Who Pays Which Closing Costs When Property Is Sold in the Philippines?

In a typical resale between individuals, the seller shoulders the capital gains tax and the broker’s commission, while the buyer shoulders the local transfer tax and the Registry of Deeds registration fee — but documentary stamp tax, notarial fees, and almost everything in a developer sale can be, and routinely is, reassigned by contract. None of this allocation is fixed by a single law the way the tax rates themselves are: the National Internal Revenue Code sets who owes each tax to the government, but it does not stop the buyer and seller from agreeing, in the deed or the contract to sell, that the other party will actually shoulder the cost (NIRC Sec. 24(D), as summarized in BIR Memorandum Circular No. 1-98, Supreme Court E-Library). This guide lays out the statutory default for each cost, the market convention for an ordinary resale, and where developer sales commonly shift that default onto the buyer.

Decision Snapshot

• What it covers: The taxes, government fees, and market-rate costs that come due when a Philippine property changes hands — and which party conventionally pays each one.
• The one law-fixed rule: Capital gains tax (6% on capital assets) is always the seller’s tax obligation to file and remit — this cannot be shifted to the buyer for BIR filing purposes, even if the buyer agrees to cover the cost.
• Everything else is negotiable: Documentary stamp tax, local transfer tax, registration fees, broker’s commission, and notarial fees follow market convention, not a statute — check the actual deed or contract to sell rather than assuming a default.
• The main rates involved: 6% capital gains tax (or 1.5%–6% creditable withholding tax for ordinary assets), 1.5% documentary stamp tax, up to 0.75% local transfer tax in Metro Manila, a tiered Registry of Deeds fee, and a broker’s commission commonly cited in the 3%–6% range.
• Important caveat: Developer and pre-selling contracts routinely reassign costs the statutory default and resale convention put on the seller — onto the buyer instead, as a Contract to Sell line item.
• Next step: Before signing anything, get the tax and fee allocation in writing in the deed or contract, and confirm each figure with the BIR, the local treasurer, and the Registry of Deeds for the property’s specific location.

Why “Who Pays” Isn’t the Same Question as “Who Owes”

Philippine tax law is specific about who is legally liable to file and remit each tax to the Bureau of Internal Revenue or the local government. It is largely silent on who, between a private buyer and seller, must ultimately bear that cost out of pocket. Those are two different questions, and conflating them is where most closing-cost disputes start. Capital gains tax is the clearest example: it is a tax on the seller’s presumed gain, so the seller’s name goes on BIR Form 1706 regardless of what the contract says about who pays for it. Documentary stamp tax is murkier — Section 173 of the Tax Code makes the parties to a taxable document jointly answerable for it in some circumstances, which is part of why market practice, not the statute itself, ends up deciding who actually writes the check in most transactions.

Capital Gains Tax vs. Creditable Withholding Tax: The Seller’s Main Cost

Which tax applies to the sale — and at what rate — depends on how the property is classified, not on what the parties prefer. A capital asset (most owner-occupied homes and condo units held for personal use) triggers a flat 6% capital gains tax on the higher of the gross selling price or the property’s fair market value, imposed on individuals, estates, and trusts under Section 24(D) of the National Internal Revenue Code (NIRC Sec. 24(D), BIR Memorandum Circular No. 1-98, Supreme Court E-Library). An ordinary asset — inventory held by a real estate dealer or developer, or property used in a trade or business — is instead subject to creditable withholding tax (CWT) at the point of sale, credited against the seller’s regular income tax return, with the withholding rate set by Revenue Regulations No. 2-98 as amended:

Both taxes are computed on the higher of the actual price or the property’s fair market value — the same comparison used for documentary stamp tax and explained in more detail in our guide to BIR zonal value. The key practical difference: capital gains tax is a final tax the seller cannot get back, while CWT is only an advance credit against the seller’s eventual income tax liability — which is exactly what the industry group CREBA has argued makes CWT an unfair tax on gross receipts rather than actual net income when a sale results in a loss (CREBA, CREBA vs. Creditable Withholding Tax). Either way, the tax is legally the seller’s to file: BIR Form 1706 for capital gains tax, due within 30 days of the deed of sale, or the appropriate withholding return for CWT, filed by the withholding agent (commonly the buyer, when the buyer is a corporation required to withhold, or the developer’s own accounting office in a self-withholding arrangement).

Documentary Stamp Tax, Local Transfer Tax, and Registration Fees

Three more government charges apply regardless of how the sale is classified, and each has its own payment deadline and collecting office:

• Documentary stamp tax (DST): 1.5% of the higher of the consideration or fair market value (₱15 for every ₱1,000), under Section 196 of the NIRC as amended. It must be filed and paid within five days after the close of the month the deed was signed and notarized — see our full guide to documentary stamp tax on property for the computation.
• Local transfer tax: Up to 0.50% of the tax base for provinces, and up to 50% more (commonly cited as 0.75%) for cities and municipalities within Metro Manila, under Section 135 of the Local Government Code (RA 7160, Sec. 135, LawPhil). Paid to the city or municipal treasurer where the property is located, ahead of registration.
• Registry of Deeds registration fee: A tiered schedule with no single fixed percentage, paid to the Land Registration Authority when the new title is issued — see our guide to Registry of Deeds fees and registration for the current fee bands.

