Congratulations for finally purchasing your dream lot! Now, what? Well I hate to burst your bubble, but there are deadlines you need to beat and taxes you need to pay! Otherwise, the BIR and the city or municipal government will be coming at you with penalties and surcharges. So buckle up, collect all documents, fill your pockets with cash, and take a dosage of a lot of patience because transferring of land titles in the Philippines requires not only paper works but also payments and of course, waiting!
But if you are still planning to buy a property, check out my post about things you need to consider before closing that deal. This is important because if something wrong happens and unfortunately you are sued, I tell you, you cannot feign ignorance in the court.
Another fact that you need to note is there is really no clear cut rule as to who should handle the process and the expenses of the transfer. It all depends on what is agreed upon between the buyer and the seller.
Now let’s get back to the step-by-step process of transferring a land title in your name. I am sharing with you another first-hand experience. It may happen that your BIR or local government unit you are transacting with will require other documents as necessary. Either way, I think the basics are already here.
Notarized Deed of Absolute Sale
You can draft your own Deed of Sale by simply copying from the internet. But if you want to be sure, then you can let your lawyer make it for you. Both the seller and the buyer should personally appear before the notary public when signing the Deed of Absolute Sale. The notarization requires a fee of about 1% to 1.5% of the property’s selling price, but no less than ₱1,000. The amount actually depends on the IBP Rules and Regulations that set the fees or of course, if you personally know the lawyer.
TIP: In the Deed of Absolute Sale, make sure to complete the details about the circumstances of both the seller and buyer. This is important because I once processed a transfer with the details incomplete. For example, I failed to put civil status of the seller. Also, while the buyer was married, I did not write “married to (name of the spouse)”. This caused delay with the Registry of Deeds (RD) or Land Registration Authority (LRA). They instructed me to go back to the notary public and let her correct the details and countersign it. The lesson is to always put the correct spelling of the names of the parties, their civil status, citizenship, and addresses. If the buyer is married but she is not buying the property with her spouse, place her name and beside it, put “married to (name of the spouse)”. Or, you can put “Spouses” before their names.
Owner’s Duplicate Copy of the Original or Transfer Certificate of Title
Tax Declaration of the subject property
You can get this from the City or Municipality Assessor’s Office where the property is located. If there is an existing improvement (e.g. house) on the subject property, secure also the Tax Declaration of that improvement.
Note that if there is no improvement in the subject property, you need to secure a Certificate of No Improvement issued by the City of Municipal Assessor’s Office.
TIN of the seller and buyer
A person has only one TIN number issued by the BIR. If you have none, the BIR will give you one once you go there to submit your documents.
Special Power of Attorney
If the person processing the transfer is not the owner, you need a Special Power of Attorney (SPA). Again, ask a lawyer to make one for you. Also, your SPA should enumerate that you are appearing on behalf of the owner in all the following government agencies: BIR, RD/LRA, Local Government Unit concerned, Department of Agrarian Reforms (DAR) if the subject property is agriculture.
Photocopies of the Government-issued Identification Cards of the seller and buyer
Photocopy all your documents in multiple copies. At least 5 is okay but you can have more just to be sure.
STEP 2: Submit these documents to the Bureau of Internal Revenue (BIR)
Okay. You cannot just go to any BIR Office and file the documents. You can only proceed to the BIR where the property is located. For example, when the property is located somewhere in Itogon, Benguet, you go to BIR La Trinidad Benguet RDO No. 009 to submit your documents and not in BIR Baguio City RDO No. 008.
When you arrive in BIR, have your documents assessed. Note that you don’t need to submit yet the original of your OCT/TCT because your worst nightmare is losing that in BIR office. So you can submit a certified true copy or the BIR will certify that the photocopy is a faithful reproduction of the original. When they receive your documents, they will check the completeness of your documents as well as calculate the taxes you need to pay which are:
Capital Gains Tax (CGT)
This is the tax you need to pay for a sale of a real property held as a capital asset. The rate is 6% based on the gross selling price or zonal value or fair market value whichever is higher. Gross selling price is the amount written in your Deed of Absolute Sale while the Fair Market Value is the amount based on the schedule of values issued by the Provincial or City Assessor. Zonal value is the amount set by the BIR for taxation purposes. Remember to pay the CGT not later than thirty (30) days from the date of the taxable transaction, that is, at the date of the notarization of the Deed of Absolute Sale.
Documentary Stamp Tax (DST)
This is the tax levied on documents, instruments, loan agreements, and papers evidencing any sale, acceptance, assignment or transfer of an obligation, rights, or property incident thereto. The DST return should be filed and the tax paid within five (5) days after the close of the month when the taxable document was made, that is, at the date of the notarization of the Deed of Absolute Sale. For example, the date of notarization is January 15. Hence, the month when the taxable document was made is January and the close of the month is January 31. This means that you should pay the DST before February 5. Same applies to all other months. The tax rate is ₱15 for every ₱1000.00 of the consideration or value or fractional part thereof. This is about 1.5% divided by ₱1000.00.
