Unilateral Deed of Sale for BIR Filing Requirements

Below is a comprehensive discussion of the concept of a “Unilateral Deed of Sale” in the Philippine context, especially as it relates to the Bureau of Internal Revenue (BIR) requirements and processes. While this information aims to provide clarity, please note it does not constitute legal advice. Consult a qualified attorney for guidance specific to your circumstances.

1. Overview of a Unilateral Deed of Sale

  1. Definition

    • A Unilateral Deed of Sale is a contract or instrument executed primarily by the seller (vendor), indicating the intention to sell and transferring ownership to the buyer (vendee).
    • Unlike a bilateral deed of sale—where both the seller and buyer typically sign—the unilateral deed is signed only by the seller.
    • In Philippine practice, many documents are referred to simply as “Deed of Sale” or “Deed of Absolute Sale,” which usually include the signatures of both parties. However, in specific circumstances, a unilateral deed may be used if the law only requires the consent of the owner-seller to transfer title.

  2. Legal Basis

    • Under Article 1475 of the Philippine Civil Code, a contract of sale is perfected at the moment there is a meeting of the minds on the object and the price.
    • While written contracts are not strictly required for validity between the parties for movable property, the sale of real property requires certain formalities for purposes of registration and enforceability against third persons.
    • The unilateral deed (signed by the seller alone) can meet the formal requirement for a public instrument so long as the buyer’s acceptance can be proven (for instance, through payment or other evidence). Notarial practice in many localities, however, often insists on signatures from both parties for clearer documentation.

2. Purpose and Common Use Cases

  1. Transfer of Ownership of Real Property

    • Typically used if the buyer has already provided payment or other forms of consideration, and the seller executes a document transferring ownership unilaterally.
    • This deed becomes the basis for the issuance of a new Certificate of Title once the appropriate taxes are paid, and registration with the Registry of Deeds is completed.

  2. Ease of Execution

    • Sometimes used in situations where the buyer’s signature may not be as essential to the formal requirements (e.g., the buyer has difficulty being physically present for signing).
    • However, many notaries will require both parties’ signatures to avoid any doubt about the authenticity of the sale and ensure acceptance by the buyer.

  3. Distinguishing Feature

    • Unilateral implies the final and binding statement comes mainly from the seller. The buyer’s acceptance may be manifested in other ways.
    • The unilateral deed helps finalize the seller’s obligation to transfer once consideration is paid. Still, from a practical standpoint, the buyer’s signature is almost always required for clarity and easier acceptance by government offices and registries.

3. BIR Filing Requirements: Overview

Regardless of whether a deed of sale is unilateral or bilateral, transferring real property triggers tax obligations with the Bureau of Internal Revenue. Below are the common steps and documentary requirements:

  1. Taxes Due

    • Capital Gains Tax (CGT) or Creditable Withholding Tax (CWT)
      • If the seller is an individual not engaged in real estate business, a 6% Capital Gains Tax is typically imposed on the higher of (a) the total consideration (selling price) or (b) the zonal/fair market value.
      • If the seller is a real estate dealer or engaged in the real estate business, instead of CGT, a Creditable Withholding Tax (CWT) may be applicable, computed based on BIR’s prescribed rates.
    • Documentary Stamp Tax (DST)
      • The DST is 1.5% of the higher of (a) the selling price or (b) fair market value/zonal value.
    • Local Transfer Tax
      • Levied by the Local Government Unit (LGU) where the property is located, typically a small percentage of the property value.

  2. Deadline of Tax Filings

    • Capital Gains Tax must be filed and paid within 30 days from the date of the execution of the Deed of Sale.
    • Documentary Stamp Tax must likewise be filed and paid within 5 days after the close of the month when the Deed of Sale was executed. Practically, taxpayers pay the CGT and DST together within 30 days.

  3. Common Documentary Requirements

    • Notarized Deed of Sale (whether unilateral or bilateral)
    • Owner’s duplicate of the Transfer Certificate of Title (TCT) or Condominium Certificate of Title (CCT)
    • Certified True Copies of the latest Tax Declaration for the land and improvement (if any)
    • BIR Forms (e.g., BIR Form 1706 for CGT or BIR Form 1606 for CWT, and BIR Form 2000-OT for DST)
    • Payment documents (e.g., official receipts for the taxes paid)
    • TIN of seller and buyer – Both parties should have valid Tax Identification Numbers.
    • Other supporting documents (e.g., Special Power of Attorney if someone is signing on behalf of the seller or buyer).

4. Steps to File with the BIR

Here is a general workflow for filing the transfer taxes based on a unilateral or bilateral Deed of Sale:

  1. Have the Deed of Sale Notarized

    • Make sure all necessary details—seller’s name, buyer’s name, property description, agreed selling price—are correct.
    • The notary public confirms the identity and capacity of the signatory/ies.
    • Even if it is called a unilateral deed, notaries often require the buyer’s signature for clarity and completeness.

