Natural and juridical sellers/transferors, whether residents or not, including Estates and Trusts, who sell, dispose or exchange real property classified as capital asset, are required to file Capital Gains Tax (CGT) Return and pay a 6 percent tax within 30 days following the transaction.
On the other hand, real properties that are considered ordinary assets (held primarily for sale or used in trade or business, including those acquired by banks through foreclosure sales) are not subject to CGT.
Exemptions
Entities with existing investment incentives or under special laws; individual or non-individual exchanging real property solely for shares of stocks resulting in corporate control; government entities or government-owned or controlled corporations selling real properties; and those disposing of real property that are gratuitous in nature or pursuant to the CARP law are exempted from paying CGT.
Natural persons who dispose of their principal residence, provided they comply with existing laws, rules, and regulations are conditionally exempted, provided that in case the proceeds are not fully utilized, that portion of the gain presumed to have been realized will be taxed.
How CGT is computed
The taxable value is based on the highest among the selling price, BIR zonal value, or the fair market value (FMV) per the Assessor’s schedule of values. If there is no zonal value, the taxable base shall be the selling price or FMV that appears in the latest tax declaration, whichever is higher.
If there is an improvement, the additional FMV based on the latest tax declaration duly certified by the Assessor shall be used. In case the tax declaration was issued 3 or more years prior to the date of sale or disposition, the seller/transferor shall be required to submit a certification from the Assessor whether or not the same is still the latest tax declaration.
Securing the Electronic Certificate Authorizing Registration (eCAR)
The mandatory requirements for simple real estate transactions include: duly validated Tax Return filed with Official Receipt/Deposit Slip as proof of payment of taxes (inclusive of 1.5 percent Documentary Stamp Tax); One-Time Transaction (ONETT) Computation Sheet of tax due duly approved by the authorized Revenue Officer; and any of the applicable document if the person presenting the return is not among the transaction parties like notarized Special Power of Attorney; Secretary’s Certificate or Board Resolution; and or Certification from the Philippine Consulate or Hague Apostille Convention if executed abroad.
In order to validate the correct tax due, the following need to be submitted: TIN of seller/s and buyer/s; Notarized Deed of Absolute Sale (DoAS)/ Deed of Transfer (only photocopied documents shall be retained by BIR); Certified copy of the Tax Declaration at the time or nearest the transaction date issued by the Assessor’s Office; Certified copy of OCT/TCT/CCT; Sworn Declaration of No Improvement by one of the transferees or Certificate of No Improvement issued by the Assessor’s Office.
Transactions covered by one Deed of Sale/Exchange/Donation involving 1-3 properties can avail of the “fast lane.” Payments amounting to P20,000 and below shall be paid in cash while those above P20,000.00 shall be through Manager’s or Cashier’s Check to the collection officer of the Regional District Office having jurisdiction over the place where the property is located.
Pursuant to RA No. 11032 or the “Ease of Doing Business Act,” taxpayers can also file and secure an eCAR online using the Electronic One-Time Transaction (eONETT) System in four steps: (i) creation of an user account; (ii) submission of the eCAR application; (iii) filing and payment of taxes and fees; and (iv) claiming the eCAR.
For more information, check out the Bureau of Internal Revenue website at bir.gov.ph
* * *
Henry L. Yap is an Architect, Fellow of both Environmental Planning and Real Estate Management. He is one of the Undersecretaries of the Department of Human Settlements and Urban Development.