Tax Declaration of Real Property – Transfer Tax Guide Philippines

What is Transfer Tax?

Transfer tax is the tax imposed on any transaction that results in the barter, the sale or the transfer of title of real property you possess. As a taxpayer, the transfer tax is needed to be settled before you are issued your new transfer certificate of title. These rates vary and depend on the Local Government Unit of that Municipality/City.

It is a common practice that the subsequent owner takes care of the transfer taxes, registration fees, documentary stamps and other incidental or additional fees incurred during the registration process of the transfer. Meanwhile, the obligation of the former owner of the said property before its transfer shall take care of the withholding taxes, capital gains tax, the commission from the agent/broker and the outstanding estate taxes due. Though, there are cases where both subsequent and former owners can mutually agree on who pays what during the negotiation period during the birth of the contract (e.g. unsigned Deed of Sale or Land Transfer Title).

When are Transfer Taxes due?

As a taxpayer settling dues, transfer taxes must be settled within sixty (60) consecutive days starting from the execution of the contract or notarization (Deed of Sale/Transfer of Title).

Once your payment is settled, the LGU involved shall issue a clearance document that shall serve as evidence of the payment of your transfer taxes. Acquiring this document is highly significant as this is a mandatory requirement when registering the deed of Absolute Sale of the property at hand. This is also a mandatory requirement when requesting for the cancellation of the old tax declaration for the acquisition of a new one.

Penalties accrued due to late payment of Transfer Tax

In the event where the taxpayer fails to pay or is late to pay the transfer tax due, provided bySection 168 of Republic Act 7160(also known as our Local Government Code), the following penalties shall apply:

(a) Surcharge not exceeding twenty five percent (25%) of the amount of taxes, fees, or charges not paid on time;

(b) Penalties no more than two percent (2%) per month of the unpaid taxes, fees, or charges including the surcharge, until such amount is fully paid but should not exceed thirty-six (36) months or seventy two percent (72%).

Where to pay Transfer Tax?

You may settle your transfer tax at either the Bureau of Internal Revenue (BIR) or at the Local Treasurer’s Office (LTO) of the Municipality/City where the transferred or bought property is located. In most cases, it is much easier to pay at the Local Treasurer’s Office (LTO), as their jurisdiction falls directly to the property located in their specific city/municipality.

Requirements to bring when paying Transfer Taxes

Be mindful that before visiting the respective Local Government Unit (LGU) handling and receiving transfer taxes – the LTO – you must first acquire the original copies of the following:

Certificate Authorizing Registration (CAR) from the bureau of Internal Revenue (BIR);
Real Property Tax Clearance from the Treasurer’s Office (LTO);
Official Receipt from the BIR (for the Documentary Stamp Tax (DST));
Deed of Sale

Additional documents may also be required for submission:

Certified true copy of the Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT) or Condominium Certificate (CCT)
Latest Tax Declarations (land and improvement as applicable)

Providing and saving photocopied duplicates of these documents is also a tactful way of keeping records up to date when the time comes where they are required for validation.

You may also file for a written protest pursuant toSection 195 of R.A. 7160, assuming that you disagree with the Local Treasurer’s computation regarding your transfer taxes.

“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.”

Should you need help or assistance in the processing of the necessary requirements for Transfer Taxes to complete the transfer of your transfer of certificate of title under your name, we are a Transfer of Title Service Provider. You may contact us at info@filedocsphil.com or +63.977.241.5709.