
notarized
deed of sale
and related
documents

Procedure

Time to
Complete

Associated
Costs

While the deed of sale can be

prepared by anyone, it must be executed
before and notarized by a notary public. In
many instances, the notary public drafts the
deed of sale and conducts the whole
process on behalf of the parties.

1 Day

1-3% of
property
value

In addition to the deed of sale, the

Register of Deeds also requires both the
buyer and the seller to submit notarized
secretary's certificates containing the
resolution of their board of directors
approving the sale. The buyer must also
produce a certificate from the Securities and
Exchange Commission (SEC) stating that
its articles of incorporation have been
registered with the SEC.

The seller, after paying any arrears,

obtains a tax clearance certificate from the
CTO.

1 Day

Obtain tax
clearance
certificate of
The documentation shall include an
Real
Property Tax original of the official receipt evidencing
from the City payment by seller of realty taxes.
Treasurers
Office (CTO)

3
Obtain
certified true
copy of
latest tax
declaration
and
certificate of
with
improvemen
t from the
City
Assessors
Office (CAO)

4
Obtain
Certificate
Authorizing
Registration
(CAR) from
the Bureau
of Internal
Revenue
(BIR)

The seller must obtain a certified

true copy of the latest tax declaration for the
land and the building as well as a certificate
of with improvement from the CAO as
these documents are required by the BIR.
Loose documentary stamps must be affixed
to these documents as proof of payment of
the documentary stamp tax (DST) on
certificates.

Doc. Stamp
Tax
Php 15

1 Day

The taxpayer/applicant must submit the

following documents to the BIR:
a. Tax identification number (TIN) of seller
and buyer
b.
Notarized
deed
of
absolute
sale/document of transfer, but only
photocopied document shall be retained by
the BIR

Per RPU
Php 100
Cert. of
improvement

Php 100
Verification
fee
Php 60
DST per
RPU
Php 15

Documentation shall include the

tax clearance certificate of real property tax
(obtained in Procedure 2).

The Certificate Authorizing

Registration (CAR) is a certification issued
by the BIR that the transfer and conveyance
of the property was reported and the taxes
due have been fully paid.

Tax
Clearance
Php 100

21 Days

Certification
Fee
Php 100
Doc. Stamp
Tax
Php 15

c. Certified true copy of the latest tax

declaration issued by the City Assessors
Office for the land and improvement
applicable to the taxable transaction.
d. Owners copy (for presentation purposes
only) and photocopy (for authentication) of
the Original Certificate of Title (OCT), or the
certified true copy of the Transfer Certificate
of Title (TCT)
e. Sworn declaration of with improvement
by at least one (1) of the transferees, or
certificate of with improvement issued by
the Assessors Office

Pay
documentar
y stamp tax
and
creditable
withholding
tax (CWT) at
an
authorized
agent bank
(AAB).

Prior to payment, applicant

accomplishes BIR forms 2000-OT and 1606
for DST and CWT respectively, based on
the ONETT computation sheets prepared by
the BIR ONETT team. The applicant files
the DST return and CWT return and pays
the taxes at the AAB of the Revenue District
Office. Payment must be made through
either a managers check or cashiers check
within 5 days after the close of the month
when the taxable document was signed or
within 30 days from the sale, whichever is
earlier.

Upon receipt of proof of tax

payment from the taxpayer/applicant, the
BIR immediately issues a claim slip.
The transfer tax must be paid at
the CTO. The documentation shall include:

Pay the
transfer tax
at the CTO.

a. Tax clearance certificate of real property

taxes from the CTO (obtained in Procedure
2)
b. Certificate Authorizing Registration from
the BIR (obtained in Procedure 4)

1 Day

DST for
every Php
1000 value
of property
Php 15

CWT of 6%
of
SP/FMV/ZV
(higher)

1 Day

.50% (50%
of 1%) of
the property
price

c. Official receipt of the BIR (for

documentary stamp tax) (obtained in
Procedure 5)

7
Secure
registration
with the
Register of
Deeds (RD)

The buyer applies for registration

with the Register of Deeds. The
documentation
shall
include:

7 Days

Registration
Fee
(Rf:table)

a. Copy of deed of absolute sale

b. Official receipt evidencing payment of
transfer tax
c. Certificate Authorizing Registration from
the BIR (CAR) including official receipts for
payment of DST and CWT
d. Real property tax clearance from the City
Treasurers Office
e. Original copy of owner's duplicate of TCT
(in the name of the seller)
f. Original or certified true copy of the latest
tax declaration
g.
Notarized
secretary's
certificate
containing resolution of the board of
directors of the seller approving the sale
h.
Notarized
secretary's
certificate
containing resolution of the board of
directors of the buyer approving the sale
i. Articles of incorporation of the buyer and
by-laws
j. Certificate from the SEC that the articles
of incorporation of the buyer have been

Legal
research
fee
(1% of RF)
Judicial
Form Fee
Php 60
IT Fee
Php 2580
Primary
Entry Fee
for Copy of
Deed of
Sale
Php 30
RF for
specific
documents
Php 540
Issuance of
Title Fee
Php 60

registered.
The Register of Deeds has been
fully computerized since December 9, 2009
as a result of the Land Registration
Authority's land titling computerization
project.

8
Obtain new
tax
declaration
over the
building and
the land in
the name of
buyer from
CAO

The buyer applies with the CAO for the

issuance of a new tax declaration over the
building
in
his
name.
The

documentation

shall

include:

7 Days

Per RPU
and
Document
(DST)
Php 115

a. Photocopy of notarized deed of sale

(obtained in Procedure 1)
b. Tax clearance certificate of real property
taxes from the CTO (obtained in Procedure
2)
c. Copy of the latest tax declaration (in the
name of seller) (obtained in Procedure 3)
d. Certificate authorizing registration from
the BIR (obtained in Procedure 4)
e. Photocopy of official receipt of transfer
tax payment (original copy to be presented)
(obtained in Procedure 6)
f. The transfer certificate of title (TCT)
issued by the RD (in the name of the buyer)
(obtained in Procedure 7).

Step 6 shows the general procedures and requirements of filing and payment of
the transfer tax by the taxpayer.

Penalties for late payment/non-payment

Failure to pay the transfer tax required on time, as well as the prescribed
barangay clearance fees shall both subject the taxpayer to a surcharge of 25% of the
amount due, and an additional 2% monthly interest upon the unpaid balance due to
delinquency. But in no case shall the total interest on the unpaid amount or portion
thereof exceed thirty-six (36) months (which is a total of 72% interest).

Sample Computations
Mr. Pantaleon Revamonte IV owns a condominium in Brgy.(state name of barangay and
municipality) with a floor area of 50sqm and a selling price of Php 2,000,000.00 The
existing market value as per tax declaration is currently at Php 1,000,000.00.
Since the selling price is higher than the market value, we shall use the selling price to
compute the transfer tax:
Iloilo City Transfer Tax Rate: 0.5% [that is, 50% of 1%]
Transfer Tax = 0.05% x 2,000,000 = Php 10,000.00