What is Capital Gains Tax on Real Estate?

Taxes are indeed inescapable and the real estate industry is no exception. I am sure a
lot of real estate investors are very much interested to know the taxes involved in
investing as they significantly impact the total cost of acquiring a property.
What may seem like a good deal may turn out to be a bad one, if all the taxes are
factored in. So before you go ahead and plunge into the world of real estate investing, I
suggest you take the time to study taxes. For this post, I will be discussing capital
gains tax on real estate.
Ill try to discuss capital gains tax on real estate in laymans terms, based on what I have
learned, for purposes of information-sharing. A disclaimer is in order of course: 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. Do read up on the
relevant laws and regulations also.

Capital Gains Tax vs. Income Tax

When there is a sale of real estate, automatically people think that they have to pay
Capital Gains Tax (CGT). This is not necessarily the case. CGT is a tax on the gain from
the sale of capital assets. Regular corporate income tax (RCIT) [for corporations] and
regular income tax [for individuals] apply to the sale of ordinary assets while CGT
applies to the sale of capital assets.
Thus, we first have to determine whether the asset being sold is a capital or an ordinary
asset so as to know the proper tax rate to be used and the BIR form to be used, among
others.

Capital assets vs. Ordinary assets

The term capital assets is defined negatively in Section 39(A)(1) of the Tax Code as
follows:
(1) Capital Assets. the term capital assets means property held by the taxpayer
(whether or not connected with his trade or business), but does not include
stock in trade of the taxpayer or other property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable year, or
property held by the taxpayer primarily for sale to customers in the ordinary course of

his trade or business, or

property used in the trade or business, of a character which is subject to the allowance
for depreciation provided in Subsection (F) of Section 34;
or real property used in trade or business of the taxpayer.
As applied to the real estate industry, the terms capital assets and ordinary assets
are defined in Section 2(c) of Revenue Regulations (RR) No. 7-2003 dated December
27, 2002. Its essentially the same as the above definition.
It has an additional provision, though, on real properties acquired by banks through
foreclosure sales the same are considered as their ordinary assets but banks shall not
be considered as habitually engaged in the real estate business for purposes of
determining the applicable rate of expanded withholding tax.
Since we are talking about the sale of real property here, we need to know the definition
of real property. Section 2(c) of RR No. 7-2003 states that Real property shall have
the same meaning attributed to that term under Article 415 of Republic Act No. 386,
otherwise known as the Civil Code of the Philippines. Article 415 of the Civil Code
provides:
Art. 415. The following are immovable property:
(1) Land, buildings, roads and constructions of all kinds adhered to the soil;
(2) Trees, plants, and growing fruits, while they are attached to the land or form an
integral part of an immovable;
(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot
be separated therefrom without breaking the material or deterioration of the object;
(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in
buildings or on lands by the owner of the immovable in such a manner that it reveals
the intention to attach them permanently to the tenements;
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works;

(6) Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar
nature, in case their owner has placed them or preserves them with the intention to
have them permanently attached to the land, and forming a permanent part of it; the
animals in these places are included;
(7) Fertilizer actually used on a piece of land;
(8) Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and
waters either running or stagnant;
(9) Docks and structures which, though floating, are intended by their nature and object
to remain at a fixed place on a river, lake, or coast;
(10) Contracts for public works, and servitudes and other real rights over immovable
property.
Thus, it appears that it is not only the sale of land and buildings or houses which we
should be focusing on, but also the sale of the above.
As RR No. 7-2003 is a very important rule on real estate, I have included the said
regulations in this post for your reference. Read it in its entirety. You may download a
copy here. Answers to frequently asked questions can be found in this document.
In simple terms, if the property is not ordinarily held for sale (as inventory) or used in
business and subject to depreciation, then the property is a capital asset. Now, if a
seller is engaged in the real estate business, and the property is one he holds out for
sale to the public, then the property may be considered as an ordinary asset.
[Note that there may be instances when a seller is engaged in the real estate business
but the property is not held for sale or used in business or was idle for a long time this
is one of the instances when the property may be considered a capital asset.]
Conversely, if a seller is not engaged in the real estate business, and the property is not
used in business and subject to depreciation, the property may be considered as a
capital asset, the sale of which is subject to CGT.
Section 3 of RR No. 7-2003 provides the Guidelines in Determining Whether a
Particular Real Property is a Capital Asset or Ordinary Asset.

Tax Rate to be Used

When the real property which is a capital asset to the seller is sold, the gross selling
price or fair market value (FMV) [zonal value], whichever is higher, will be subject to 6%
CGT. Please refer to the BIR
website http://www.bir.gov.ph/zonalvalues/zonalvalues.htm for the zonal values.
Technically, its not really only the gain (selling price less cost) which is taxed, because
even if the seller suffered a loss (that is, the selling price is lower than the original
acquisition cost of the property), there will still be CGT, because a gain is always
presumed.
On the other hand, if the seller is engaged in the real estate business, and the real
property sold is an ordinary asset, the sale will be subject to RCIT [or minimum
corporate income tax (MCIT), when applicable] if the taxpayer is a corporation and
income tax if the seller is an individual.
The proceeds from the sale of the real property will be included in the sellers global
income (meaning income from all sources note that domestic corporations and
resident citizens are taxed on all sources of income, whether from within or outside the
country) and only the net income, after allowable deductions such as depreciation,
losses, etc. will be subjected to RCIT, MCIT, or regular income tax, whichever is
applicable.
ADVERTISEMENT

Under Republic Act No. 9337, the RCIT is now 30% on net taxable income (beginning
on January 1, 2009, down from 35%). The regular income tax for individuals remains at
32%.
Please note that there is an exception to the application of the CGT, and that is the sale
of a principal residence (your own home). This deserves a separate discussion as I
intend to take advantage of this when we purchase our next residence.

BIR procedure
Assuming that you are interested in buying a property from a seller who is an individual
and who is not engaged in the real estate business, the seller needs to pay CGT on the
sale of his real property, unless you have made an agreement that you as the buyer will
shoulder this.
The seller needs to file BIR Form No. 1706 within thirty (30) days after each sale,
exchange, transfer or other disposition of real property. You can download BIR Form
No. 1706 here.

Documentary Requirements
1 ) One original copy and one photocopy of the Notarized Deed of Sale or Exchange
2 ) Photocopy of the Transfer Certificate of Title; Original Certificate of Title; or
Condominium Certificate of Title
3 ) Certified True Copy of the tax declaration on the lot and/or improvement during
nearest time of sale
4 ) Certificate of No Improvement issued by the Assessors office where the property
has no declared improvement, if applicable or Sworn Declaration/Affidavit of No
Improvement by at least one (1) of the transferees
5 ) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable
6 ) Duly approved Tax Debit Memo, if applicable
7 ) Sworn Declaration of Interest as prescribed under Revenue Regulations 13-99, if
the transaction is tax-exempt
8 ) Documents supporting the exemption
Additional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures.

How to File the Capital Gains Tax Return

You just have to file the Capital Gains Tax return in triplicate (two copies for the BIR and
one copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue
District where the property is located, along with the documentary requirements and the
tax due.
In places where there are no AAB, the return will be filed directly with the Revenue
Collection Officer or Authorized City or Municipal Treasurer. You can view the Revenue
District Offices (RDO) here: http://www.bir.gov.ph/directory/rdo.htm. Click on the
concerned RDO.

For example, if you click on RDO 48 West Makati, you will get
tohttp://www.bir.gov.ph/directory/rdoinner.htm#48. The names of the Revenue District
Officer and Assistant Revenue District Officer as well as their contact numbers and email addresses, and the address of the Revenue District Office and the AABs within the
said RDO may be found there.

Sample CGT computation

A residential condominium in Makati City with a floor area of 50sqm has a Selling Price
(SP) of 1.0M. The existing zonal value per square meter for that condo in Makati is
currently Php50,000/sqm. You have called the owner and found out that he is not
engaged in the real estate business.
He also told you that as part of the deal, the buyer shall shoulder the CGT. As the buyer,
how much is the CGT which you will have to pay the seller on top of the selling price?
First lets compute for the Fair market Value (FMV):
FMV=Zonal Value x Floor Area
=50,000 pesos/sqm x 50sqm
=2,500,000 pesos
Since FMV is higher than SP, we shall use FMV to compute the CGT:
CGT=6% x FMV
=0.06 x 2,500,000 pesos
=150,000 pesos
Therefore, the buyer shall have to shell out an additional 150,000 pesos.
Note that while technically, the CGT is always the responsibility of the seller, and that if
the buyer shoulders the CGT, it is in effect part of the selling price to be compared to
FMV for purposes of computing the 6% CGT, I noted that the practice of banks is to
compute the CGT this way.
Now, what if you called up the seller and told him that you are willing to buy the property
but he should shoulder the capital gains tax as the seller, then he counters your offer
and says he is willing to shoulder the CGT up to his selling price and the buyer shall
shoulder the CGT for the excess or the difference between the SP and FMV, how do
you compute for the CGT?
First, lets compute for the excess or difference between the SP and the FMV:

Excess=FMV-SP
=2,500,000pesos 1,000,000pesos
=1,500,000 pesos
Now, lets compute for the CGT to be shouldered by the buyer:
CGT for the buyer =6% x Excess
=0.06 x 1,500,000 pesos
=90,000 pesos
The CGT to be shouldered by the seller is as follows:
CGT=6% x SP
=0.06 x 1,000,000 pesos
=60,000 pesos
Take note that the total CGT is 90,000 pesos + 60,000 pesos = 150,000 pesos, which is
consistent with our first computation. The CGT was just split between the buyer and the
seller.
As investors, we should always try to negotiate for the best terms and in relation to this
particular example, always try to have the other party shoulder the CGT.
The seller will still be the one to file the CGT and he shall have to file the return in an
Authorized Agent Bank within the Revenue District where the property is located in
Makati, within 30 days the deed of sale was executed.

