Buying or selling real estate opens up a world of possibilities. However, it also comes at a cost. Whether you're a first-time homebuyer or a seasoned investor, understanding the costs of transferring land titles in the Philippines is essential in your real estate journey.

Read below to learn all the necessary fees and taxes to consider during the land title transfer process.

Overview of the Land Title Transfer Process

Transferring land titles in the Philippines involves a series of steps. The process of how to transfer land titles in the Philippines starts when the seller and buyer execute a Deed of Sale—a legally binding agreement stipulating the transaction's terms.

Afterward, the Bureau of Internal Revenue (BIR) undertakes the crucial task of assessing the property's value. This step is necessary to determine an accurate real property tax amount. After establishing the property's value, the next thing to do is to ensure financial compliance. Here, both parties must settle the costs of transferring land titles in the Philippines that apply to their role.

Then, the responsible party will submit all executed documents⎯such as the Deed of Sale⎯to the Registry of Deeds (ROD) for verification of the contract and forms. Once validated, the process advances to preparing the new title. The ROD then records the transfer and formally registers the new owner's name for the land title.

8 Fees and Taxes When Transferring Land Title in the Philippines

If you're contemplating buying property, you must know more than just how to transfer land titles in the Philippines. It's imperative to have an in-depth understanding of the various fees and taxes that come into play. Below are the costs of transferring land titles in the Philippines according to real estate laws and standard market practices.

The Buyer Pays

1. Transfer tax

According to the Local Government Code of 1991 (1), this tax is imposed on the "sale, donation, barter, on any other mode of transferring ownership or title of real property." Transfer tax has two types: one you pay to the local treasurer's office and the other to the BIR.

For the first type, you must calculate the amount based on the property's selling price or fair market value—whichever is higher. Typically, cities and municipalities outside Metro Manila impose a maximum tax of 50% of 1% of the property's value. However, those inside the metro can set a maximum of 75% of 1% of the property's value (2).

Additionally, the BIR imposes a transfer tax. You may need to pay 6% of the exceeding sum (3) from the Php 250,000 exempted value for donated property. Meanwhile, inherited properties incur a tax of 6% of the net estate value (4) at the time of the benefactor's death.

2. Documentary stamp tax

The documentary stamp tax amounts to 1.5% of the property's selling price or fair market value (5)⎯whichever is higher. This tax validates the transaction's legal records, which you incur from the Deed of Sale and accompanying documents. It reinforces the authenticity and legality of the transfer.

3. Registration fee

This fee is for legally registering the transfer of land ownership. You must pay to the Registry of Deeds with jurisdiction over the property. The amount generally costs around 0.25% of the property's selling price.

4. Commission of agent or broker

Buying properties can be tricky if you're unfamiliar with the ins and outs of real estate, but enlisting the help of a real estate agent or a broker can make things easier. However, you must prepare your funds for the costs of taking this route.

Typically, real estate agents or brokers charge around 3% to 5% of the land's sale price. This expense signifies your agent is responsible for ensuring a successful transaction with the seller.

5. Additional or miscellaneous expenses

When buying property or land, you must have enough funds to cover expenses accompanying the purchase of a property, including notarial fees, transportation costs, etc. For instance, notarizing your Deed of Absolute Sale will cost you around 1.5% of the property's selling price (6).

The Seller Pays

6. Unpaid real estate or property tax

The property's seller must address any outstanding real estate or property taxes before the property transfer. Generally, the property's price and the prevailing tax rates determine how much the seller should pay. The current real estate tax rate for provinces is 1% and 2% for those within Metro Manila.

7. Capital gains tax

This tax is an essential facet of the seller's financial obligations in the transaction. According to BIR (7), the capital gains tax is "imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines." Currently, the tax rate for capital gains on real property is 6%.

8. Withholding tax

Based on amended tax rates on real property, the withholding tax can range from 1.5% to 6% (8) of the land's selling price. The rate depends on whether the paying party is "habitually engaged" in selling real estate properties. Corporations that own properties also incur this tax.

Navigating the Costs of Land Ownership in the Philippines

Embarking on land ownership in the Philippines requires a good grasp of the intricate financial responsibilities, regardless of whether you're the buyer or seller. Knowledge of the fees and taxes associated with property transactions can empower you to make informed decisions and navigate its complexities confidently.

If you're looking to invest in real estate or buy a new home, visit OnePropertee. We offer a wide array of properties in the Philippines catering to your needs—from foreclosed properties to lots for sale in the province. Check our listings today to learn more!

Sources

1. “Republic Act No. 7160.” Accessed Aug. 30, 2023. https://faolex.fao.org/docs/pdf/phi93246.pdf.

2. "Closing of Real Estate Sale Transactions and Transfer of Title." Arceo & Tandoc Law Firm, Sept. 15, 2021. https://www.arceotandoc.com/single-post/closing-of-real-estate-sale-transactions-and-transfer-of-title.

3. "Donor's Tax." Bureau of Internal Revenue. Accessed Aug. 30, 2023. https://www.bir.gov.ph/index.php/tax-information/donor-s-tax.html.

4. "Estate Tax." Bureau of Internal Revenue. Accessed Aug. 30, 2023. https://www.bir.gov.ph/index.php/tax-information/estate-tax.html.

5. "Documentary Stamp Tax." Bureau of Internal Revenue. Accessed Aug. 30, 2023. https://www.bir.gov.ph/index.php/tax-information/documentary-stamp-tax.html.

6. Atty. Martelino, Raymund. "Notary Public and the Pandemic." Property Report, June 18, 2020. https://propertyreport.ph/news-and-events/2020/06/19/14442/notary-public-and-the-pandemic/.

7. "Capital Gains Tax." Bureau of Internal Revenue. Accessed Aug. 30, 2023. https://www.bir.gov.ph/index.php/tax-information/capital-gains-tax.html.

8. "21 Items Subject to Expanded Withholding Tax under Train RA 10963." Tax and Accounting Center, Inc. Accessed Aug. 30, 2023. https://taxacctgcenter.ph/items-subject-expanded-withholding-tax-train-ra-10963-philippines/.