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Capital Gains Tax

Revenue Issuances

Registration Requirements

Legal Matters

International Tax Matters

Tax Information

You are here: Home (/index.php) Tax Information (/index.php/tax-information.html) Capital Gains Tax

Index for Capital Gains Tax

Description
Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital Assets (Taxable and Exempt)
Capital Gains Tax for Onerous Transfer of Shares  of Stocks Not Traded Through the Local Stock Exchange
Annual Capital Gains Tax for Onerous Transfer of  Shares of Stocks Not Traded Through the Local Stock Exchange
Related Revenue Issuances
Codal Reference
Frequently Asked Questions
DESCRIPTION

Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other
disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.

[return to index]

CAPITAL GAINS TAX FOR ONEROUS TRANSFER OF REAL PROPERTY CLASSIFIED AS CAPITAL ASSETS (TAXABLE AND EXEMPT)

Tax Form

BIR Form 1706 (/index.php/bir-forms/income-tax-return.html#itr1706) – Final Capital Gains Tax Return (For Onerous Transfer of Real
Property Classified as Capital Assets -Taxable and Exempt)

Documentary Requirements

Mandatory Requirements [additional two (2) photocopies of each document]:

1. Taxpayer Identification Number (TIN) of Seller/s and Buyer/s;

2. Duly Notarized Original Deed of Absolute Sale/Deed of Transfer;
3. Certified True Copy/ies of the Tax Declaration at the time or nearest to the date of the transaction issued by the Local Assessor’s
Office for land and improvement;
4. Certified True Copy/ies of Original/Transfer/Condominium Certificate/s of Title (OCT/TCT/CCT);
5. Sworn Declaration of No Improvement by at least one (1) of the transferees or Certificate of No Improvement issued by the
Assessor’s Office, if applicable;
. Validated return and Original Official Receipt/Deposit Slip as proof of payment; for no payment return, copy of Acknowledgment
Receipt of return filed thru eBlRForms;
7. Acknowledgment receipt of proceeds of sale from the seller;
. Secretary’s Certificate or Board Resolution, approving the sale/transfer of the real property and indicating the name and position of
the authorized signatory to the Deed of Sale/Assignment, if the seller/transferor is a corporation;
9. Duly Notarized Original Special Power of Attorney (SPA) from the transacting party/ies if the person signing is not one of the parties
to the Deed of Transfer;

For sales made in prior years [additional two (2) photocopies of each document]

Certified True Copy of Deed of Sale/Assignment/Exchange or certification of notarization issued by the Clerk of Court of
City/Municipality or Regional Trial Court (RTC) or the Office of the Executive Judge of the City/Municipality where the Notary Public is
registered or certification of notarization from the National Archives Office

Other Additional Requirements, if applicable [additional two (2) photocopies of each document]:

Duly Notarized Original Special Power of Attorney (SPA), if the person transacting/processing the transfer is not a party to the
transaction
Certification from the Philippine Consulate if document is executed abroad
Location Plan/Vicinity map issued by the Local Assessor’s Office if zonal value cannot be readily determined from the documents
submitted
Certificate of Exemption/BIR Ruling issued by the Commissioner of Internal Revenue or his authorized representative, if tax exempt
Such other documents as may be required by law/rulings/regulations/etc.

Procedures

Who shall file

The Capital Gains Tax Return (BIR Form No. 1706) shall be filed in triplicate copies by the Seller/Transferor who are natural or juridical
whether resident or non-resident, including Estates and Trusts, who sell, exchange, or dispose of a real property located in the Philippines
classified as capital asset as defined under Sec. 39 (A) (1) of RA No. 8424. The term “sale” includes pacto de retro sale and other forms
of conditional sales. The transaction may be taxable or exempt.