Creditable Withholding Tax In Real Estate Transactions

Creditable withholding tax (CWT) is the tax which is withheld by the buyer/withholding
agent from his payment to the seller for the sale of the sellers ordinary asset/services,
and which tax is creditable against the income tax payable of the seller. I know this
sounds confusing so let me tell you about the withholding tax system first.
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. Do
read up on the relevant laws and regulations also.

Background on the Withholding Tax System

We all know that the ordinary income of a person/corporation is subject to regular

income tax. Under the withholding tax system, the government gives the buyer the
responsibility to withhold a certain percentage of his payment to the seller and remit the
same to the government. Thus, the amount remitted by the buyer to the seller is less
than the purchase price. The buyer should provide the seller with BIR Form No.
2307 (Certificate of Creditable Taxes Withheld) which states the amount of the taxes he
withheld.
The tax withheld is called the withholding tax and the buyer in this case is called a
withholding agent. Please note that this only applies to the ordinary income of the seller,
as opposed to his capital gain. Please refer to my earlier post on the difference between
ordinary assets and capital assets.
What is the rationale for this system?, you may ask.
To put it simply, the tax withheld by the buyer acts as the advanced payment of the
sellers taxes. Since the seller will only pay income taxes on a quarterly basis, and the
government spends all throughout the year, it would be difficult for the government to
operate if it only gets income taxes quarterly. Also, since the buyer withholds only a
small percentage of the sellers gross receipts (lets say 2%), the government is alerted
that the seller realized income to the extent of the grossed-up amount of the taxes
withheld.
For example, P2,000.00 which pertains to 2% withholding tax means that the seller sold
P100,000.00 worth of assets/services for which he should pay income taxes. When the
time comes for the payment by the seller of his income taxes, and he doesnt declare
the income from which the buyer withheld taxes, a discrepancy will arise and the
government will have a tip to investigate whether the seller is paying the correct taxes.
Take note, the Bureau of Internal Revenue (BIR) already has computer software in
place which determines discrepancies automatically.

On the part of the buyer, he must withhold taxes, otherwise, he will not be able to
deduct his expense. For example, if his expense is P100,000.00 and he is required to
withhold 2% of this or P2,000.00 and he does not withhold and remit this amount, for
income tax computation purposes, he may not deduct his P100,000 expense from his
taxable income.
Thus, if his gross income is P200,000.00 and he may not deduct the P100,000.00
expense (assuming there are no other deductible expenses of course), he will pay taxes
based on a net income of P200,000.00 instead of P100,000.00.
On the part of the seller, since the taxes withheld act as his advanced payment of his
income tax, when the time comes for the quarterly payment of income taxes, he will
subtract the tax withheld from his income tax payable. For example, if his income tax
payable is P32,000.00 and the tax withheld from him is P2,000.00, then he will only pay
P30,000.00 income tax.
As proof of the taxes withheld, he should attach the BIR Form No. 2307 (Certificate of
Creditable Taxes Withheld) provided by the buyer to his income tax return.
Creditable Withholding Taxes On Real Estate Transactions

As earlier noted, this only applies to the sale of real estate which are ordinary assets of
the seller. Thus, when the real estate sold is a capital asset to the seller, his income
from the sale of real estate will be subject to capital gains tax, and no creditable
withholding tax shall be imposed on the transaction.
Please refer to my earlier post about ordinary assets vs. capital assets. From hereon we
will assume that we are talking about the sale of ordinary real estate assets.
Going now to the creditable withholding tax base, the withholding agent/buyer is
required to withhold a creditable withholding tax based on the higher of the following:
a) gross selling price/total amount of consideration, or
b) the fair market value determined in accordance with Section 6(E) of the Code.

Under Section 2.57.2 (J) of Revenue Regulations (RR) No. 2-98, as amended by RR
No. 6-2001, the percentages of taxes to be withheld are as follows:
A. Upon the following values of real property where the seller /transferor is habitually
engaged in the real estate business as per proof of registration with the HLURB or the
HUDCC or other satisfactory evidence (for example, he/it consummated during the
preceding year at least six taxable real estate transactions, regardless of amount):
a)With a selling price of Seven Hundred Fifty Thousand Pesos (P500.000.00) or
less

1.5
%

b)With a selling price of more than Five Hundred Thousand Pesos but not more 3.0
than Two Million Pesos (2,000,000.00)
%
c)With a selling price of more than Two Million Pesos (2,000,000.00)

5.0
%

B.
Where the seller/transferor is not habitually engaged in the real estate business 6.0
(but the real estate sold is an ordinary asset)
%

C.
Where the seller/transferor is exempt from creditable withholding tax in
accordance with Section 2.57.5 of Revenue Regulations No. 2-98 [When the
Exem
seller is exempt from income taxes. As earlier noted, the creditable taxes
pt
withheld serve as advance payment of income taxes. So when a seller is taxexempt, it follows that no tax should be withheld from his income.]

Please note that the sale of foreclosed properties by banks is subject to creditable
withholding tax of 6% because banks are not considered as habitually engaged in the
real estate business, and properties acquired by banks through foreclosure sales are
considered as ordinary assets pursuant to Revenue Regulations No. 7-2003.
Time and Place of Payment of Creditable Withholding Tax

A. General Rule

Section 4 of RR No. 004-08 dated February 19, 2008 provides for the time and place of
payment of creditable withholding tax and DST on the sale, exchange or other mode of
onerous disposition of real properties classified as ordinary assets.
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Creditable withholding taxes deducted and withheld by the withholding agent/buyer on

the sale, transfer or exchange of real property classified as ordinary asset, shall be paid
by the withholding agent/buyer upon filing of the return with the Authorized Agent Bank
(AAB) located within the Revenue District Office (RDO) having jurisdiction over the
place where the property being transferred is located within ten (10) days following the
end of the month in which the transaction occurred. The creditable withholding tax
return is BIR Form 1606.
Taxes withheld in December shall be filed on or before January 15 of the following year.
Please note that this is subject to the rules prescribed by Electronic Filing and Payment
System (EFPS) regulations in case the taxpayer is an EFPS taxpayer. Useful tip: You
can find the AABs for each RDO in the BIR website. Just click on the RDO number
concerned.

Rules under Section 2.57.2 (J) of Revenue Regulations (RR) No. 298, as amended by RR No. 17-2003, in cases where the buyers are
engaged or not engaged in trade or business:
B. Buyer is not engaged in trade or business
1. Installment Sale

Under Section 2.57.2 (J) of Revenue Regulations (RR) No. 2-98, as amended by RR
No. 17-2003, if the sale is a sale of property on the installment plan (i.e., payments in
the year of sale do not exceed twenty five percent (25%) of the selling price), no
withholding is required to be made on the periodic installment payments.

In such a case, the applicable rate of tax based on the gross selling price or fair market
value of the property at the time of the execution of the contract to sell, whichever is
higher, shall be withheld on the last installment or installments immediately prior to such
last installment, if the last installment is not sufficient to cover the tax due, to be paid to
the seller until the tax is fully paid.

2. Cash Basis or Deferred Payment Sale Not on the Installment Plan

If the sale is on a cash basis or is a deferred-payment sale not on the installment

plan (that is, payments in the year of sale exceed 25% of the selling price), the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property, whichever is higher, on the first installment.

C. Buyer is engaged in trade or business

1. Installment Sale

If the sale is a sale of property on the installment plan [i.e., payments in the year of sale
do not exceed twenty five percent (25%) of the selling price], the tax shall be deducted
and withheld by the buyer from every installment which tax shall be based on the ratio
of actual collection of the consideration against the agreed consideration appearing in
the Contract to Sell applied to the gross selling price or fair market value of the property
at the time of the execution of the Contract to Sell, whichever is higher.
2. Cash Basis or Deferred Payment Sale Not on the Installment Plan

If the sale is on a cash basis or is a deferred-payment sale not on the installment

plan (that is, payments in the year of sale exceed 25% of the selling price), the buyer
shall withhold the tax based on the gross selling price or fair market value of the
property, whichever is higher, on the first installment.