All three of these, plus the capital gains tax or CWT, have to be settled before the BIR will issue the Electronic Certificate Authorizing Registration (eCAR) that the Registry of Deeds requires before it will register the deed and release a new title. A seller with unpaid real property tax on the property faces a separate obstacle at this stage: an outstanding RPT balance carries its own tax lien and is commonly required to be cleared, with a current tax clearance from the treasurer’s office, before the local transfer tax step can proceed.

Non-Tax Costs: Broker’s Commission and Notarial Fees

Not every closing cost is a government charge. Two of the largest remaining line items are set entirely by private agreement:

Broker’s commission. The Real Estate Service Act (RA 9646) regulates who may practice as a licensed real estate broker in the Philippines, but it does not fix a commission rate — that figure is set entirely by the listing agreement between the seller and the broker. Commentary on typical Philippine practice commonly cites a range around 3%–6% of the selling price, conventionally paid by the seller since the seller is the one who engages the broker to find a buyer, though this is a market norm rather than a legal requirement and can be negotiated or split differently by agreement.

Notarial fees. The 2004 Rules on Notarial Practice governs how a notary public must perform and record a notarization, but it does not prescribe a nationwide fee schedule for notarizing a deed of sale — some local Integrated Bar of the Philippines chapters publish their own suggested minimum fee schedules, and individual notaries otherwise set their own rates, sometimes computed as a small percentage of the property’s value. There is no single figure this guide can state as the applicable rate; ask the specific notary handling the deed for their fee before signing.

Who Pays What: Statutory Default vs. Resale Convention vs. Developer Sale

Putting the tax rules and the market conventions side by side shows why the same cost can land on a different party depending on the type of transaction:

Because both resale convention and developer practice describe market habits rather than legal requirements, the only way to know for certain who pays what in a specific transaction is to read the actual deed, reservation agreement, or contract to sell. For the developer-side pattern in more detail — including VAT thresholds and condo-specific turnover costs — see our guide to hidden charges when buying a condo.

The 2026 Update to Watch

Two regulatory changes affect how these costs are computed, though neither has changed who conventionally pays them. First, BIR Revenue Memorandum Circular No. 31-2025 clarified that transfer, processing, and other miscellaneous fees collected by businesses regularly engaged in real estate are themselves subject to income tax and 12% output VAT — meaning a developer’s flat processing fee may not be the final number if VAT isn’t already built into the quoted figure. Second, Republic Act No. 12001 is gradually replacing BIR zonal values and separate assessor fair market values with a single, LGU-by-LGU Schedule of Market Values, with a rollout continuing through 2026 — since capital gains tax, CWT, and DST are all computed on whichever valuation is highest, a locality’s updated schedule can raise the tax base even when the contract price doesn’t change. Neither update is complete nationwide as of this writing, so confirm the currently applicable valuation and fee treatment with the BIR office handling the transaction.

Step-by-Step: The Typical Closing Cost Sequence

1. Agree on cost allocation in writing before signing — state in the deed or contract to sell exactly who pays each tax and fee, rather than relying on convention.
2. Clear any unpaid real property tax and obtain a current tax clearance from the treasurer’s office where the property is located.
3. Notarize the deed of sale, which starts the clock on both the 30-day capital gains tax deadline and the DST deadline (five days after the close of the month of notarization).
4. File and pay capital gains tax or CWT (BIR Form 1706 or the applicable withholding return) with the BIR Revenue District Office covering the property.
5. File and pay documentary stamp tax (BIR Form 2000-OT) within the same filing window.
6. Secure the eCAR from the BIR once all national taxes are confirmed paid.
7. Pay local transfer tax at the city or municipal treasurer’s office and obtain the corresponding clearance.
8. Register the deed and pay the registration fee at the Registry of Deeds to have a new title issued in the buyer’s name.
9. Settle the broker’s commission and notarial fee according to the listing agreement and the notary’s own billing, typically at or shortly after closing.
10. File for a new tax declaration in the buyer’s name at the Assessor’s Office once the new title is released.

Worked Example: A Hypothetical ₱4,500,000 House-and-Lot Resale

The figures below are a hypothetical illustration only — not a real transaction, not tax advice, and not a quote.