Taxpayers who are filing BIR Form No. 1706 are excluded in the mandatory coverage from using the eBIRForms (Section 2 of RR No. 9-
2016)

When and Where to File and Pay

The Capital Gains Tax Return (BIR Form No. 1706) shall be filed and paid within thirty (30) days following the sale, exchange or
disposition of real property, with any Authorized Agent Bank (AAB) or Revenue Collection Officer (RCO) of the Revenue District Office
(RDO) having jurisdiction over the place where the property being transferred is located.

When the return is filed with an AAB, taxpayer must accomplish and submit BIR-prescribed deposit slip, which the bank teller shall
machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word
“Received” on the return and also machine validate the return as proof of filing the return and payment of the tax by the taxpayer,
respectively. The machine validation shall reflect the date of payment, amount paid and transactions code, the name of the bank, branch
code, teller’s code and teller’s initial. Bank debit memo number and date should be indicated in the return for taxpayers paying under the
bank debit system.

Filing and payment may also be made using the electronic filing and payment facilities of the BIR (i.e., EFPS/eBIRForms and G-cash,
credit, debit card/prepaid card)

For transactions covered by one (1) Deed of Sale/Exchange/Donation involving one (1) to three (3) properties, the taxpayer can avail of
the ‘fast lane’ pursuant to Revenue Memorandum Circular (RMC) No. 43-2018, as amended by RMC No. 107-2018. Payments amounting
to twenty thousand pesos (P 20,000.00) and below shall be paid in cash while payments above twenty thousand pesos (P 20,000.00)
shall be made through Manager’s Check or Cashier’s Check to the RCO of the RDO having jurisdiction over the place where the property
being transferred is located.

Tax Rate

For real property - 6%.

[return to index]

CAPITAL GAINS TAX FOR ONEROUS TRANSFER OF SHARES OF STOCKS NOT TRADED THROUGH THE LOCAL STOCK EXCHANGE

Tax Form

BIR Form 1707 (/index.php/bir-forms/income-tax-return.html#itr1707) - Capital Gains Tax Return (For Onerous Transfer of Shares of
Stocks Not Traded Through the Local Stock Exchange)

Documentary Requirements

Mandatory Requirements [additional two (2) photocopies of each document]:

1. Taxpayer Identification Number (TIN) of Seller/s and Buyer/s;

2. Duly Notarized Original Deed of Absolute Sale/Document of Transfer;
3. Stock certificate;
4. Proof of acquisition cost (i.e. Deed of Sale: fair market value (FMV) at the time of acquisition);
5. Validated return and Original Official Receipt/Deposit Slip as proof of payment; for no payment return, copy of Acknowledgment
Receipt of return filed thru eBlRForms;
 . Secretary’s Certificate or Board Resolution, approving the sale/transfer of the shares of stocks and indicating the name and position
of the authorized signatory to the Dee of Sale/Assignment, if the seller/transferor is a corporation;
7. Duly Notarized Special Power of Attorney (SPA) for the transacting party if the person signing is not one of the parties to the Deed of
Transfer;

Additional Requirements, if applicable [additional two (2) photocopies of each document]:

For claiming expenses of sale - Proof of claimed deductions such as official receipt and/or invoices;
For shares of stocks not listed/not traded - Latest Audited Financial Statement of the issuing corporation with computation of the
book value per share;
For shares of stocks listed/traded - Price index from the Philippine Stock Exchange (PSE)/latest FMV published in the newspaper at
the time of transaction;
For club shares - Price published in newspapers on the transaction date or nearest to the transaction date;
Notarized Original Special Power of Attorney (SPA), if the person transacting/processing the transfer is not a party to the transaction;
Certificate of Exemption/BIR Ruling issued by the Commissioner of Internal Revenue or his authorized representative, if tax exempt;
Such other documents as may be required by law/rulings/regulations/etc.

Procedures

Who shall file

The Capital Gains Tax Return (BIR Form No. 1707) shall be filed in triplicate by every natural or juridical person, resident or non-resident,
for sale, barter, exchange or other onerous disposition of shares of stock in a domestic corporation, classified as capital assets, not
traded through the local stock exchange.