In any case, no Certificate Authorizing Registration (CAR)/Tax Clearance Certificate

(TCL), shall be issued to the buyer unless the withholding tax due on the sale, transfer,
or exchange of real property has been fully paid.
For the sale of property on installment basis or deferred payment basis where the
Contract to Sell is always executed before the execution of the Deed of Sale, the said
Contract to Sell must be attached to the Deed of Absolute Sale executed upon
completion of the payments and the duly notarized original duplicate copy of both
documents must be presented to the RDO having jurisdiction of the place where the
property is located for validation of the correctness of issuance of CAR/TCL.
If upon completion of the payment of the purchase price of real property classified as
ordinary asset, but before the execution of the Deed of Sale, the buyer decides to
assign his right over the property to another person for a consideration, the assignment
shall be considered a separate sale of real property and, therefore, subject to the
creditable/expanded withholding tax (EWT) or final withholding of capital gains tax, as
the case may be, which shall be withheld by the assignee of such property based on the
consideration per Deed of Assignment or the fair market value of such property at the
time of assignment, whichever is higher, and to the DST imposed under Sec. 196 of the
same Code using the same basis.
It is to be clarified, however, that sale of interest in real property (real property
purchased on installment covered by Contract to Sell which was sold by the original
buyer before it was fully paid) shall be taxable on the part of the original buyer (now
seller) based on the realized gain thereon which is measured by the difference between
the agreed consideration and the amount actually paid by the said original buyer.

What you need to know about Value-Added Tax (VAT) on the sale of
Real Estate
Updated on May 22, 2014 by Cherry Vi Saldua Castillo 23 Comments
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A lot of people have questions on taxes, including Value-Added Tax or VAT[1] on the
sale of Real Estate[2], so I will try my best to explain it as simply as I can.
The subject of taxes is quite technical so I apologize if my explanation may seem quite
hard to digest at times.
Why should we learn about taxes?

Why is it important to know whether the sale of a certain property is subject to VAT and
Creditable Withholding Tax (CWT), or Capital Gains Tax (CGT)? To put it simply, if you
pay the wrong tax, for example, CGT instead of VAT and CWT, you may be liable for
deficiency VAT and CWT plus penalties, and you would have to undergo a long and
difficult process to get a refund (Good luck in getting a refund!).
Aside from the very painful payment of a lot of taxes, there may be a delay in the r
elease of the Certificate Authorizing Registration (CAR) which you need in order for the
title to the property to be transferred to the name of the buyer.
In addition to the above, VAT should be considered in the pricing of real estate sold.
Note that compared to a capital asset subject to 6% CGT, an ordinary asset will be
subject to CWT of as high as 6% plus 12% VAT. Thus, VAT may make or break a
transaction, or lower the profit of the seller.
When is a sale of real property subject to VAT?

If the seller-taxpayer is a VAT-registered person, the sale of his ordinary asset shall be
subject to VAT.
A person should register as a VAT entity if his gross annual sales and/or receipts
exceed P1,919,500.00 in a year. If he is not originally registered as a VAT entity but he
exceeded the threshold, he should submit BIR Form No. 1905 (Taxpayer Registration
Update) to change to VAT.
When is an asset considered as ordinary? Ordinary assets are those which are:

1.

Stock in trade of a taxpayer or other real property of a kind which would properly be
included in the inventory of the taxpayer if on hand at the close of the taxable year; or

2.

Real property held by the taxpayer primarily for sale to customers in the ordinary course
of his trade or business; or

3.

Real property used in trade or business (i.e., buildings and/or improvements) of a

character which is subject to the allowance for depreciation provided for under Sec. 34(F)
of the Code; or

4.

Real property used in trade or business of the taxpayer.

In simple terms, real property considered as ordinary assets are those which are used
in the trade or business of the taxpayer. Please read Revenue Regulations (RR) No.
7-2003[3] in full to determine when an asset shall be considered as capital or
ordinary this is also dependent on the classification of the taxpayer.
I also wrote about the Creditable Withholding Tax (CWT)
here:http://www.foreclosurephilippines.com/2009/03/creditable-withholding-tax-inreal.html and the Capital Gains Tax (CGT)
here: http://www.foreclosurephilippines.com/2009/02/real-estate-taxation-what-iscapital.html, you may read the said posts should you wish to learn more about them.
VAT Taxpayer

The VAT taxpayer in this case is a person who is engaged in the real estate
business and is the seller of a real property classified as an ordinary asset. Taxpayers
engaged in the real estate business shall refer collectively to real estate dealers, real
estate developers, and/or real estate lessors. A taxpayer whose primary purpose of
engaging in business, or whose Articles of Incorporation states that its primary purpose
is to engage in the real estate business shall also be deemed to be engaged in the real
estate business.
How about those not in the above list? Registration with the HLURB or HUDCC as a
real estate dealer or developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate. If the taxpayer is not registered with the
HLURB or HUDCC as a real estate dealer or developer, he/it may nevertheless be

deemed to be engaged in the real estate business through the establishment of

substantial relevant evidence (such as consummation during the preceding year of at
least six (6) taxable real estate sale transactions, regardless of amount; registration as
habitually engaged in real estate business with the Local Government Unit or the
Bureau of Internal Revenue (BIR), etc.).
Many ask how are the six taxable real estate sale transactions counted. According to
our real estate mentor, when you buy a property and later sell it, those are counted as
two transactions. I believe this is the conservative position. It will actually depend on the
BIR officer processing your papers. Technically, and as written, it says six sale
transactions.
A person who is not engaged in the real estate business but who is selling real property
which is classified as its ordinary asset is also subject to VAT. This is pursuant to RR
No. 4-07 which provides:
However, even if the real property is not primarily held for sale to customers or held for
lease in the ordinary course of trade or business but the same is used in the trade or
business of the seller, the sale thereof shall be subject to VAT being a transaction
incidental to the taxpayers main business.
Thus, if a taxpayer is engaged in the restaurant business and sells his restaurant
building which he used in his restaurant business, the said sale shall be subject to VAT,
notwithstanding that the taxpayer is not engaged in the real estate business.
Please note thank banks are not considered as VAT taxpayers. Thus, their sale of
foreclosed properties are not subject to VAT. They are subject instead to Creditable
Withholding tax (CWT). Their foreclosed assets, when sold, are considered as ordinary
assets but banks are not considered as engaged in the real estate business.
VAT rate

The sale of properties which may be considered as ordinary assets would be subject to
the 12%[4] VAT effective February 1, 2006.
Tax base of output VAT

The tax base of the 12% output VAT is the selling price (SP) or the fair market value
(FMV) of the property whichever is higher.
If VAT is not billed separately in the document of sale, the selling price stated in the
deed isdeemed inclusive of VAT. Thus, to get the selling price without VAT, divide the
selling price in the deed by 1.12. To get the VAT, multiply the selling price without VAT by
.12.
What if the gross selling price in the document of sale is equal to the zonal value or
market value of the property? Will the selling price without VAT be effectively lower than
the zonal or market value of the property? No, the zonal/market value shall be
considered as net of the output VAT.[5]
Please note that the VAT should be separately indicated in the document of sale and
official receipt as there are penalties for non-compliance.[6]
VAT payable

The amount of VAT payable is the difference between the output VAT and input VAT.
Keep the VAT-registered official receipts (for services purchased) and invoices (for
goods purchased) supporting your business expenses so you can claim input VAT
which can reduce your output VAT payable.
Time of payment of VAT

The time of payment will depend on whether a sale is an Installment Sale or a Deferred
Payment Sale. A sale is on installment if the initial payments in the year of sale do not
exceed 25% of the gross selling price. A sale is considered as cash or deferred payment
if the initial payments in the year of sale exceed 25% of the gross selling price. [7]
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Initial payments means payment or payments which the seller receives before or upon
execution of the instrument of sale and payments which he expects or is scheduled to
receive in cash or property (other than evidence of indebtedness of the purchaser)
during the taxable yearwhen the sale or disposition of the real property was made. It

covers any downpayment made and includes all payments actually or constructively
received during the year of sale, the aggregate of which determines the limit set by the
law.
In other words, add the downpayment plus all amortization payments (principal portion
only) during the year and compute if the total exceeds 25% of the gross selling price.
A.

Deferred payment/Cash basis

The transaction shall be treated as a cash sale which makes the entire selling price
subject to VAT in the month of sale.

B.

Installment basis
Each installment payment actually and/or constructively received by the seller is subject
to VAT.

