Late Payment Penalty for Transferring Property Title - Lot, House & Lot, Condo

How to Prevent Penalty for Property Title Transfer - Lot, House & Lot, Condo

After agreeing to a sale of a property, whether a lot, house and lot or a condo, the buyer and seller should close the deal thru a Deed of Absolute Sale. The seller or buyer should also pay the necessary taxes to completely transfer the property title from the seller to the buyer.
Only then can the buyer obtain the Torrens Title. Also known as a Certificate of Title, it’s a Certificate of Ownership proving the ownership right of an individual. Thus, it’s essential to register the Deed of Absolute Sale and property title transfer from the seller to the buyer.
But what happens when you fail to pay the taxes on time? Read on as we share the late payment penalty for property title transfer and how you can avoid such charges.

1. Delayed Capital Gains Tax (CGT)

Once a Deed of Absolute Sale has been created, the next step is to obtain a Certificate Authorizing Registration (CAR). This is issued by the Bureau of Internal Revenue (BIR), which serves as a tax clearance and is required to transfer property title in the buyer's name.

Moreover, the Capital Gains Tax should be paid 30 days after the Deed of Sale notarization.
To pay the Capital Gains Tax, the seller should pay the tax at the BIR Revenue District Office (RDO), which has jurisdiction over the property's location. But if you fail to pay the said tax, you have to pay the following penalty:

• Surcharge not over 25%
• Pro-rated 12% annual interest
• Compromise penalty (fixed value)

2. Delayed Documentary Stamp Tax (DST)

Before BIR issue the Certificate Authorizing Registration (CAR), the Documentary Stamp Tax should also be settled. It should be paid on or before the 5th day of the following month. For instance, if the Deed of Sale was notarized on January 31, 2023, the Documentary Stamp Tax should be paid on or before February 5, 2023.

Like Capital Gains Tax, the Documentary Stamp Tax can be paid at BIR RDO, which has jurisdiction over the property's location. On the other hand, if you're unable to settle the payment for Documentary Stamp Tax, you should pay the following penalty:

• Surcharge not over 25%
• Pro-rated 12% annual interest
• Compromise penalty (fixed value)

3. Delayed Transfer Tax Fee

After the Deed of Sale notarization, the Transfer Tax Fee should also be paid within 60 days. The Transfer Tax Fee can be paid at the Local Government Unit (LGU) Treasurer's Office, which has jurisdiction over the property's location. To pay the Transfer Tax Fee, secure the following requirements:

• Certificate Authorizing Registration (CAR) from BIR
• Real Property Tax Clearance from Treasurer’s Office
• Documentary Stamp Tax Official Receipt from the BIR

​
However, if the seller or transferor didn’t pay the Transfer Tax Fee on time, you should pay the following penalty:

• Surcharge not over 25%
• Interest rate of up to 2% per month

Wrapping Up

Do note that the penalty is based on the tax plus the surcharge. For example, if your Capital Gains Tax is P100,000 and there's a surcharge of 25%, the penalty would be P25,000 for Capital Gains Tax alone. There's also the Documentary Stamp Tax, Transfer Tax Fee, late payment penalties, and interest. So after notarizing your Deed of Sale, I advise you to head straight to BIR and LGU Treasurer's Office to settle the payments and avoid any penalty and interest rate.