Capital Gains Tax

 

PHILIPPINES.  Capital Gains Tax is a tax imposed on the gains to have been realized by the seller from the sale, this is a standard sharing between the buyer and the Seller when transferring the real estate property title either Transfer Certificate of Title [TCT] or Condominium Certificate of Title [CCT]. 

 

The tax rate is 6% based on the Gross Selling Price – The total contracted price stipulated in the Deed of Sale, Fair Market Value – Computed by the assessors of the Bureau of Internal Revenue [BIR] based on the Tax Declaration of the real property or taken from the Zonal Value –based on the list of zones in the country with corresponding value per square meters. The Capital Gains Tax is collected from whichever value is higher.

 

The usual practice is that Capital Gains Tax is paid by the Seller.  Transfer Tax of 0.5%, Documentary Stamp Tax of 1.5%, Registration Fee of 0.25% is paid by the buyer.  However, Buyer and Seller can mutually agree on other terms as long as it is stipulated before the buyer signs for the Deed of Absolute Sale (Document showing the Legal transfer of the Property Ownership).  It is important to settle all taxes and have the Deed of Absolute Sale brought to Registry of Deeds for the transfer of real estate property officially recorded.

 

Requirements for Transferring of Title

 

Tax Form

 

BIR Form 1706 – Final Capital Gains Tax Return (For Onerous Transfer of Real Property Classified as Capital Assets -Taxable and Exempt)

 

Documentary Requirements

1) One original copy and one photocopy of the Notarized Deed of Sale or Exchange

 

2) Photocopy of the Transfer Certificate of Title; Original Certificate of Title; or Condominium Certificate of Title

 

3) Certified True Copy of the tax declaration on the lot and/or improvement during nearest time of sale

 

4) “Certificate of No Improvement” issued by the Assessor’s office where the property has no declared improvement, if applicable or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees

 

5) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable

 

6) Duly approved Tax Debit Memo, if applicable

 

7) “Sworn Declaration of Interest” as prescribed under Revenue Regulations 13-99, if the transaction is tax-exempt

 

8) Documents supporting the exemption

 

Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures.

  

Note that rates are based on the Gross Selling Price, Fair Market Value or Zonal Value -whichever is higher.