The monthly VAT return should be filed on or before the 20 th day of the month following
the close of the 1st two months of the quarter (February 20, March 20, May 20, June 20,
August 20, September 20, November 20, December 20) while the quarterly VAT return
should be filed on or before the 25th day of the month following the last month of the
quarter (April 25, July 25, October 25, January 25).
Place of payment

The VAT should be paid at the Authorized Agent Bank (AAB) of the Revenue District
Office (RDO)where the seller is registered as a taxpayer. In places where there are
no AAB, the return shall be filed directly with the Revenue Collection Officer or
Authorized City or Municipal Treasurer.
BIR Form to use

The monthly VAT return is BIR Form No. 2550M,[8] while the quarterly VAT return is BIR
Form No. 2550Q[9]
Exemptions from VAT

The following are exempt from VAT:

Sale of residential lot not exceeding P1,919,500.00 (effective January 1, 2012, as per
RR No. 16-2011[10]). If two or more adjacent lots are sold or disposed in favor of one
buyer, for the purpose of utilizing the lots as one residential lot, the sale shall be exempt
from VAT only if the aggregate value of the lots does not exceed P1,919,500.00 (effective
January 1, 2012, as per RR No. 16-2011[11]).

In practice, I have heard of cases where adjacent condominium units are bought but the
selling prices are not aggregated for purposes of computing whether the sale exceeds
the threshold. I believe that the reasoning made is that adjacent condominium units are
not the same as adjacent residential lots and thus, the rule on adjacent residential lots
does not apply. This is the aggressive position. [Edit: RR 13-2012 clarified the rules on
adjacent units.]

Sale of real properties not primarily held for sale to customers or held for lease in the
ordinary course of trade or business (in other words, a capital asset);

Sale of real property utilized for low-cost ( i.e. P750,000.00) and socialized housing ( i.e.
P400,000) as defined by Republic Act No. 7279 or the Urban Development and Housing
Act of 1992;

Sale of residential house and lot not exceeding P3,199,200.00 (effective January 1,
2012, as per RR No. 16-2011[12]). In practice, condominiums use this amount as
the VAT threshold.

More On Documentary Stamp Tax (DST) On Real Estate Transactions

Updated on December 8, 2015 by Jay Castillo 23 Comments
ADVERTISEMENT

There are different DST rates on different types of transactions. In my previous post
on How to Easily Compute DST, I was referring to DST on the sale of real property.
Please note that there is DST too on loan agreements, lease agreements, and
mortgages, and there are also exemptions from DST. For this post, aside from
discussing these, I will also discuss the deadline date and venue for filing the DST
return.

I will provide you as well with a blank DST form for your use and reference. Take note
that most of this post was actually written by my wife.
DST on the sale of real property

Section 196 of the Tax Code, as amended, provides:

SEC. 196. Stamp Tax on Deeds of Sale and Conveyances of Real Property. On all
conveyances, deeds, instruments, or writings, other than grants, patents or original
certificates of adjudication issued by the Government, whereby any land, tenement
or other realty sold shall be granted, assigned, transferred or otherwise conveyed to
the purchaser, or purchasers, or to any other person or persons designated by such
purchaser or purchasers, there shall be collected a documentary stamp tax, at the
rates herein below prescribed, based on the consideration contracted to be paid for
such realty or on its fair market value determined in accordance with Section 6(E) of
this Code, whichever is higher: Provided, That when one of the contracting parties is
the Government, the tax herein imposed shall be based on the actual consideration:

(a) When the consideration, or value received or contracted to be paid for such realty,
after making proper allowance of any encumbrance, does not exceed One thousand
pesos (P1,000), Fifteen pesos (P15.00).
(b) For each additional One thousand pesos (P1,000), or fractional part thereof in
excess of One thousand pesos (P1,000) of such consideration or value, Fifteen pesos
(P15.00).
When it appears that the amount of the documentary stamp tax payable hereunder has
been reduced by an incorrect statement of the consideration in any conveyance, deed,
instrument or writing subject to such tax the Commissioner, provincial or city Treasurer,
or other revenue officer shall, from the assessment rolls or other reliable source of
information, assess the property of its true market value and collect the proper tax
thereon.
To compute the DST, divide the higher amount between the selling price and the fair
market value by P1,000.00, then round off the amount to next higher number if
there are decimals, then multiply it by P15.00. As a shortcut, multiply the higher
amount between the selling price and the fair market value by .015 and if the DST is
not a multiple of 15, the DST shall be the next higher multiple of 15.

Take note that if the tax base is incorrect (for example, the selling price or the zonal
value is understated to lower the DST), the true value of the property may be assessed
so that the proper tax may be collected. Please refer to my previous post on How to
Easily Compute DST as to the sample computations.

DST on loan agreements

If you will be taking out a loan, another type of DST may be imposed. Section 179 of
the Tax Code, as amended, provides for the DST on loan agreements, as follows:

SEC. 179. Stamp Tax on All Debt Instruments. On every original issue of debt
instruments, there shall be collected a documentary stamp tax on One peso (P1.00) on
each Two hundred pesos (P200), or fractional part thereof, of the issue price of any
such debt instruments: Provided, That for such debt instruments with terms of less than
one (1) year, the documentary stamp tax to be collected shall be of a proportional
amount in accordance with the ratio of its term in number of days to three hundred
sixty-five (365) days: Provided, further, That only one documentary stamp tax shall be
imposed on either loan agreement, or promissory notes issued to secure such loan.
For purposes of this section, the term debt instrument shall mean instruments
representing borrowing and lending transactions including but not limited to debentures,
certificates of indebtedness, due bills, bonds, loan agreements, including those signed
abroad wherein the object of contract is located or used in the Philippines, instruments
and securities issued by the government of any of its instrumentalities, deposit
substitute debt instruments, certificates or other evidences of deposits that are either
drawing interest significantly higher than the regular savings deposit taking into
consideration the size of the deposit and the risks involved or drawing interest and
having a specific maturity date, orders for payment of any sum of money otherwise than
at sight or on demand, promissory notes, whether negotiable or non-negotiable, except
bank notes issued for circulation.
DST on loan agreements (which may be taken out in order to purchase real property
) is thus computed as P1.00 for every P200.00. To compute the DST, divide the loan
amount by P200.00, then round off the amount to next higher number if there are
decimals. As a shortcut, multiply the loan amount by .005 and round off the amount
to next higher number if there are decimals.
DST on lease agreements

If you will be leasing out your property, DST will be imposed at the rate of P3.00 for the
first P2,000.00 and an additional P1.00 for every P1,000.00 in excess of the first
P2,000.00 pursuant to Section 194 of the Tax Code, to wit:
Section 194. Stamp tax on Leases and Other Hiring Agreements. On each lease,
agreement, memorandum, or contract for hire, use or rent of any lands or tenements, or
portions thereof, there shall be collected a documentary stamp tax of Three pesos
(P3.00) for the first Two thousand pesos (P2,000), or fractional part thereof, and an

additional One peso (P1.00) for every One Thousand pesos (P1,000) or fractional part
thereof, in excess of the first Two thousand pesos (P2,000) for each year of the term of
said contract or agreement.
To compute DST, multiply the monthly rent by 12 months and then by the number of
years stated in the contract. Subtract P2,000.00 and multiply the amount by .001, then
add P3.00.
ADVERTISEMENT

For example, the monthly rent is P10,000.00, and the contract is for 3 years. The DST is
computed as follows:
Monthly rent P10,000.00
Multiply by 12 months
Annual rent = P120,000.00
Multiply by 3 years
Total contract amount = P360,000.00
Subtract P2,000 = P358,000.00
Multiply this by .001 = P358
Plus P3.00
DST = P361.00
As a shortcut, multiply the contract amount by .001 and add P1.00 to get the DST.
If the total contract amount is not a multiple of P1,000.00, for example, its P360,500.00,
round it up to the next 1,000 then multiply the contract amount by .001 and add P1.00 to
get the DST.
DST on mortgages

Section 195 of the Tax Code provides:

Section 195. Stamp Tax on Mortgages, Pledges and Deeds of Trust. On every
mortgage or pledge of lands, estate, or property, real or personal, heritable or movable,
whatsoever, where the same shall be made as a security for the payment of any definite
and certain sum of money lent at the time or previously due and owing of forborne to be
paid, being payable and on any conveyance of land, e
state, or property whatsoever, in trust or to be sold, or otherwise converted into money
which shall be and intended only as security, either by express stipulation or otherwise,
there shall be collected a documentary stamp tax at the following rates:

