the difference between tax declaration and tax clearance

Tax Declaration vs Tax Clearance

We often hear the word “tax declaration” and “tax clearance” in every real estate transaction. Have you ever asked yourself what is this for? Are they one and the same? Why is there a need of these documents when buying or selling real estate? Let us take a deep dive into these two types of tax documents.
 
A Tax Declaration ("Tax Dec") is an official document, issued by the local assessor’s office where the property is located, that serves as a record of the assessed property value for the purpose of calculating real property tax (RPT). Tax Dec includes important data such as the owner’s name, property location, property type (either residential, commercial, agricultural, etc.), and tax declaration number which is often required for property transactions such as selling, buying, or mortgaging real estate. Tax Dec shows the computation of the real property’s assessed value and the corresponding real property tax due to the local government. While a Tax Dec doesn’t directly prove ownership in the same way a certificate of title does, it may be evidence that the person named therein has a claim over the property. However, a diligent buyer should always look for a Certificate of Title (TCT for house and/or lot or CCT for condominium) to make sure it's free from liens and encumbrances. While a tax declaration is significant, it's not definitive proof of ownership of title.
 
On the other hand, Tax Clearance Certificate (“TCC”) is a document issued by the local government showing that the real property owner has paid the real property taxes in full and has complied with tax laws. The issuance of tax certificates proves that the real property tax for the whole year has been properly paid. When buying a real property, the TCC helps prospective buyers verify that real property taxes are updated, ensuring no pending liabilities. Once the Tax Clearance has been issued, it has a validity period of one year from the date of issuance since this shows full payment of taxes for the current year only.
 
The main difference is while a tax declaration relates to real property assessment value, a tax clearance pertains to compliance of real property tax payments. When buying a real estate, a prospective buyer should ensure these are presented by the seller as proof that there are no pending liabilities to the government and for the prospective buyer to determine the annual real property taxes due from them going forward.

written by: Angie Wee, CPA

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