Below is a comprehensive discussion of the common taxes and fees associated with transferring real property located in Makati, Philippines. Please note that this article is for general informational purposes only and does not constitute legal advice. For specific questions regarding your circumstances, it is best to consult a qualified attorney, tax specialist, or government authority.

1. Overview of Real Property Transfers in the Philippines

When real property changes hands in the Philippines—whether by sale, donation, or inheritance—several taxes and fees become due. These obligations are governed primarily by:

The National Internal Revenue Code (NIRC) of the Philippines,
Local ordinances of the city or municipality (in this case, Makati),
The Local Government Code (R.A. 7160), and
Applicable rules issued by the Bureau of Internal Revenue (BIR) and the local Assessor’s Office/City Treasurer’s Office.

2. Capital Gains Tax or Withholding Tax

2.1. Capital Gains Tax (CGT) on Sale of Real Property

Rate: 6% of the gross selling price or the fair market value (FMV) of the property, whichever is higher.
Who pays: In practice, this is typically shouldered by the seller, unless the parties stipulate otherwise in the contract.
Legal basis: Section 24(D) of the NIRC imposes a 6% tax on the presumed gains from the sale of real property that is considered a “capital asset.”

When it applies

Capital Gains Tax applies if the property is considered a “capital asset” (generally, property not held primarily for sale in the ordinary course of business). If the seller is engaged in the real estate business and the property is part of their regular inventory, a different tax regime applies (i.e., Creditable Withholding Tax at graduated rates, as per Revenue Regulations).

2.2. Creditable Withholding Tax (CWT) on Sale of Ordinary Assets

Rate: Depends on the property’s classification and the property’s value or the seller’s tax status. Rates range from 1.5% to 6% (sometimes even higher, depending on certain thresholds).
Who pays: Typically withheld by the buyer on behalf of the seller if the seller is considered to be in the real estate business.
Legal basis: Revenue Regulations issued by the BIR under the NIRC.

3. Documentary Stamp Tax (DST)

Rate: 1.5% of the total consideration (selling price) or the fair market value—again, whichever is higher.
Who pays: Usually this is also shouldered by the seller, unless otherwise agreed.
Legal basis: Title VII of the NIRC imposes documentary stamp taxes on certain documents, including Deeds of Sale, Deeds of Exchange, or other transfer instruments of real property.

4. Local Transfer Tax in Makati

Aside from national taxes, local governments impose a transfer tax upon the sale or transfer of property. Under the Local Government Code of 1991, highly urbanized cities such as Makati may charge a rate of up to 0.75% (i.e., 75% of 1%) on the property value.

4.1. Transfer Tax Rate in Makati

Typical Rate: 0.75% of the gross selling price or the fair market value (whichever is higher).
Who pays: Local practice often assigns this cost to the buyer, although the parties are free to negotiate.

4.2. Where to Pay

Payment for the local transfer tax is made at the Office of the City Treasurer (or a similar designated department) in Makati. The local government will require documents such as the Deed of Sale (or other transfer instrument), Tax Declaration, and proof of payment of national taxes (Capital Gains Tax/CWT and Documentary Stamp Tax) when assessing the exact amount.

5. Registration and Other Fees

5.1. Register of Deeds (RD) Fees

After paying the national and local taxes, the new owner (or a representative) proceeds to the Register of Deeds to register the Deed of Sale (or other transfer document). The RD charges registration fees based on the property’s value, typically following a schedule outlined by the Land Registration Authority (LRA). The total can range from a few thousand pesos to more substantial amounts, depending on the property value.

5.2. Notarial Fees

Any Deed of Sale or similar instrument must be notarized to be valid and binding.
Notarial fees vary, typically ranging from 1% to 2% of the property’s value or may be a fixed amount depending on arrangements with a notary public.

5.3. Miscellaneous Fees

Documentary Requirements: Often you will have to secure certified true copies of the Transfer Certificate of Title (TCT) from the Register of Deeds, the latest Tax Declaration from the Assessor’s Office, and sometimes a Real Property Tax Clearance from the Treasurer’s Office. Each of these can involve minimal fees.
Real Property Tax (RPT) Clearance: Makati typically requires that the real property taxes on the property be fully paid up to date before approving a transfer. If any RPT is unpaid, it must be settled first.