(a) When the amount secured does not exceed Five thousand pesos (P5,000), Twenty
pesos (P20.00).
(b) On each Five thousand pesos (P5,000), or fractional part thereof in excess of Five
thousand pesos (P5,000), an additional tax of Ten pesos (P10.00).
On any mortgage, pledge, or deed of trust, where the same shall be made as a security
for the payment of a fluctuating account or future advances without fixed limit, the
documentary stamp tax on such mortgage, pledge or deed of trust shall be computed
on the amount actually loaned or given at the time of the execution of the mortgage,
pledge or deed of trust, additional documentary stamp tax shall be paid which shall be
computed on the basis of the amount advanced or loaned at the rates specified above:
Provided, however, That if the full amount of the loan or credit, granted under the
mortgage, pledge or deed of trust shall be computed on the amount actually loaned or
given at the time of the execution of the mortgage, pledge or deed of trust. However, if
subsequent advances are made on such mortgage, pledge or deed of trust, additional
documentary stamp tax shall be paid which shall be computed on the basis of the
amount advanced or loaned at the rates specified above: Provided, however, That if the
full amount of the loan or credit, granted under the mortgage, pledge or deed of trust is
specified in such mortgage, pledge or deed of trust, the documentary stamp tax
prescribed in this Section shall be paid and computed on the full amount of the loan or
credit granted.
To compute DST, subtract P5,000 from the contract amount, then divide whats left by
P5,000.00 and round off any decimal to the higher number. Multiply this by 10 then add
P20.00.
To illustrate, if the amount secured is P106,000.00, the DST is computed as follows:
Amount secured P106,000.00
Subtract P5,000 = 101,000
Divide by P5,000.00 = 20.20
Round off to higher number = 21
Multiply by 10 = 210
Add 20 = P230 DST
As a shortcut, divide the contract amount by P5,000.00 and round off any decimal to the
higher number. Multiply this by 10 then add P10.00.
Exemptions from DST

Section 199 of the Tax Code, as amended, provides the documents which are
exempt from DST, including loan agreements which does not exceed P250,000, viz:
(d) Loan agreements or promissory notes, the aggregate of which does not exceed
Two hundred fifty thousand pesos (P250,000), or any such amount as may be
determined by the Secretary of Finance, executed by an individual for his purchase
on installment for his personal use or that of his family and not for business or
resale, barter or hire of a house, lot, motor vehicle, appliance or furniture: Provided,
however, That the amount to be set by the Secretary of Finance shall be in
accordance with a relevant price index but not to exceed ten percent (10%) of the
current amount and shall remain in force at least for three (3) years.
Deadline for filing the DST return
Under Revenue Regulations (RR) No. 5-2009 dated March 16, 2009, the DST Return
(BIR Form No. 2000-OT) shall be filed within five (5) days after the close of the
month when the taxable document was made, signed, accepted or transferred. For
example, the DST on a taxable document signed on April 15, 2009 will be due on
May 5, 2009.
Venue for filing the DST return
The DST due shall be paid at the same time the aforesaid return is filed with the
AAB having jurisdiction over the place where the property being transferred is
located based on the consideration contracted to be paid for such realty or on its
fair market value determined in accordance with Section 6(E) of the Tax Code,
whichever is higher.

Please feel free to leave a comment below.

What is Transfer Tax?

Updated on October 5, 2012 by Jay Castillo 47 Comments
ADVERTISEMENT

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).

Transfer Tax Rates

With regard to the transfer tax rates, please click on the links to see the different
transfer tax rates and documents required to transfer the registration of a property. You
have to check the rates on a per city or per municipality basis as the LGC only provides
for the maximum rates. Click on the links below for the transfer tax rates of major cities.

Manila

Caloocan [I have no idea why the transfer tax rate in Caloocan is 82.5% of 1%]

Cebu

Davao

Las Pinas

Makati

Mandaluyong

Marikina

Pasig

Quezon City

The http://www.doingbusiness.org site is so cool. You can learn about the requirements
for registering property, etc., with cost and estimated time to complete.
Transfer Tax Base

In the case Romulo D. San Juan vs. Ricardo L. Castro, in his capacity as City Treasurer
of Marikina City [G.R. No. 174617 dated December 27, 2007], one of the issues was the
proper computation of the transfer tax base. In this case, petitioner San Juan conveyed
real properties to a corporation in exchange for its shares of stock[1]. Using as basis
Section 135 of the LGC, San Juan wanted to pay the transfer tax based on the
consideration stated in the Deed of Assignment. Respondent Castro, as the Treasurer,
informed him that the tax due is based on the fair market value of the property.
Petitioner Castro protested the Treasurers computation in writing, which the Treasurer
also denied in writing. Petitioner Castro then filed a Petition for mandamus and
damages against the Treasurer praying that he be compelled to accept payment of the
transfer tax based on the actual consideration of the transfer/assignment.
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
Petitioner San Juan took the position that the transfer tax base should be the total
consideration involved, because the intention of the law is not to automatically apply the
whichever is higher rule. He argued that it is only when there is a monetary
consideration involved and the monetary consideration is not substantial that the tax
rate is based on the higher fair market value. His argument was that since he received
shares of stock in exchange for the real properties, there was no monetary
consideration involved in the transfer.
ADVERTISEMENT

Respondent Castro, on the other hand, took the position that the transfer tax base
should be the fair market value, because it is higher than the monetary consideration
San Juan received in exchange for his real properties. Castro argued that monetary
consideration as used in the LGC does not only pertain to the price or money involved
but also, as in the case of donations or barters, to the value or monetary equivalent of
what is received by the transferor, which, in this case, Castro argued to be the par value
of the shares of stock San Juan transferred in exchange for shares of stock.
As anticlimactic as this may sound, the Court did not rule squarely on the correct
computation of the transfer tax base because it held that a Petition for Mandamus was
not the correct remedy. Mandamus lies only to compel an officer to perform a ministerial
duty (one which is so clear and specific as to leave no room for the exercise of
discretion in its performance) but not a discretionary function (one which by its nature
requires the exercise of judgment).
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 dont agree with the Treasurers computation?

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.
In my view, the Petitioner San Juan could have made another argument, that is,
assuming that the monetary consideration would be equivalent to the par value of the
stocks (which is still lower than the fair market value), that value is substantial and thus,
there is no need for the whichever is higher provision to kick in. Anyway, hopefully this
issue would be decided upon squarely soon as there are really a lot of tax-free
exchanges occurring and we really need guidance on the computation of transfer tax.
Perhaps one day a taxpayer and his tax attorneys may decide to bring this issue up until
the Supreme Court for a final decision.
Taking everything into consideration, personally, unless the difference in tax that you
need to pay is really significant, it would be better to follow the computation of the
Treasurer. Filing a case in court would require filing fees and fees for tax attorneys, not
to mention taking up much of your time. If you will not pay the transfer taxes, you cannot

transfer the title to your name and this would lead to problems with your buyer and the
closing of your sale transaction. Weigh your options first before heading to battle. In real
estate, as in everything, closing the deal fast is key.

What You Need to Know About Real Property Tax (RPT)

Updated on July 9, 2014 by Cherry Vi Saldua Castillo 83 Comments
ADVERTISEMENT

Real Property Tax (RPT) is a tax that owners of real property need to pay every year so
that the local government unit (LGU) will not auction off their property.
There are some investors who buy tax-delinquent real properties and participate in
auctions held by LGUs, and this is one of the ways one can buy properties at low
prices. We also publish schedules and lists of tax-delinquent real properties of different
cities they are classified under the category tax-delinquent properties.
What is Real Property Tax?

Real Property Tax is the tax on real property imposed by the Local Government Unit
(LGU). The legal basis is Title II of the Local Government Code (LGC), Republic Act
(R.A.) no. 7160. The implementing rules and regulations of R. A. 7160 can be
found here.
The RPT for any year shall accrue on the first day of January and from that date it shall
constitute a lien on the property which shall be superior to any other lien, mortgage, or
encumbrance of any kind whatever, and shall be extinguished only upon payment of the
delinquent tax.
If you have prior years delinquencies, interests, and penalties, your RPT payment shall
first be applied to them. Once they are settled, your tax payment may be credited for the
current period.
Who should pay the RPT

The owner or administrator of the property

Where to pay

At the City or municipal treasurers office

When to pay

If you choose to pay for one whole year, the payment is due on or before January 31. If
the basic RPT and the additional tax accruing to the Special Education Fund (SEF) are
paid in advance, the sanggunian concerned may grant a discount not exceeding twenty
percent (20%) of the annual tax due. Jay wrote about the discount on RPT recently in
his post How To Get A 20% Discount on Real Property Taxes.
If you choose to pay in installments, the four quarterly installments shall be due on or
before the last day of each quarter, namely: March 31, June 30, September 30, and
December 31.
In case of failure to pay the basic RPT and other taxes when due, the interest at the rate
of two percent (2%) per month shall be imposed on the unpaid amount, until fully paid.
The maximum number of months is thirty-six (36) months, so effectively, the maximum
interest rate is seventy-two percent (72%).
How do you compute real property tax (RPT)?

RPT = RPT Rate x Assessed Value

What are the RPT rates?