  2. Obtain an Assessment from the BIR

    • Go to the BIR Revenue District Office (RDO) with jurisdiction over the property’s location.
    • Present the notarized Deed of Sale, tax declaration, title, etc.
    • The BIR will compute the tax obligations (CGT or CWT, plus DST).

  3. Pay the Taxes

    • Pay the computed Capital Gains Tax or Withholding Tax and Documentary Stamp Tax at an authorized agent bank within the deadlines.
    • Secure the official receipts or system-generated confirmations of payment.

  4. Secure the Certificate Authorizing Registration (CAR) or Electronic Certificate Authorizing Registration (eCAR)

    • Once the BIR is satisfied with the documentary requirements and payments, it will issue the CAR/eCAR.
    • This document is crucial for the next step (registration with the Registry of Deeds).

  5. Proceed to the Registry of Deeds

    • Present the CAR/eCAR, the notarized Deed of Sale, and the Owner’s Duplicate Certificate of Title.
    • Pay the corresponding registration fees.
    • The Registry of Deeds will cancel the old title (in the seller’s name) and issue a new title (in the buyer’s name).

  6. Update the Tax Declaration at the Assessor’s Office

    • After obtaining the new title, proceed to the local Assessor’s Office to update the tax declaration in the name of the new owner (the buyer).

5. Common Issues and Concerns

  1. Validity and Acceptance of a Unilateral Deed

    • Although legally permissible in certain contexts, some BIR offices or notaries may still prefer or require both parties’ signatures to avoid disputes about the buyer’s acceptance.
    • Make sure your Deed of Sale meets local notarial requirements to avoid processing delays.

  2. Zonal Value vs. Actual Selling Price

    • When paying taxes, the basis for computation will be the higher of the declared selling price or the zonal/fair market value. Under-declaring the price to reduce taxes exposes parties to penalties and possible future liability.

  3. Deadline Violations

    • Late payments of CGT or DST lead to penalties, surcharges, and interest.
    • Always file within the mandated deadlines to avoid additional costs.

  4. Special Situations

    • Inherited property: Estate tax must be settled first before any sale.
    • Extra-judicial settlement: If the property is part of an unsettled estate, settlement or partition must be done before a valid sale by the heirs.
    • Properties under mortgage or encumbrances: Ensure all liens are cleared or consent is obtained where needed.

  5. Practical Advice

    • Even if the document is called “unilateral,” most real estate transactions benefit from the buyer’s signature, reducing the risk of future disputes.
    • Always retain originals or certified copies of notarized documents and official receipts for taxes.

6. Legal References and Guidelines

  1. Civil Code of the Philippines – Governs contracts of sale (Articles 1458 to 1637).
  2. National Internal Revenue Code (NIRC) – Outlines tax obligations, including capital gains tax and documentary stamp tax.
  3. BIR Issuances (Revenue Regulations, Revenue Memorandum Circulars) – Provide specific procedures and rates for CGT, DST, and other real property-related taxes.
  4. Local Government Codes – Address local transfer tax requirements.
  5. Notarial Law (A.M. No. 02-8-13-SC) – Sets out rules for notarization in the Philippines, including the form of notarial documents.

7. Practical Tips

  • Consult a Lawyer: Real estate transactions can be complex, and the use of a unilateral deed may raise questions about the buyer’s acceptance. Proper legal guidance can prevent disputes.
  • Coordinate with the BIR Early: Different Revenue District Offices may have varying internal practices or checklists. Clarify requirements for a unilateral deed if you plan to use one.
  • Check Local Requirements: City or municipal assessors might have additional documentary requirements, particularly on changes in the tax declaration.
  • Keep All Receipts: Always keep official receipts (or bank confirmations) for taxes paid; these are crucial if any questions arise later.

Conclusion

In Philippine real estate practice, a Unilateral Deed of Sale—while not as common as a bilateral deed—can be valid to convey ownership if it complies with legal formalities and the buyer’s acceptance is properly shown or evidenced. For purposes of paying the BIR taxes (Capital Gains Tax, Documentary Stamp Tax, etc.), what truly matters is that the Deed of Sale (in whichever format) is notarized, meets the tax computation requirements, and is filed within statutory deadlines.

After paying the appropriate taxes, the BIR issues a Certificate Authorizing Registration (CAR/eCAR), which enables the buyer to register the property with the Registry of Deeds. Ultimately, whether unilateral or bilateral, ensure the deed is correctly executed and that all BIR filing requirements and local regulations are strictly observed to avoid complications or disputes.

Because real estate transactions in the Philippines can be intricate, especially when using a non-standard document format, it is always best to work with an experienced attorney to navigate the legal and procedural steps smoothly.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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