In this blog, let us discuss how to compute the cost of Transfer of Land Title and what are the things you need to know.
Case: Your cousin sells her land at P3 million net of taxes. It means that she will receive P3 million and you will pay all expenses from notarial fee to registration of title. How do you compute the transfer cost?
Actually, there is a shortcut method in determining the transfer cost. Simply multiply the P3 million by 11% and you will get the transfer cost of the said property.
P3,000,000 x 11% = P330,000 <----- This is the estimated Transfer Cost of the property.
Thus, your Total Cost of the property is P3,330,000 from buying the land to registering the same under your name.
NOW, let us discuss the details of it. It is better to know the procedure in the transfer and registration of the land title under your name.
TAX BASE COMPUTATION
Tax base is the amount or value of the property as determined by BIR for the purposes of taxation. The BIR will take a look at these 3 things:
Gross Selling Price | P3,000,000 |
Zonal Value | P2,500,000 |
Fair Market Price | P2,300,000 |
The BIR will get the tax base on WHICHEVER IS HIGHER among the three. In our case, it is the Gross Selling Price as stated in the Deed of Sale: P3,000,000.
PROCEDURE
STEP 1. VISIT A NOTARY PUBLIC
> Drafting of the Deed of Sale
> Signing of the Deed of Sale
> Notarial of the Deed of Sale
HOW MUCH IS THE NOTARIAL FEE?
> Range: 1% to 5% of the Gross Selling Price stated in the Deed of Sale
> Usually, a good lawyer will charge at 2%
Notarial Fee: P3,000,000 x 2% = P60,000
STEP 2. VISIT THE BIR
> Submit the notarized Deed of Sale
> BIR computes the Capital Gains Tax and Documentary Stamp Tax
HOW MUCH?
> Capital Gains Tax - 6% (P180,000)
> Documentary Stamp Tax - 1.5% (P45,000)
You will be issued Certificate Authorizing Registration (CAR)
STEP 3. VISIT THE TREASURER OFFICE
> Submit CAR and related documents for the computation of the Transfer Tax
HOW MUCH?
> 75% of 1% of tax base (Metro Manila)
> 50% of 1% of tax base (Outside Metro Manila)
Note: Get the local taxation rate where the property is located.
STEP 4. VISIT THE REGISTRY OF DEEDS
> Submit all documents
> Pay for Registration Fee HOW MUCH?
> Estimates: 0.5% of tax base
Schedule of Fee based on LRA Circular No. 11-2002
Based on the schedule, the highest amount is:
1,680,000.00 - 1,700,000.00 = P8,796.00
Note: In excess of P1,700,000.00, the addition to the fee of P8,796.00 is P90.00 per P20,000.
For example: Tax base P3,000,000
3,000,000 minus 1,700,000 = 1,300,000
1,300,000 divided by 20,000 = 65
Now, 65 x 90 = 5,850
So, P8,796 + P5,850 = P14,646 <-- Transfer Tax
Short-cut: P3,000,000 x 0.005 = P15,000 (estimates)
SUMMARY OF EXPENSES
ITEMS | PERCENTAGE | AMOUNT |
Notarial Fee | 2% | P60,000 |
​Capital Gains Tax | 6% | P180,000 |
Documentary Stamp Tax | 1.5% | P45,000 |
Transfer Tax | 50% of 1% | P15,000 |
​Registration Fee | 0.5% | P15,000 |
TOTAL | 10.5% | P315,000 |
OTHER EXPENSES
> Certified True Copy of Title
> Tax Declaration of Property
> Certificate of No Improvement
> Tax Clearance
> Verification of TIN Number
> Transportation and snacks
SO, you can budget at 11% of the Tax base of the property.
If you hire a processor to process the transfer for you, you can budget P10,000-P15,000. If it involves DAR certification, P25,000. The amount is negotiable.
I hope that this information can help you. If you need assistance to Transfer your Land Title, let us talk... I am willing to help. Call/Text 09202075035 or 09925176284