Who Pays Capital Gains Tax, DST, Transfer Tax, and Registration Fees in a Property Sale?
Quick answer: The answer depends on the tax and on whether the property is a capital asset or an ordinary asset. For a typical sale of Philippine real property classified as a capital asset, the 6% capital gains tax is imposed on the seller. Documentary stamp tax applies to the deed/transaction. Local transfer tax is imposed by the relevant LGU under the Local Government Code. Registration fees are paid to the Registry of Deeds/LRA. The parties may agree who will shoulder many transaction expenses, but a private allocation does not change who the tax law treats as the statutory taxpayer or withholding party.
Typical allocation
| Tax or fee | Legal/practical point |
|---|---|
| Capital Gains Tax (capital asset) | Final tax imposed on the seller; generally 6% of the higher tax base prescribed by law |
| Documentary Stamp Tax | Tax on the deed/instrument; parties often allocate the cost by contract |
| Local transfer tax | LGU tax under Section 135 of the Local Government Code; rate depends on the local jurisdiction within statutory limits |
| Registration/IT fees | Paid in connection with Registry of Deeds/LRA registration |
| Real property tax arrears | Usually must be cleared before or as part of transfer processing |
Capital asset vs ordinary asset changes the tax treatment
Do not automatically apply the 6% capital-gains-tax rule to every seller. BIR rules distinguish property held as a capital asset from property held as an ordinary asset, including property sold in the ordinary course of a real-estate business. Current BIR guidance for ordinary-asset sales addresses creditable withholding tax and VAT or other applicable taxes rather than the capital-asset CGT framework.
Documentary Stamp Tax
Section 196 of the National Internal Revenue Code, as amended, imposes documentary stamp tax on deeds and conveyances of real property based on the consideration or applicable fair market value, whichever tax base the law requires. The current statutory rate is ₱15 for each ₱1,000, or fractional part, of the applicable base.
Local transfer tax
Section 135 of the Local Government Code allows a province to impose transfer tax at a rate not exceeding 0.5% of the consideration or relevant fair market value, whichever is higher under the provision. Cities may exercise broader taxing powers under the Code, so the actual local rate and payment procedure should be checked with the city or provincial treasurer where the property is located.
Put the cost allocation in writing
The deed or contract should state which party will advance or shoulder CGT, DST, transfer tax, registration fees, notarization, association clearances, and other closing costs. This prevents a closing dispute even where tax law identifies a particular taxpayer.
Related guides
See When Should a Deed of Absolute Sale Be Signed?, Documents to Check Before Paying, and the Sales and Buyer–Seller Remedies hub.
Primary sources
BIR discussion of CGT and DST on real-property transactions; BIR RMC No. 31-2025 on ordinary-asset real-property sales; RA 10963, Section 196 DST amendment; Local Government Code, Section 135.