By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefore a price certain in money or its equivalent. (Article 1458, Civil Code)
One of the most common methods of acquiring real property, is through the contract of sale. Unfortunately, most people seem to think that the mere act of possessing a copy of the Deed of Absolute Sale is sufficient to cement their claim of ownership over the property that they had purchased. In reality, while the Deed of Absolute Sale may be ample proof that one has purchased the property from the seller, what if the seller sold the property to another person a second time? Or what if the seller had previously sold the property to someone else? In such cases, the best evidence of ownership over the property would have to be the Certificate of Title.
In purchasing real property, the most prudent buyer would always require the seller to produce a copy of the Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT), as well as the Tax Declaration which covers the property. A quick look at the OCT or TCT would show whether the property is under mortgage, is the subject of pending litigation, or contains other encumbrances which would not make it a good purchase. The Tax Declaration would not only show the fair market value of the property, but is likewise a good indicator of whether or not the seller had been religiously paying his/her real property taxes every year. To take things a step further, one may secure a tax clearance from the City or Provincial Assessor’s Office to actually determine whether or not real property taxes had been paid.
Once the parties have agreed to execute a Deed of Absolute Sale over the property and have actually done so, the task of securing a Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue (BIR) is at hand. The CAR enables the buyer to have the OCT or the TCT registered under his/her name. While many balk at the idea of securing the CAR by themselves, the process is actually not an impossible one, to wit:
- PAYMENT OF THE CAPITAL GAINS TAX & DOCUMENTARY STAMP TAX
The Seller (or the Buyer, depending on the agreement between the parties) pays the Capital Gains Tax and the Documentary Stamp Tax with the BIR. This is done by filling up and submitting the Capital Gains Tax Return Form (BIR Form No. 1706) and the Documentary Stamp Tax Declaration/Return Form (BIR Form No. 2000-OT), in triplicate, together with the required attachments, to the BIR.
The required attachments for BIR Form No. 1706 are:
- A copy of the notarized Deed of Sale or Exchange.
- A photocopy of the Transfer Certificate of Title (TCT), Original Certificate of Title, or Condominium Certificate of Title (CTT),
- Certified True Copy of the latest Tax Declaration on the property and/or the improvements contained therein (e.g. house, building).
- If the property subject of the sale does not contain any improvements, or does contain an improvement but the said improvement is in the name of another, a certification to that effect from the Assessor’s Office.
An Examiner at the BIR will determine how much Capital Gains Tax is due, which is six percent (6%) of the Gross Selling Price or the Fair Market Value of the property, whichever is higher. Payment of the Capital Gains Tax should be made within thirty (30) days following the sale, exchange or disposition of the property, at an Authorized Agent Bank (AAB), or directly to the Revenue Collection Officer or duly authorized City or Municipal Treasurer in the absence of an AAB.
On the other hand, the amount of Documentary Stamp Tax due is Php15/Php1,000, or Fifteen Pesos for every One Thousand Pesos from the tax base (whichever is higher between the Gross Selling Price or the Fair Market Value of the property). Payment of the Documentary Stamp Tax should be made within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted or transferred. To illustrate: If the property was sold on January 15, then the deadline for the payment of the Documentary Stamp Tax would be on February 5.
If one has somehow forgotten to pay the Capital Gains Tax and/or the Documentary Stamp Tax on or before their due dates, a surcharge, interest and compromise penalty will be imposed.
After filing the Capital Gains Tax Return and the Documentary Stamp Tax Return, with their required attachments and paying the taxes, surcharges, interests and compromise penalties, if any, with the AAB, one goes back the the BIR and shows proof of such filing and payment (the receipt or validated deposit slip issued by the AAB). The BIR then issues a claim slip and will advise you when to pick up your Certificate Authorizing Registration (CAR), which is usually in two weeks’ time.
Once you are able to claim your CAR, you can now take steps for the actual transfer of the property to your name.
II. TAX CLEARANCE
First, you must make sure that the real property tax on the property has been paid. You can do this by asking for a tax clearance from the Tax Clearance Section of the Real Property Tax Division at the City Treasurer’s Office. In order to secure a tax clearance, you need the following:
1. Letter request
2. Tax declaration number
3. Tax payment verification sheet (TPVS) print-out
You can obtain the TPVS print-out at the Tax Clearance Section.
The Tax Clearance Section first verifies that payments of real property tax on the property have been made. If the person in charge determines that real property tax on the property has not been made for the current year, or any of the previous years, a bill for the tax due will be printed. You will then pay the bill, as well as the Certification Fee, at the Cashier. If payment of real property tax is up to date, all you need to do is pay for the Certification Fee at the Cashier. You then present the Official Receipt, together with the supporting documents to the verifier. Your tax clearance will then be released to you after a few minutes.
III. TRANSFER TAX
After claiming your tax clearance, you can now head on over to the Transfer Tax Division. You submit the Tax Clearance together with the CAR and its attachments to the person-in-charge. Transfer tax is then computed. You will have to pay for the computed tax at the cashier. After paying the transfer tax, you have to get a certified true copies of the Official Receipt that had just been issued to you. You will need this when you visit the Registry of Deeds to have the title of the property transferred to your name.
IV. REGISTRY OF DEEDS
After Transfer Tax has been paid, submit a Certified True Copy of the Official Receipt that had been issued to you for the Transfer Tax as well as the CAR and other supporting documents attached to the same, to the person-in-charge at the Registry of Deeds. You can monitor the status of your title online at: http://www.lra.gov.ph/LOTS.htm, or you can visit the Registry of Deeds personally. You can claim your Transfer Certificate of Title (TCT) at the Registry of Deeds once it is ready.
V. TAX DECLARATION
After you receive your TCT, you can now have the property’s tax declaration transferred under your name. To do this, you have to submit a photocopy of the TCT, the CAR and its supporting attachments, and a Certified True Copy of the Official Receipt for the Transfer Tax. You can then claim the new Tax Declaration after a few days.
If the process of transferring title to real property does not appeal to you, you may engage the services of a law firm or an accounting firm to do the work for you. Just make sure that the firm that you hire has knowledgeable, honest and trustworthy employees.