The BIR will then give you an ONETT COMPUTATION SHEET which contains the computation of taxes you need to pay. You will also be asked to fill out and sign copies of BIR Forms 1706 (CGT), 2000 (DST) and 0605 Payment Form for the ₱100 Certification Fee.
STEP 3: Pay in the bank.
You can now go to an Authorized Agent Bank (AAB) to pay the taxes and fees. Get three (3) deposit slips and fill it out according to the assessed amounts of CGT, DST and certification fee that you need to pay. Write your name as the payor or account holder while write “Bureau of Internal Revenue” as the company name. You also need to write your TIN number. You can only pay in an AAB which is within the territorial jurisdiction of the BIR you are transacting with. The AABs are usually listed and posted in the BIR. Check the operating hours of these AABs because usually, they only accept BIR payments before 12NN. And yup, you need another dose of patience here because there’s a long line for BIR payments in the bank. After paying, the bank will stamp your copy of the deposit slips.
STEP 4: Go back to BIR and file the documents.
Submit the stamped deposit slips together with the BIR Forms that you earlier signed. The BIR will then give you a claim slip with the scheduled date of the issuance of Certificate Authorizing Registration (CAR). There are phone numbers written there. It is best to follow-up first before going back to claim the CAR. Under BIR Rules, the CAR should be available after five (5) days from the time you have submitted your documents. However, that is not usually the case. The last one I processed took me more than two (2) weeks to wait.
STEP 5: Claim your CAR.
The CAR will be released together with the other documents that you have submitted earlier but already stamped by the BIR including the deposit slips from the bank. Note that the validity of the CAR is five (5) years reckoned from the date of issuance for purposes of presenting the same to the RD or LRA. If expired, a new CAR should be generated and issued upon the request of the taxpayer.
STEP 6: Pay the Transfer Taxes at the City or Municipal Treasury Office
Okay. So this transfer tax is different from those taxes you already paid with the BIR. This one is payable to the city or municipality where the property is located. According to the Local Government Code (LGC), 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. Note also that this should be paid within sixty (60) days from the date of the execution of the deed.
To pay the transfer taxes, you need to present the original and submit a photocopy of the Deed of Absolute Sale and Tax Declaration. If the owner is not the one processing, you need to show an authorization or an SPA with photocopies of the IDs of buyer and seller.
STEP 7: Secure a Tax Clearance Certificate from the City or Municipal Treasury Office
Like I said before, make sure that the real property taxes of the subject property is settled. To get a tax clearance certificate, present the Tax Declaration and/or the Official Receipt of the payment of the latest real property tax.
The payment of transfer taxes and securing a tax clearance certificate need not be done while waiting for your CAR from the BIR because I once tried doing this step first even before going to the BIR.
STEP 8: Submit documents with the Registry of Deeds or Land Registration Authority and pay the fees
Once your CAR is released, it is now time to go to the Registry of Deeds to submit all the documents, which are:
- Original Deed of Absolute Sale, the one already stamped by the BIR
- Owner/seller’s copy of the OCT or TCT
- CAR from the BIR and all other documents attached therein
- Official Receipts or Deposit slips of payments of CGT, DST together with the BIR returns
- Official Receipt of payment of the local transfer tax
- Tax Clearance Certificate
- Certificate of no Improvement if applicable
- Tax Declaration
- Special Power of Attorney if applicable
If all your documents are okay and complete, it’s time to pay the registration fees based on an Assessment Form and Payment Order that will be given to you. A registration fee is the amount you pay for registering the Deed of Absolute Sale with the Registry of Deeds. I actually do not know how they compute the fees but I found a schedule of fees from the RD/LRA. To give you a sample, the last transaction that I had was worth 4M, hence, we paid more or less ₱22,000.00.
In the Assessment Form and Payment Order, the date when you can claim your registered documents is written on the upper right of the document.
STEP 9: Release of the new TCT and issuance of new Tax Declaration
Once you got your new TCT, the process doesn’t end there because you need to go back to the City or Municipal Assessor’s Office for the issuance of a new Tax Declaration. Bring with you all the documents that you got from the Registry of Deeds which shall include the new TCT, Deed of Absolute Sale, CAR, Tax Clearance Certificate, and the Official Receipt for the payment of Transfer Tax.
FINALLY! You are done! It is indeed a very long process. If all your documents are complete, then you are lucky to finish it in few months. Additionally, it takes guts and patience to finish it all. P.S. If there is one thing I forgot to tell you, that is to bring your own pen! Goodluck!