• Setup: An individual seller sells a house-and-lot classified as a capital asset for ₱4,500,000, the highest of the selling price, zonal value, and assessor’s fair market value in this hypothetical. A broker engaged by the seller earns a 5% commission. The seller and buyer agree in the deed that the buyer will shoulder DST, following that specific contract’s own allocation rather than the resale default.
• Seller’s costs: Capital gains tax, 6% × ₱4,500,000 = ₱270,000. Broker’s commission, 5% × ₱4,500,000 = ₱225,000. Seller’s total: ₱495,000.
• Buyer’s costs: Documentary stamp tax (shifted to buyer by this contract), 1.5% × ₱4,500,000 = ₱67,500. Local transfer tax (Metro Manila maximum), 0.75% × ₱4,500,000 = ₱33,750. Registry of Deeds registration fee: not quoted here, since it follows a tiered schedule — budget for it separately. Buyer’s total (excluding registration fee): ₱101,250.
• Result: Before the registration fee and notarial fee, this hypothetical sale generates roughly ₱596,250 in combined closing costs — about 13% of the contract price — split unevenly between the two parties by the specific terms the buyer and seller agreed to, not by any single default the law imposed on them.

What to Verify Before You Rely on This

• Get the allocation in writing in the deed of sale or contract to sell — never assume a “usual” split applies to your specific transaction.
• Confirm whether the property is a capital or ordinary asset with a tax professional, since this determines whether capital gains tax or creditable withholding tax applies.
• Check the current local transfer tax rate with the specific city or municipal treasurer, since the exact rate within the legal ceiling is set by local ordinance.
• Ask whether quoted developer fees are VAT-inclusive in light of RMC 31-2025, and whether the applicable valuation has changed under RA 12001’s rollout in your locality.
• Get the broker’s commission rate and the notary’s fee in writing before closing, since neither is fixed by law.
• Confirm all national and local taxes are settled before expecting the eCAR or the new title, since the Registry of Deeds will not register the transfer without them.

Frequently Asked Questions

Is there a law that says the buyer or seller must pay a specific closing cost?

Only for capital gains tax, which is always the seller’s tax obligation to the BIR. Every other cost discussed here — DST, transfer tax, registration fees, broker’s commission, and notarial fees — follows market convention or private agreement, not a specific statutory assignment between buyer and seller.

Can the seller and buyer agree that the buyer pays the capital gains tax?

They can agree the buyer will reimburse or shoulder the cost, but the BIR filing itself — BIR Form 1706, under the seller’s TIN — remains the seller’s legal responsibility, since the tax is imposed on the seller’s presumed gain.

Why do developer sales shift more costs to the buyer than resales do?

Because a developer’s standard Contract to Sell is drafted by the developer, and it is common industry practice for that contract to make the buyer contractually responsible for documentary stamp tax, transfer tax, registration, and miscellaneous processing fees as separate line items, rather than following the individual-resale convention.

What happens if the buyer and seller never agree in writing on who pays what?

Disputes over unallocated costs are common precisely because the law doesn’t fill every gap. In practice, parties fall back on local market convention, but an unwritten understanding is much harder to enforce than a cost allocation stated plainly in the deed or contract.

Does the 6% capital gains tax apply if I sell at a loss?

Generally yes, for a capital asset — the 6% rate is a final tax computed on the gross selling price or fair market value, whichever is higher, regardless of the seller’s actual gain or loss on the property. This is a key difference from an ordinary income tax, which is computed on net gain.

Is the real estate broker’s commission negotiable?

Yes. Since no law fixes the rate, the commission is set entirely by the listing agreement between the seller and the broker, and both the percentage and who ultimately bears it can be negotiated before signing.

Who pays for clearing unpaid real property tax before a sale?

By convention, the seller is expected to clear any outstanding real property tax and deliver a current tax clearance, since the unpaid balance is the seller’s existing obligation and a lien tied to the property itself carries forward if left unresolved.

What to Do Next

Before you sign a deed of sale or a contract to sell, list every cost this guide covers — capital gains tax or CWT, documentary stamp tax, local transfer tax, the registration fee, the broker’s commission, and the notarial fee — and confirm in writing which party is paying each one. Don’t assume the resale convention applies to a developer sale, or that a developer’s Contract to Sell follows the same allocation as a private resale. If the numbers are material to your decision, have a real estate lawyer or tax professional review the actual contract language and confirm current rates with the BIR Revenue District Office and the local treasurer before you commit any funds.

Figures in this article reflect the National Internal Revenue Code as amended, Revenue Regulations No. 2-98, the Local Government Code (RA 7160), and published BIR circulars (including RMC No. 31-2025) as of September 18, 2026. Tax rates, thresholds, and local transfer tax ordinances can change by legislation or local action, and broker’s commission and notarial fee ranges cited here reflect commonly described market practice rather than a fixed schedule. The worked example uses illustrative, hypothetical figures only. Always confirm current rates, deadlines, and cost allocation with the BIR, the relevant local government office, and a licensed real estate lawyer or tax professional before relying on this guide for an actual transaction.