Maximum RPT rates:

Coverage
Cities and Municipalities within Metro
Manila

RPT rate

2%

Provinces

1%

Special Education Fund (SEF) 1%

In addition to the basic RPT, the LGUs may levy and collect an annual tax of one
percent (1%) which shall accrued exclusively to the Special Education Fund (SEF).
Ad Valorem Tax on Idle Lands 5%

In addition to the basic RPT, the LGUs may collect a maximum idle land tax is 5%
assessed value of the property.
How do you compute the Assessed Value?

Assessed Value = Fair Market Value x Assessment

Level

Sec. 199 (l) of the LGC defines Fair Market Value as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is not
compelled to buy. In practice, however, the Fair Market Value is based on the
assessment of the municipal or city assessor as written in the Tax Declaration.
The Assessment Level shall be fixed through ordinances of the Sangguniang
Panlalawigan, Sangguniang Panglungsod, or the Sangguniang Pambayan of the
municipality within the Metro Manila area. To get this data, look for the tax Ordinance of
the city or municipality where your property is located.
Maximum Assessment Level rates

I. Land

Class

Assessment Level

Residential

20%
Timberland

20%
Agricultural

40%
Commercial

50%
Industrial

50%
Mineral

50%

II. Building and Other Structures

1.

Residential

FMV Over

But Not Over

Assessment Level

0.00

175,000.00

0%

175,000.00

300,000.00

10%

300,000.00

500,000.00

20%

500,000.00

750,000.00

25%

750,000.00

1,000,000.00

30%

1,000,000.00

2,000,000.00

35%

2,000,000.00

5,000,000.00

40%

5,000,000.00

10,000,000.00

50%

10,000,000.00

60%

2. Agricultural

FMV Over

But Not Over

Assessment Level

300,000.00

25%

300,000.00

500,000.00

30%

500,000.00

750,000.00

35%

750,000.00

1,000,000.00

40%

1,000,000.00

2,000,000.00

45%

2,000,000.00

50%

ADVERTISEMENT

3. Commercial/Industrial

FMV Over

But Not Over

Assessment Level

300,000.00

30%

300,000.00

500,000.00

35%

500,000.00

750,000.00

40%

750,000.00

1,000,000.00

50%

1,000,000.00

2,000,000.00

60%

2,000,000.00

5,000,000.00

70%

5,000,000.00

10,000,000.00

75%

10,000,000.00

80%

4. Timberland

FMV Over

But Not Over

Assessment Level

300,000.00

45%

300,000.00

500,000.00

50%

500,000.00

750,000.00

55%

750,000.00

1,000,000.00

60%

1,000,000.00

2,000,000.00

65%

2,000,000.00

70%

II. Machineries

Class

Assessment Level

Agricultural

40%
Residential

50%
Commercial

80%

Industrial

80%

Sample Computation

Data:
Actual use of property: Residential
Location: City within Metro Manila
FMV per assessors officer (based on Tax Declaration):
Land P350,000
Improvement P350,000

Assessment Level for Land: 20%

Assessment Level for Improvement: 20%
Note: The assessment levels are fixed through ordinances of the Sangguniang
Panlalawigan, Sangguniang Panglungsod, or the Sangguniang Pambayan of the
municipality within the Metro Manila area. We will be using the maximum rates for
sample computation purposes.
Computation
Assessed Value of Land = P350,000 x 20% = P70,000
Assessed Value of Improvement = P350,000 x 20% = P70,000
Basic Real Property Tax for Land and Improvement
= (P70,000 + P70,000) x 2% = P2,800
Special Education Fund (SEF) for Land and Improvement = (P70,000 + P70,000) x
1% = P1,400

Special Classes of Real Property

All lands, buildings, and other improvements thereon actually, directly and exclusively
used for hospitals, cultural, or scientific purposes, and those owned and used by local
water districts, and government-owned or controlled corporations rendering essential
public services in the supply and distribution of water and/or generation and
transmission of electric power
What are the assessment levels for special classes of real property?

Actual Use

Assessment
Level

Cultural

15%
Scientific

15%
Hospital

15%
Local water districts

10%
Government-owned or controlled
corporations engaged in the supply
and distribution of water and/or
generation and transmission of
electric power

10%

What are Idle Lands?

1. Agricultural lands more than one (1) hectare in area, suitable for cultivation, dairying,
inland fishery, and other agricultural uses, of which remain uncultivated or
unimproved.

Exceptions

i.

Lands planted to permanent or perennial crops with at least 50 trees to a

hectare; and
ii.

Lands used for grazing purposes (Note: put goats or cows on your property).

2. Lands Other than Agricultural, located in a city or municipality, more than 1,000 sqm.
in area, of which remain unutilized or unimproved

3. Residential lots in subdivisions, regardless of land areaDonation

As An Estate Planning Tool (A Discussion on Donors Tax)
Updated on July 9, 2014 by Cherry Vi Saldua Castillo 61 Comments
ADVERTISEMENT

The donation of properties can be used as a tool for estate planning. One just needs
to be aware that donations are subject to donors tax. Read this to find out how much
donors tax you need to pay when donating a property as part of estate planning.
Real property, just like any other material possession, may not be brought to the
afterlife. You need to transfer property sooner or later. Usually, however, the transfer of
property prior to death is a taboo subject so many end up dealing with property transfer
problems only after a person has died. It is always good to be prepared since we will all
surely die there is simply no escaping it, so might as well prepare for the inevitable.

Donation of properties are subject to donors tax

Why donate your properties prior to death?

Donation may be considered as an estate planning tool because you are able to
transfer your properties prior to death little by little every year and therefore you can
take advantage of the graduated donors tax rates. If you have a lot of properties at the
time of death, the estate tax* would be higher because the total amount of the
properties will probably fall under a higher tax range
*If you want to learn more about estate tax (the tax that needs to be paid after death)
read this:Death, Real Estate, and Estate Tax
On another note, it is usually the case that the family spends a lot for medical care prior
to death, and because of this, the familys cash reserves are depleted. If the family is
not liquid and they need to pay the estate tax within six months from the time of death,
many times the family is forced to sell their properties below market value because they
are under time pressure. It is during these pressure points that many investors are able
to buy good properties at a good price. I dont want to view it as taking advantage of the
misfortune of others rather, I want to think of it as the investors helping the family
solve their cash problem. If no one bought the property, the family would be in a worse
situation.
Another problem that may arise upon death is that the children or heirs will be fighting
each other for their rightful share of the deceaseds property. I dont think any parent
would want their loved ones to be fighting over money or property. If the properties are
already distributed as agreed upon by all parties prior to death, then this problem may
be alleviated.
Lastly, I believe that a person who already thought in advance of the transfer of
properties prior to death, and actually had no more significant properties to transfer
upon death, would be at peace upon death because he/she did not leave problems to
his/her family. Dealing with grief is hard enough, it would be difficult to deal with the
nitty-gritty taxes and what-not during a most stressful time.
Of course, there are downsides to donation too Who shall control the properties? Who
gets the fruits/rental income? etc etc These may be answered by trusts and other
legal documents. But for now, lets deal with straightforward donation.

What is Donors Tax?

Donors tax is imposed on tax on the transfer by any person, resident or non-resident, of
a property by gift. For an overview on donors tax, please check the BIR website. The
legal basis for donors tax may be found in Sec. 98 to Sec. 104 of the National Internal
Revenue Code (NIRC) (aka the Tax Code). Check also the Donors and Estate Tax
Regulations (BIR Revenue Regulations No. 2-2003) and Revenue Memorandum Order
(RMO) No. 1-98.
What is the tax base?

The donors tax base shall be the total value of the net gifts during the taxable year. The
value of the net gifts shall be based on the fair market value (FMV) of the gifts at the
time of donation. In case of real property, the tax base shall be the BIR Zonal Value or
FMV per Tax Declaration, whichever is higher. If there is no Zonal Value, the tax base
shall be the FMV based on the latest tax declaration. If there is an improvement (like a
house or a building), the FMV of the improvement shall be the construction cost based
on the building permit and/or occupancy permit plus 10% per year after the year of
construction, or the FMV based on the latest tax declaration.
The term net gift, for purposes of donors tax, pertains to the net economic benefit
which the done gets from the transfer. Thus, if a property encumbered with a mortgage
is transferred as a gift, but the donee is required to pay the mortgage, then the net gift
is computed by deducting the amount of mortgage assumed by the donee from the fair
market value of the property given as a gift.
If you donate on different dates within a year, a donors tax return shall be filed for each
date of donation, and the donors tax base shall be based on the accumulated
donations for the current calendar year (January 1 to December 31). Thus, the more
gifts you make within a calendar year, the higher the probability that the donors tax will
fall on a higher tax bracket. Note though, that donors tax previously paid on previous
donations shall be deducted from the donors tax payable. The good news here is that
you will get a fresh start for each year, and effectively, you can donate P100,000 in cash
or in kind at zero donors tax.

