Articles
8 Essential Steps Before Buying Land in the Philippines
By : Sofia Mendoza
Date Published : October 19, 2024
6 min read
Purchasing land in the Philippines is an exciting investment, but it requires careful planning, legal verification, and compliance with several steps to ensure a smooth and legitimate transaction. From verifying the land title to transferring ownership, this guide outlines eight essential steps to help you navigate the process of buying land in the Philippines.
Step 1: Obtain and Verify the Land Title
Before committing to any land purchase, it is crucial to secure a certified true copy of the Original Certificate of Title (OCT) or Transfer Certificate of Title (TCT). You can obtain this from the Registry of Deeds. Verifying the title ensures that the land is free from liens, encumbrances, or legal disputes. It also confirms that the seller is the rightful owner of the property.
Step 2: Conduct a Relocation and Boundary Survey
Hiring a licensed Geodetic Engineer is essential to conduct a boundary or relocation survey. This ensures the physical boundaries of the land match what is stated in the title, preventing future disputes with neighboring property owners. The survey will confirm the land’s actual size and location.
Step 3: Execute and Notarize a Deed of Sale
Once the title has been verified and the survey completed, the next step is to draft a Deed of Sale or Contract of Sale. This document formalizes the transaction, including the agreed-upon sale price, payment terms, and property details. Both the buyer and seller must sign the deed, and it must be notarized to be legally binding.
Step 4: Pay the Documentary Stamp Tax (DST)
Within 30 days of notarizing the Deed of Sale, the buyer must pay the Documentary Stamp Tax (DST), which amounts to 1.5% of the selling price or the zonal value (whichever is higher). This payment is necessary before the title transfer process can proceed.
Step 5: Pay the Capital Gains Tax (CGT)
Typically, the seller is responsible for paying the Capital Gains Tax (CGT), which is 6% of the selling price or the zonal value. This tax must be paid to the Bureau of Internal Revenue (BIR), which will then issue a Certificate Authorizing Registration (CAR). The CAR is essential for transferring ownership to the buyer.
Step 6: Pay Transfer Fees and Complete the Title Transfer
After paying the CGT and obtaining the CAR, the buyer must pay the Transfer Tax at the Local Treasurer’s Office. The next step is to register the title with the Registry of Deeds, which will issue a new Transfer Certificate of Title (TCT) in the buyer’s name, officially transferring ownership.
Step 7: Secure a New Tax Declaration
Once the title is transferred, the buyer must secure a new Tax Declaration Certificate from the Municipal or Provincial Assessor’s Office. This process updates the tax records to reflect the new owner and ensures future real estate taxes are correctly assessed. To update the Tax Declaration, you will need the Deed of Sale, the Certificate Authorizing Registration (CAR), and the new Transfer Certificate of Title (TCT).
Step 8: Settle Real Property Taxes
Lastly, ensure that the real property taxes (commonly referred to as "Amilyar") are up-to-date. As the new owner, it is essential to pay these taxes annually to avoid penalties. You can settle these taxes at the Local Treasurer’s Office or through online platforms offered by some local government units. Keeping property taxes updated helps maintain clear ownership, avoids legal complications, and ensures compliance with local regulations.
Final Thoughts
Buying land in the Philippines involves multiple critical steps, from verifying the title to completing the transfer and updating tax declarations. By following this comprehensive 8-step guide, you can avoid legal complications and ensure a smooth transaction. It is highly recommended to consult a real estate lawyer or a licensed real estate broker throughout the process to ensure compliance with Philippine laws.
