Before you agree on a price, it helps to know what the sale will cost you. In a typical sale of property held as a capital asset, the main government charges are capital gains tax, documentary stamp tax, transfer tax and registration fees.
The main costs at a glance
| Charge | Typical rate | Paid to |
|---|---|---|
| Capital gains tax (CGT) | 6% of the tax base | BIR |
| Documentary stamp tax (DST) | 1.5% of the tax base | BIR |
| Transfer tax | Up to 0.5% in provinces, up to 0.75% in cities | Local government |
| Registration fee | Based on a schedule of fees | Registry of Deeds |
Notarial fees and any agreed professional fees are separate from these charges.
What the percentage is based on
CGT and DST are not always computed on your actual selling price. The BIR generally uses whichever is highest: the selling price, the zonal value, or the fair market value shown on the tax declaration. So a sale below zonal value can still be taxed on the zonal value.
A worked example
Say you sell a house and lot for ₱3,000,000. The zonal value computes to ₱2,500,000 and the tax declaration shows a lower figure, so the tax base is ₱3,000,000.
- Capital gains tax at 6%: ₱180,000
- Documentary stamp tax at 1.5%: ₱45,000
Transfer tax and registration fees are added on top. This example is only an illustration, and the BIR and your local government compute the final amounts.
Who pays what
By common practice, the seller pays CGT, and the buyer pays DST, transfer tax and registration fees. That is a custom and not a fixed rule, so the parties can agree otherwise. Write down who pays what in your contract so there are no arguments at closing.
Deadlines to watch
- CGT: generally within 30 days after the sale.
- DST: generally by the fifth day of the month after the deed is notarized.
- Transfer tax: generally within 60 days of the deed’s execution.
Late payment can mean surcharges and interest. Because the dates run from notarization, check the requirements with your BIR Revenue District Office and local treasurer before signing.
When the 6% may not apply
- Ordinary assets. Property used in a business, or sold by a developer or dealer, is generally taxed differently. Withholding tax and VAT may apply instead.
- Selling your principal residence. The law allows an exemption if the proceeds are fully used to buy or build a new principal residence within 18 months. Conditions apply, including notifying the BIR and placing the tax in escrow, so ask the BIR or a tax adviser first.
Once the taxes are paid, the BIR issues the eCAR, which the Registry of Deeds needs to transfer the title. Our document checklist shows what else to prepare, and you can read more about selling property in Pampanga.