With the recent congressional inquiries on transfer of lands, it makes sense to revisit the requirement to get the Certificate Authorizing Registration (CAR).
To ensure the proper reporting and monitoring of the sale, transfer and other disposition of real properties and the payment of correct taxes arising from these transactions, the Bureau of Internal Revenue (BIR) required the issuance of a CAR and prescribed the manner for its issuance.
Under existing BIR rules, a CAR is a certification issued by the Revenue District Officer (RDO) having jurisdiction over the real property transferred to ensure that the transfer and conveyance of the real property was reported and that the taxes due thereon have been fully paid and remitted to the government. The CAR is a mandatory requirement for the registration of the property with the Register of Deeds (RD) and is necessary for the issuance of a new Transfer Certificate of Title in favor of the new owner. It is in effect a tax clearance relative to the transfer of real properties.
The requirement for the issuance of CAR finds support in Section 58(E) of the National Internal Revenue Code (NIRC) of the Philippines, as amended, which provides that no registration of any document transferring real property can be effected by the RD unless the Commissioner of Internal Revenue (CIR) or his duly authorized representative has certified that such transfer has been reported, and the capital gains or creditable withholding tax (CWT), if any, has been paid. Likewise, with respect to the estate tax, Section 95 of the NIRC, as amended, provides that the RD can not register in the Registry of Property any document transferring real property or real rights therein xxx unless a certification from the CIR that the tax actually due had been paid.
The requirements for securing a CAR in case of sale/transfer of real property would depend on the transaction (as this would determine the proper taxes due – e.g. donor’s tax, capital gains tax (CGT), CWT, etc.) and whether the real property to be transferred is classified as a capital asset (not used in trade or business) or an ordinary asset (used primarily or for sale in the ordinary course of trade or business). This means that the classification of the real property will determine the tax returns to be filed and the taxes to be paid. For instance, sale of real property classified as capital asset carries with it payment of capital gains tax (CGT) and the filing of the CGT return (BIR Form No. 1706). On the other hand, sale of real property classified as ordinary asset requires payment of CWT and the filing of the withholding tax remittance return (BIR Form No. 1606). Note also that a documentary stamp tax is required.
Some of the basic documentary requirements for the issuance of a CAR are the following: documents evidencing the sale or transfer of real property (e.g. deed of absolute sale, deed of donation, etc.), documents evidencing that appropriate taxes have been fully paid (CGT, CWT, documentary stamp tax, donor’s tax, estate tax, etc. and their corresponding tax returns), official receipts/deposit slips/acknowledgment receipts issued by the seller, latest tax declarations from the City Assessor’s Office, certificate of title of the property involved, tax identification numbers of the buyer/transferee and seller/transferor, etc.
The CARs issued by the RDO should have a validity of one year from the date of issue. Nonetheless, the BIR released issuances addressing issues or guidelines concerning the replacement and/or revalidation of CAR.
In line with the BIR’s continuing initiative to strengthen internal control towards integrity and to fortify the review/monitoring with respect to the sale/transfer of ownership of real properties, it recently issued Revenue Memorandum Circular No. 40-2014 which prescribes the use of Electronic CAR (eCAR) or BIR Form No. 2313-R for transaction involving transfer of real properties. The eCAR system was already primed in the RDOs under the jurisdiction of Revenue Region No. 1 – Calasiao, Pangasinan.
Further, the BIR is expected to work for the computerization of the procedure for the issuances of the CAR. This aligns with what seems to be the current thrust of the BIR to use online means for tax reporting and filing. Thus, it makes sense to revisit the requirement to get the CAR.
Lastly, for the sake of thoroughness, it is worthy to note that before the new title to the property may be actually transferred and registered in the name of the new owner, the RD necessitates submission also of a local tax clearance. This local tax clearance pertains to the real property tax and local transfer taxes. Under Sections 135 and 151 of Republic Act No. 7160 (Local Government Code of 1991(LGC)), provinces and cities may impose a tax on the sale, donation, barter, or any other mode of transferring ownership or title of real property at the rates not exceeding the rates prescribed in the said sections. Further, before the local tax clearance is issued, local government units require that the annual real property taxes have been paid.
Chandine Kaye P. Villegas is a supervisor from the tax group of R.G. Manabat & Co. (RGM&Co.), the Philippine member firm of KPMG International.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.
The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or RGM&Co. For comments or inquiries, please email ph-kpmgmla@kpmg.com or rgmanabat@kpmg.com.
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