You may even donate cash which the donee can use to purchase property, so the
property can be in the name of the donee. For example, a parent can donate cash for
installment payments of property so that the property may be declared in their childs
name, since the child cannot purchase directly without a source of income.
Please note that in case of donation to relatives (not strangers), only one return shall be
filed for several gifts/donations by the donor (the one giving the donation) to the different
donees (those receiving the donation) on the same date. If the gift/donation involves
conjugal or community property, each spouse shall file a separate return for their
respective shares in the said property.
Deemed Gift

If you purchased a property below its fair market value (FMV), the difference between
the FMV and the selling price shall be deemed a gift of the seller, subject to donors tax.
This is also called a transfer for less than adequate consideration.
Exemptions from Donors Tax
1.

Dowries or gifts made on account of marriage and before its celebration or within one
year thereafter by parents to each of their legitimate, recognized natural, or adopted
children to the extent of the first Ten thousand pesos (P10,000);

2.

Gifts made to or for the use of the National Government or any entity created by any of
its agencies which is not conducted for profit, or to any political subdivision of the said
Government; and

3.

Gifts in favor of an educational and/or charitable, religious, cultural or social welfare

corporation, institution, accredited non-government organization, trust or philanthropic
organization or research institution or organization, provided, however, That not more than
thirty percent (30%) of said gifts shall be used by such donee for administration purposes.

Based on the BIR website, the following are likewise exempt from donors tax:
1.

Encumbrances on the property donated if assumed by the donee in the deed of donation

2.

Donations made to the following entities as exempted under special laws:

Aquaculture Department of the Southeast Asian Fisheries Development Center of the

Philippines

Development Academy of the Philippines

Integrated Bar of the Philippines

International Rice Research Institute

National Social Action Council

Ramon Magsaysay Foundation

Philippine Inventors Commission

Philippine American Cultural Foundation

Task Force on Human Settlement on the donation of equipment, materials and services

What are the Donors Tax rates?

The donors tax rate will be based on the law prevailing at the time of donation.
For donations made on January 1, 1998 up to the present, if the donee is a stranger,
the donors tax rate is thirty percent (30%).
A stranger is a person who is not a brother, sister (whether by whole or half-blood),
spouse, ancestor and lineal descendant, or a relative by consanguinity in the collateral
line within the fourth degree of relationship. This just means you are related by blood,
and you count the degree by going up first to the person who connects you then go
down.
ADVERTISEMENT

For example, your first cousin is within the fourth degree. You go up to your dad (1
degree), then up to your lolo (1 degree), then go down to your uncle who is your
dads brother (1 degree), then down to your first cousin (1 degree), so 4 degrees in all.
Note that a child who is legally adopted is not considered a stranger. Donations
between corporations or from an individual to a corporation shall be considered as
donations to a stranger.
If the donee is not a stranger, the donors tax rate, based on the net gifts, are as follows:

Over

But not over

The tax shall

be

Plus

Of the excess
over

100,000

Exempt

100,000

200,000

2%

100,000

200,000

500,000

2,000

4%

200,000

500,000

1,000,000

14,000

6%

500,000

1,000,000

3,000,000

44,000

8%

1,000,000

3,000,000

5,000,000

204,000

10%

3,000,000

5,000,000

10,000,000

404,000

12%

5,000,000

1,004,000

15%

10,000,000

10,000,000

Who should pay

The donor or the transferor for less than adequate consideration

When to pay

Within thirty (30) days after the date the gift is made. If more than one gift or donation is
made within one year, a separate return should be filed for each gift/donation within
thirty (30) days after the date the gift is made.

BIR Form to be used

BIR Form No. 1800 (Donors Tax Return)

Where to file and pay/ Filing procedure

Prepare three copies of the donors tax return (two copies shall be for the BIR and one
copy shall be for the taxpayer) and file them with any Authorized Agent Bank (AAB) of
the Revenue District Office (RDO) having jurisdiction over the place of the domicile of
the donor (that is, where the donor lives) at the time of the transfer.
In places where there are no AAB, the return will be filed directly with the Revenue
Collection Officer or duly Authorized City or Municipal Treasurer where the donor was
domiciled at the time of the transfer. If the donor has no legal residence in the
Philippines, file the return with Revenue District No. 39 South Quezon City (this is
along Quezon Avenue, with a DBP branch at the ground floor).
In the case of gifts made by a non-resident alien (that is, not a Filipino citizen), the
return may be filed with Revenue District No. 39 South Quezon City, or with the
Philippine Embassy or Consulate in the country where donor is domiciled at the time of
the transfer.
Penalties for late payment

Same as other taxes, 25% surcharge plus 20% interest per year (under Secs. 248 and
249 of the Tax Code, respectively). If there is fraud, the surcharge shall be 50%. You
may also paycompromise penalties in lieu of imprisonment (click on the link for
the schedule of compromise penalties).
Documentary requirements

Based on the BIR website, the following requirements must be submitted before the Tax
Clearance Certificate/Certificate Authorizing Registration (that is, the document required
for the title to be transferred) can be released:
1. Deed of Donation

2. Sworn Statement of the relationship of the donor to the donee

3. Proof of tax credit, if applicable
4. Certified true copy(ies) of the Original/Transfer/Condominium Certificate of Title
(front and back ) of lot and/or improvement donated, if applicable
5. Certified true copy(ies) of the latest Tax Declaration (front and back pages) of lot
and/or improvement, if applicable
6. Certificate of No Improvement issued by the Assessors office where the
properties have no declared improvement, if applicable
7. Proof of valuation of shares of stocks at the time of donation, if applicable
For listed stocks newspaper clippings or certification issued by the Stock
Exchange as to the par value per share
For unlisted stocks latest audited Financial Statements of the issuing
corporation with computation of the book value per share
8. Proof of valuation of other types of personal properties, if applicable
9. Proof of claimed deductions, if applicable
1 Copy of Tax Debit Memo used as payment, if applicable
0.

Additional requirements may be requested for presentation during audit of the tax case
depending upon existing audit procedures.

Death, Real Estate, and Estate Tax

Updated on April 24, 2015 by Cherry Vi Saldua Castillo 47 Comments
ADVERTISEMENT

The topic of death is usually taboo on ordinary days except the start of November when
we remember our dead on All Saints and All Souls Day, or when we are jolted by the
death of a close friend or relative. We must accept, though, that we will all die it is just
a matter of time. With death, estate taxes must be settled, and we will discuss this here.
In times of death, we still need to pay our taxes

When someone passes away, loved ones left behind are usually overwhelmed with
emotions and are unable to do anything. I know this from experience. But, there are
certain things that need to be done, and someones got to do them. Someone has to
arrange for the embalming, the wake, the casket, the interment or cremation, the burial
plot (incidentally, there are a lot of foreclosed memorial lots) and the gravestone, among
others.

And of course, someone has to take care of the estate tax.

Note: For the rest of this article, we will use the terms decedent or deceased person
to refer to the person who died.
At A Glance... [show]
What is Estate Tax?

Estate tax is imposed on the transfer of the net estate, which is the difference between
the gross estate (as defined under Section 85 of the Tax Code) and allowable
deductions (under Section 86) of the decedent. Estate tax rates are graduated and
depend on the net estate amount.
Net Estate = Gross Estate Deductions
Real property may not be transferred from the decedent to his or her heirs without the
filing of the estate tax return and payment of the estate tax. Non-payment of estate tax
is common and this brings about many problems when the properties need to be
transferred to the names of buyers.

What to do when someone has died

Estate tax-wise, these are the things that need to be done:

1.

File a Notice of Death with the Bureau of Internal Revenue within two months after the
date of death. This is applicable when the gross value of the estate exceeds P20,000.00.
This should be filed by the executor or administrator of the estate, or any of the legal heirs.
It shall be filed with the RDO where the decedent was domiciled at the time of his death.
There is no specific format.

2.

Get a Tax Identification Number (TIN) for the Estate of the deceased person by
using BIR Form No. 1901. Use this TIN when filing the Estate Tax Return (BIR Form No.
1801).

3.

Prepare the list of assets and liabilities of the decedent. Get the fair market values of the
properties at the time of death.

4.

Prepare the supporting documents for the assets and liabilities, as well as the
deductions you are going to take. You will need these for the estate tax computation and
as attachments to the Estate Tax Return.
a.

Certified true copy of the Death Certificate

b.

Notice of Death duly received by the BIR, if gross estate exceeds P20,000 for
deaths occurring on or after Jan. 1, 1998; or if the gross estate exceeds P3,000 for
deaths occurring prior to January 1, 1998

c.

Any of the following:

Deed of Extra-Judicial Settlement of the Estate, if the estate is settled

extra judicially (sample forms may be found here and here).

Court Orders/Decision, if the estate is settled judicially;

Affidavit of Self-Adjudication (sample here) and Sworn Declaration of all

properties of the Estate

A certified true copy of the schedule of partition of the estate and the
order of the court approving the same, if applicable.

d.

Certified true copy(ies) of the Transfer/Original/Condominium Certificate of

Title(s) of real property(ies) (front and back pages), if applicable

e.

