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What is Transfer Tax?

A transfer tax is imposed on tax on the sale, donation, barter, or any other mode of
transferring ownership or title of real property at the 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. This is pursuant to Section 135 of the Local Government Code of 1991 (LGC).
You need to pay the transfer tax 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. Please do not confuse the transfer tax which is paid to the
local government with the transfer taxes due to the BIR (which may either be
donors or estate taxes).
Disclaimer: While great effort has been taken to ensure the accuracy of the discussion
here as of its writing, this is not intended to replace seeking professional services.
Always consult with your tax attorneys and read up on the relevant laws and regulations
also.

Who should pay


The payment of the transfer tax is the responsibility of the seller, donor, transferor,
executor or and administrator.

When to pay
The deadline for payment is sixty (60) days from the date of the execution of the deed
or from the date of the decedents death. Please note too that notaries public are
required to furnish the provincial treasurers with a copy of any deed transferring
ownership or title to any real property within thirty (30) days from the date of
notarization.

Surcharges and penalties for late payments (as per section 168 of RA
7160)

Surcharge No more than twenty-five percent (25%) of the amount of taxes,


fees or charges not paid on time

Penalty No more than two percent (2%) per month of the unpaid taxes, fees or
charges including surcharges, until such amount is fully paid, but in not to exceed
thirty-six (36) months or seventy-two percent (72%).

Where to pay
The transfer tax is to be paid at the Treasurers Office of the city or municipality where
the property is located.

Requirements
In general, the requirements for the payment of transfer tax are the following:

Certificate Authorizing Registration from the Bureau of Internal Revenue;

Realty tax clearance from the Treasurers Office; and

Official receipt of the Bureau of Internal Revenue (for documentary stamp tax).

The bone of contention was the proper interpretation of Section 135 of the LGC which
provides:
SECTION 135. Tax on Transfer of Real Property Ownership. (a) The province may
impose a tax on the sale, donation, barter, or on any other mode of transferring
ownership or title of real property at the rate of not more than fifty percent (50%) of the
one percent (1%) 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. The sale, transfer or other disposition of real
property pursuant to R.A. No. 6657[2] shall be exempt from this tax. xxx

Sample Computation
Considering that there is still an issue as to the proper computation of the transfer tax
base, I suggest that we not delve into the various interpretations of Section 135 of the
LGC and simply multiply the transfer tax rate by the higher amount between the
consideration paid and the fair market value.
Lets take for example a residential condominium in Antipolo with a floor area of 50sqm
and a Selling Price (SP) of Php2.0M. The existing market value as per Tax Declaration
is currently at Php 1M.
Since SP is higher than the Market Value, we shall use SP to compute the transfer tax:
Antipolo City Transfer Tax Rate: 0.75% [that is, 75% of 1%]
Transfer Tax = 0.75% x 2,000,000 = Php15,000

What if you
computation?

dont

agree

with

the

Treasurers

Assuming you disagree with the tax assessment made by a local treasurer, you may file
a written protest thereof pursuant to Section 195 of the LGC, which provides:
SECTION 195.

Protest of Assessment. When the local treasurer or his duly

authorized representative finds that the correct taxes, fees, or charges have not been
paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge,
the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days
from the receipt of the notice of assessment, the taxpayer may file a written protest with
the local treasurer contesting the assessment; otherwise, the assessment shall become
final and executory. The local treasurer shall decide the protest within sixty (60) days
from the time of its filing. If the local treasurer finds the protest to be wholly or partly
meritorious, he shall issue a notice cancelling wholly or partially the assessment.
However, if the local treasurer finds the assessment to be wholly or partly correct, he

shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall
have thirty (30) days from the receipt of the denial of the protest or from the lapse of the
sixty-day (60) period prescribed herein within which to appeal with the court of
competent

jurisdiction,

otherwise

the

assessment

becomes

conclusive

and

unappealable.
In the case earlier discussed, the Petitioner protested in writing against the assessment
and Respondent denied it in writing as well. Petitioner should thus have either: 1)
appealed the assessment before the court of competent jurisdiction, or 2) paid the tax
and then sought a refund.

This is the standard sharing of expenses between the buyer and the seller
when transferring the real estate property title (TCT - Transfer Certificate of
Title or CCT - Condominium Certificate of Title) to a new owner:
The SELLER pays for the:
Capital Gains Tax equivalent to 6% of the selling price on the Deed of
Sale or the zonal value, whichever is higher. (Withholding Tax if the
seller is a corporation)
Unpaid real estate taxes due (if any).
Agent / Broker's commission.
The BUYER pays for the cost of Registration:
Documentary Stamp Tax - 1.5% of the selling price or zonal value or fair
market value, which ever is higher.
Transfer Tax - 0.5% of the selling price, or zonal value or fair market
value, which ever is higher.
Registration Fee - 0.25% of theselling price, or zonal value or fair
market value, which ever is higher.
Incidental and miscellaneous expenses incurred during the registration
process.

The above sharing of expenses is the standard practice in the Philippines.


However, buyers and sellers can mutually agree on other terms as long as it is
done during the negotiation period (before the signing of the "Deed of Sale").
The "Deed of Sale" or "Deed of Absolute Sale" is the document showing legal
transfer of real estate property ownership. The deed of sale is then taken to the
Registry of Deeds to be officially recorded after paying the documentary
stamp, transfer tax and registration fees. Alwaysverify from the Registry of
Deeds the authenticity of a Transfer Certificate of Title before buying a
property. If the seller only has a tax declaration, be extra cautious and check
with neighbours, the Barangay captain or anyone in the know in the
community to verify the seller/owner's true identity and the property's history.
Your Agent / Broker will usually do theregistration process (sometimes for a
fee). However, all government taxes, transfer fees and incidental or
miscellaneous expenses will be shouldered by the buyer.
Documents needed when transferring the title (TCT or CCT) to the new owner:
Certified true copy of the title
Notarized copies of the Deed of Sale
Latest tax declaration of the property
Certificate from the Bureau of Internal Revenue that the capital gains
tax and documentary stamps have been paid
Receipt of payment of the transfer tax and registration fees
An adapted form of the "Torrens" system of land registration is used in the
Philippines. The system was adapted to assure a buyer that if he buys a land
covered by an Original Certificate of Title(OCT) or the Transfer Certificate of
Title(TCT) issued by the Registry of Deeds, the same will be absolute,
indefeasible and imprescriptible.

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