6. Donor’s Tax and Estate Tax (for Other Modes of Transfer)

If the transfer is not through a sale but rather via donation (gift) or inheritance, the applicable taxes differ:

Donor’s Tax (Donation):
- Rate: A flat rate of 6% on the excess over PHP 250,000 (annual exclusion) of the total net gifts made during the calendar year.
- Basis: This is imposed on the fair market value of the donated property at the time of donation.
- Who pays: The donor (the person giving the property).
Estate Tax (Inheritance):
- Rate: 6% on the value of the net estate above the standard deductions allowed by law.
- Basis: Determined on the total value of the deceased’s assets minus allowable deductions.

While these modes of transfer are less common for typical property purchases, they are still relevant when ownership is passed without a sale.

7. Documentary Requirements and Process in Makati

Below is a simplified overview of the standard procedures and documentary requirements when transferring real property in Makati by sale:

Due Diligence
- Obtain a Certified True Copy of the Title (TCT or CCT if condominium) from the Makati Register of Deeds.
- Obtain a Tax Declaration from the Makati Assessor’s Office.
- Ensure the Real Property Tax payments are current.
Execute the Deed of Sale
- Prepare and sign the Deed of Sale (or other transfer documents).
- Have the Deed of Sale notarized by a duly commissioned notary public.
Pay Capital Gains Tax and Documentary Stamp Tax at the BIR
- Within 30 days (for CGT) from the date of notarization of the Deed of Sale (deadlines differ if the property is an ordinary asset).
- File the appropriate BIR forms (BIR Form 1706 for CGT, BIR Form 2000 for DST, etc.).
- Pay at an Authorized Agent Bank (AAB) in Makati or as directed by the BIR.
Obtain Certificate Authorizing Registration (CAR) or eCAR
- Once the taxes have been paid, the BIR will issue an eCAR, signifying that the national taxes (CGT/CWT and DST) have been settled.
- This is required before you can proceed with transfer at the Register of Deeds.
Pay the Transfer Tax at the Makati City Treasurer’s Office
- Present the notarized Deed of Sale, eCAR, Tax Declaration, and other required documents.
- The Treasurer’s Office will assess and collect the local transfer tax.
Register the Sale at the Register of Deeds
- Submit the notarized Deed of Sale, eCAR, Transfer Tax payment documents, and original Owner’s Duplicate of Title.
- Pay the corresponding registration fees.
- The RD will then cancel the old title and issue a new one in the name of the buyer.
Obtain New Tax Declaration from the Makati Assessor’s Office
- Present the new title and other documents for the issuance of a new Tax Declaration under the buyer’s name.

8. Penalties for Non-Compliance

Failure to pay the required taxes and fees on time typically results in:

Interest on unpaid taxes (12% per annum or a different rate set by BIR regulations),
Surcharges for late payments (often 25% for late filing/payment),
Possible penalties imposed by the local government for late remittance of transfer tax,
Potential complications in registering the property, since the Register of Deeds will not process the transfer without proof of tax payments.

9. Practical Tips and Considerations

Negotiate who pays: The law does not strictly require the seller or buyer to shoulder specific taxes; it is mostly by custom and agreement. However, it is most common that the seller pays the Capital Gains Tax and Documentary Stamp Tax, while the buyer pays the Transfer Tax, registration fees, and notarial fees.
Compare Valuations: Be mindful of the different valuations—(a) declared selling price, (b) BIR zonal valuation, and (c) Assessor’s FMV. The highest of these is typically used as the tax base.
Timeframe: Plan for the time it will take to secure clearance from the BIR (issuance of eCAR) and from the City Treasurer’s Office in Makati. Processing times can vary based on workload, but typically range from a few weeks to a couple of months.
Consult Professionals: Real estate transactions involve multiple offices and complex rules. Engaging a lawyer or a reputable broker can help ensure compliance and expedite processing.
Check for Makati-Specific Ordinances: Although Makati follows general laws in the Philippines, it may issue local ordinances that affect real property taxes or fees. Consult the Makati City Hall or its official website (or a local lawyer) for recent updates.

10. Conclusion

Transferring real property in Makati involves national taxes (Capital Gains Tax or Creditable Withholding Tax, and Documentary Stamp Tax), local transfer tax, plus registration and administrative fees. Ensuring proper compliance requires attention to deadlines, documentary requirements, and valuation rules. While the general processes are similar across Philippine cities, Makati’s specific rates and requirements must be observed.

Because real estate transactions can be significant investments, it is strongly recommended to consult with legal counsel or a qualified tax professional to navigate the requirements efficiently and avoid costly penalties.