Signing and notarizing the Deed of Absolute Sale does not by itself put the property in the buyer's name. The title must be transferred through the BIR, the local treasurer, the Register of Deeds, and the Assessor's Office. Missing a deadline along the way means surcharges and interest.
The taxes and fees on a typical sale
For the sale of real property classified as a capital asset (for example, a family home or a lot held by an individual not engaged in real estate business):
- Capital Gains Tax (CGT): 6% of the gross selling price or the fair market value, whichever is higher. The fair market value is the higher of the BIR zonal value and the value in the tax declaration. Customarily paid by the seller.
- Documentary Stamp Tax (DST): 1.5% of the same base. Customarily paid by the buyer.
- Local transfer tax: a percentage of the higher of the selling price or fair market value, up to 0.75% in cities and municipalities within Metro Manila such as Quezon City, paid to the city or municipal treasurer.
- Registration fees at the Register of Deeds, based on the schedule of the Land Registration Authority.
Who pays which tax can be changed by agreement. Write it clearly in the deed to avoid disputes.
Selling as a business? If the seller is a corporation or is engaged in the real estate business, the property may be an ordinary asset. Instead of capital gains tax, creditable withholding tax and possibly VAT apply. Check this before signing, because it changes the cost of the deal.
Deadlines that trigger penalties
- Capital gains tax: within 30 days from the date of notarization of the deed.
- Documentary stamp tax: on or before the 5th day of the month following the month of notarization.
- Transfer tax: within 60 days from notarization.
Late payment of national taxes generally carries a 25% surcharge plus interest. Plan the payment schedule before the deed is notarized.
Step by step
- Prepare and notarize the Deed of Absolute Sale. Check the title for liens, adverse claims, and the correct technical description first.
- Pay CGT and DST at the BIR office with jurisdiction over the property, and submit the required documents.
- Secure the eCAR (electronic Certificate Authorizing Registration). The Register of Deeds will not transfer the title without it.
- Pay the transfer tax at the city or municipal treasurer and secure a real property tax clearance.
- Register with the Register of Deeds. Submit the owner's duplicate, the deed, the eCAR, and the tax receipts. The old title is cancelled and a new one is issued in the buyer's name.
- Update the tax declaration at the City or Municipal Assessor's Office.
Documents commonly required
- Notarized Deed of Absolute Sale
- Owner's duplicate certificate of title and a certified true copy
- Latest tax declaration and real property tax clearance
- Valid IDs and TINs of seller and buyer
- For corporations: secretary's certificate or board resolution, and SEC documents
- Special power of attorney, if a representative signs
Not a sale? Different taxes apply
Transfers by inheritance are subject to estate tax, and transfers by donation to donor's tax, generally at 6% under current rules, plus DST and transfer tax where applicable. The documents and deadlines differ, so plan these separately.
Before relying on this guide: Tax rates, thresholds, and procedures change. Confirm current rates with the BIR and your local treasurer before each transaction.
Frequently asked questions
Who pays the capital gains tax, the buyer or the seller?
By custom the seller pays capital gains tax and the buyer pays documentary stamp tax, transfer tax, and registration fees. The parties may agree otherwise, so the deed should say who pays what.
Is the tax based on the price in the deed?
Not always. It is based on the gross selling price or the fair market value, whichever is higher. Declaring a lower price in the deed does not lower the tax.
What happens if we pay late?
Late payment generally results in a surcharge and interest, and the transfer cannot proceed until all taxes and penalties are settled.
How long does the whole transfer take?
It depends on how quickly the documents are complete and on processing times at the BIR, the treasurer, and the Register of Deeds. Complete documents are the biggest factor.