Local Transfer Tax on Real Property

Overview

Local Transfer Tax (LTT) is a provincial or city tax levied on the transfer of ownership of real property located within the Local Government Unit's (LGU's) territorial jurisdiction. It is distinct from the national Documentary Stamp Tax (DST) and is authorized under Section 135 of the Local Government Code (Republic Act 7160, as amended). The LGU where the property is situated imposes and collects it.

Legal Basis

Section 135 of the Local Government Code (RA 7160) allows provinces to tax the sale, donation, barter, or any other mode of transferring ownership of real property at not more than 50% of 1% (0.5%) of the total consideration or of the fair market value, whichever is higher. Under Section 151, cities may levy the same tax at rates up to 50% higher than the provincial maximum, or 0.75%.

Scope and Applicability

Local Transfer Tax applies to transfers of ownership of real property, including:

• Sales
• Exchanges (barter) of real property
• Donations
• Transfers from a decedent's estate, paid by the executor or administrator
• Any other mode of transferring ownership or title

The tax base is the total consideration involved in the acquisition, or the fair market value where the money consideration is not substantial, whichever is higher. Transfers under the agrarian reform law (RA 6657) are exempt.

Rate and Computation

The maximum rate is 0.5% for provinces and 0.75% for cities. Individual LGUs may impose a lower rate through their revenue code, so the actual rate depends on the ordinance of the LGU where the property is located.

Example calculation: A residential lot in Quezon City is sold for ₱2,000,000, which is higher than its fair market value. If the city's rate is 0.75%, the Local Transfer Tax due is ₱2,000,000 × 0.0075 = ₱15,000.

Who Pays and When

The seller, donor, transferor, executor or administrator must pay the tax within 60 days from the date of execution of the deed or from the date of the decedent's death (LGC §135(b)). The Register of Deeds must require evidence of payment before registering any deed, and the assessor requires it before issuing a new tax declaration. Notaries public must send the treasurer a copy of any deed transferring real property within 30 days of notarization.

Exemptions and Special Cases

Exemptions come from the Code and from local ordinances:

• Transfers made under the agrarian reform law, RA 6657 (LGC §135(a))
• The National Government, its agencies and instrumentalities, and LGUs, which LGUs cannot tax (LGC §133(o))
• Any other exemption granted in the LGU's revenue code

Since local exemptions differ, check the specific LGU's revenue code.

Relationship to Other Taxes

Local Transfer Tax is separate from and in addition to the national Documentary Stamp Tax on deeds of sale and conveyances (NIRC §196). A property transfer may be subject to both. A sale may also be subject to 6% capital gains tax, or to regular income tax if the property is an ordinary asset, under the NIRC.

Compliance and Documentation

To complete a property transfer, the transferor must:

1. Pay the Local Transfer Tax to the provincial or city treasurer within 60 days and keep the official receipt
2. Present this proof to the Register of Deeds when registering the deed of transfer
3. Present it to the assessor for the issuance of a new tax declaration

The Register of Deeds will not register the transfer without evidence that Local Transfer Tax has been paid (LGC §135(b)).