Certified true copy of the latest Tax Declaration of real properties at the time of
death, if applicable

f.

Certificate of No Improvement issued by the Assessors Office declared

properties have no declared improvement or Sworn Declaration/Affidavit of No
Improvement by at least one (1) of the transferees

g.

Certificate of Deposit/Investment/Indebtedness owned by the decedent and the

surviving spouse, if applicable

h.

Photocopy of Certificate of Registration of vehicles and other proofs showing the

correct value of the same, if applicable

i.

Photo copy of certificate of stocks, if applicable

j.

Proof of valuation of shares of stocks at the time of death, if applicable

For listed stocks newspaper clippings or certification from the Stock

Exchange

For unlisted stocks latest audited Financial Statement of issuing

corporation with computation of book value per share

k.

Proof of valuation of other types of personal property, if applicable

l.

Proof of claimed tax credit, if applicable

m.

CPA Statement on the itemized assets of the decedent, itemized deductions from
gross estate and the amount due if the gross value of the estate exceeds two million
pesos, if applicable

n.

Certification of Barangay Captain for claimed Family Home

o.

Duly notarized Promissory Note for Claims against the Estate arising from
Contract of Loan

p.

Accounting of the proceeds of loan contracted within three (3) years prior to
death of the decedent

q.

Proof of the claimed Property Previously Taxed

r.

Proof of claimed Transfer for Public Use

s.

Copy of Tax Debit Memo used as payment, if applicable

2. Compute the net estate and estate tax.

3. File the Estate Tax Return and pay the estate taxes.
4. Follow the procedure for transferring real properties to the name of the heirs (this will be
discussed in a separate post).
5. Follow the procedure for cancellation of the TIN of the decedent as discussed in Section
12 of Revenue Regulations No. 7-2012. Use BIR Form No. 1905 for the cancellation of
TIN.

Gross Estate

Gross estate is the value at the time of death of all property, real or personal, tangible
or intangible, wherever situated. In the case of a nonresident decedent who at the time
of his death was not a citizen of the Philippines, only that part of the entire gross estate
which is situated in the Philippines shall be included in his taxable estate.
The value of the properties shall be based on their fair market value (FMV) as of
the time of death.
If the property is a real property, the FMV shall be the higher between the BIR zonal
valuation and FMV per tax declaration (I paraphrased this).
Please also note that also included in the computation of the gross estate are interest or
share in a property, transfers in contemplation of death, and revocable transfers.
The proceeds of life insurance are included in the gross estate unless the beneficiary is
designated as irrevocable).
Deductions from gross estate
1.

Expenses, Losses, Indebtedness, and Taxes (ELIT)

a. Funeral expenses Lowest among:

o

Actual funeral expenses;

5% of the gross estate; and

P200,000.00.

b. Judicial expenses of the testamentary and intestate proceedings

c. Claims against the estate
At the time the indebtedness was incurred, the instrument was duly notarized;

and

If the loan was contracted within three (3) years before the death of the

decedent, the administrator or executor shall submit a statement showing the disposition of
the proceeds of the loan

d. Claims of the deceased against insolvent persons

e. Unpaid mortgages, etc.
2. Property Previously Taxed (Vanishing deduction)
2. Transfers for Public Use
The amount of all bequests, legacies, devises or transfers to or for the use of the

Government of the Republic of the Philippines, or any political subdivision thereof, for
exclusively public purposes.
4. Family Home
o

Fair Market Value of the Family Home or P1 million, whichever is lower.

As a condition for the exemption or deduction, said family home must have been
the decedents family home as certified by the barangay captain of the locality.

5. Standard Deduction P1 million (no substantiation needed)

6. Medical Expenses
Medical expenses incurred by the decedent within one (1) year prior to his death

which shall be duly substantiated with receipts

Maximum: P500,000.00

7. Amount received by heirs under RA 4917 (retirement benefits of employees of private

firms)
7. Share in the Conjugal Property

The net share of the surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to such property
What are the Estate Tax rates?

The estate tax rates depend on the date of death. For those who died on January 1,
1998 and onwards, the following are the estate tax rates based on the net estate:
Over

But not over The tax shall

Plus

Of the

be

excess over

200,000

Exempt

200,000

500,000

5%

200,000

500,000

2,000,000

15,000

8%

500,000

2,000,000

5,000,000

135,000

11%

2,000,000

5,000,000

10,000,000

465,000

15%

5,000,000

10,000,000

And Over

1,215,000

20%

10,000,000

ADVERTISEMENT

If the decedent died between July 28, 1992 to December 31, 1997, the following are the
applicable estate tax rates based on the net estate amount:

Over

But not Over

The Tax
Shall be

Plus

Of the Excess
Over

P 200,00.00

0%

P200,000.00

500,000.00

5%

P 200,000.00

500,000.00

2,000,000.00

P 15,000.00

8%

500,000.00

2,000,000.00

5,000,000.00

135,000.00

12%

2,000,000.00

5,000,000.00 10,000,000.00 495,000.00

21%

5,000,000.00

10,000,000.00

1,545,000.00 35% 10,000,000.00

If the decedent died between January 1, 1973 and July 27, 1992, the following are the
applicable estate tax rates based on the net estate amount:

Over

But not Over

The Tax
Shall be

P 10,00.00

Exempt

Plus

Of the Excess
Over

3%

P 10,000.00

P 10,000.00

50,000.00

50,000.00

75,000.00

P 1,200.00

4%

50,000.00

750,000.00

100,000.00

2,200.00

5%

75,000.00

100,000.00

150,000.00

3,450.00

10%

100,000.00

150,000.00

200,000.00

8,450.00

15%

150,000.00

200,000.00

300,000.00

15,950.00

20%

200,000.00

300,000.00

400,000.00

35,950.00

25%

300,000.00

400,000.00

500,000.00

60,950.00

30%

400,000.00

500,000.00

625,000.00

90,950.00

35%

500,000.00

625,000.00

750,000.00

134,700.00

40%

625,000.00

750,000.00

875,000.00

184,700.00

45%

750,000.00

875,000.00

1,000,000.00

240,950.00

50%

875,000.00

1,000,000.00 2,000,000.00

303,450.00

53%

1,000,000.00

2,000,000.00 3,000,000.00

833,450.00

56%

2,000,000.00

1,393,450.00

60%

3,000,000.00

3,000,000.00

If the decedent died between September 15, 1950 to December 31, 1972, the following
are the applicable estate tax rates based on the net estate amount:

From

To

ESTATE

INHERITANCE

5,000.00

5,000.00

Exempt

Exempt

7,000.00

5,000.00

12,000.00

1.0%

2&

18,000.00

12,000.00

30,000.00

2.0%

4%

20,000.00

30,000.00

50,000.00

2.5%

6%

30,000.00

50,000.00

70,000.00

3.0%

8%

Sample computations

Please refer to BIR Revenue Regulations No. 2-2003 for sample computations.
When is an Estate Tax return required to be filed?

When the gross value of the estate exceeds P200,000 (though exempt from tax); or

Regardless of the gross value of the estate, where the said estate consists of registered
or registrable property such as real property, motor vehicle, shares of stock, or other similar
property for which a clearance from the BIR is required as a condition precedent for the
transfer or ownership thereof in the name of the transferee

When to file and pay

Within six (6) months from the decedents death;

Unless an extension of time is requested in cases where the payment of the tax will
result in undue hardship on the heirs

Not to exceed 5 years in case the estate is settled through the courts;

Not to exceed 2 years in case the estate is settled extrajudicially.

Penalties for late payment

The penalties shall include 25% surcharge and 20% interest per year (Under Secs. 248
and 249, respectively). If fraud is involved, the surcharge shall be 50%. You may also
pay compromise penalties in lieu of imprisonment, which can be viewed at the BIRs
website through the following link: Schedule of compromise penalties.
BIR Form to be used

BIR Form No. 1801 (Estate Tax Return)

Where to file

The Authorized Agent Bank (AAB), Revenue District Officer (RDO) or duly authorized
Treasurer of the city or municipality where the decedent was domiciled at the time of his
death; or

If there be no legal residence in the Philippines, with the Office of the Commissioner.

How to Get A BIR Certificate Authorizing Registration (CAR)

The Registry of Deeds will not allow you to transfer the title of real properties of a
deceased person if there is no BIR CAR. Please make sure that you have the
documents as enumerated in the Checklist of Documentary Requirements (CDR) for
Estate Tax, which can be found in Annex A-6 and A-6.1 of Revenue Memorandum Order
(RMO) No. 15-03 (see pages 7 to 9).
To help you determine the computation for the estate tax due, you may refer to
the ONETT (One-Time Transaction) Computation Sheet, in Annex B-3 (pages 16 and
17) also of RMO No. 15-03. Please also check the sample computations in BIR RR No.
2-2003 and BIR Form No. 1801.