Taxpayers who are filing BIR Form No. 1707 are excluded in the mandatory coverage from using the eBIRForms (Section 2 of RR No. 9-
2016).

When and Where to File and Pay

The Capital Gains Tax Return (BIR Form No. 1707) shall be filed and paid within thirty (30) days after each sale, barter, exchange or other
disposition of shares of stock not traded through the local stock exchange with any Authorized Agent Bank (AAB) under the jurisdiction
of the Revenue District Office (RDO) where the seller/transferor is required to register.

When the return is filed with an AAB, taxpayer must accomplish and submit BIR-prescribed deposit slip, which the bank teller shall
machine validate as evidence that payment was received by the AAB. The AAB receiving the tax return shall stamp mark the word
“Received” on the return and also machine validate the return as proof of filing the return and payment of the tax by the taxpayer,
respectively. The machine validation shall reflect the date of payment, amount paid and transactions code, the name of the bank, branch
code, teller’s code and teller’s initial. Bank debit memo number and date should be indicated in the return for taxpayers paying under the
bank debit system.

Filing and payment may also be made using the electronic filing and payment facilities of the BIR (i.e., EFPS/eBIRForms and G-cash,
credit, debit card/prepaid card)

Tax Rates

Effective January 1, 2018 to present (Republic Act (RA) No. 10963/TRAIN Law)

A.  For Individual                      -           15 %

B.  For Corporation:

B.1 Domestic                 -              15 %

B.2 Foreign:
 B.2.1.   Not Over P100,000                                   -              5.0 %
B.2.2.  On any amount excess of P100,000             -              10 %

Effective January 1, 1998 to December 31, 2017 (RA No. 8424/NIRC of 1997)

Not over P 100,000                                  - Five percent (5%)

On any amount in excess of P 100,000       - Ten percent (10%)

[return to index]

ANNUAL CAPITAL GAINS TAX FOR ONEROUS TRANSFER OF SHARES OF STOCKS NOT TRADED THROUGH THE LOCAL STOCK
EXCHANGE

Tax Form

BIR Form 1707A (/index.php/bir-forms/income-tax-return.html#itr1707a) - Annual Capital Gains Tax Return (For Onerous Transfer of
Shares of Stocks Not Traded Through the Local Stock Exchange)

Procedures

File the Capital Gains Tax return in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent Bank (AAB)
in the Revenue District where the seller or transferor of stocks is registered. In places where there are no AAB, the return will be filed
directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer.

Tax Rates

Effective January 1, 2018 to present (RA No. 10963/TRAIN Law)

 
A. For Individual              -        15 %

B. For Corporation:

B.1 Domestic           -        15 %

B.2 Foreign:

B.2.1 Not Over P100,000                           -            5.0 %

B.2.2 On any amount excess of P100,000     -            10 %

Effective January 1, 1998 to December 31, 2017 (RA No. 8424/NIRC of 1997)

Not over P 100,000 – Five percent (5%)

On any amount in excess of P 100,000 – Ten percent (10%)

Deadline

For Individual Taxpayers - On or before April 15 of each year covering all stock transactions of the preceding taxable year
For Corporate Taxpayers - On or before the fifteenth (15) day of the fourth (4th) month following the close of the taxable year covering
all transactions of the preceding taxable year
 [return to index]

RELATED REVENUE ISSUANCES

Revenue Regulations (RR) Nos. 2-1998 (/images/bir_files/assessment_performance_and_monitoring_1/RR-02-98.doc), 8-1998

(/images/bir_files/assessment_performance_and_monitoring_1/RR-08-98.doc), 4-1999
(/images/bir_files/assessment_performance_and_monitoring_1/RR-04-99.doc), 13-1999
(/images/bir_files/assessment_performance_and_monitoring_1/RR-13-99.doc), 7-2003
(/images/bir_files/assessment_performance_and_monitoring_1/rr07_03.pdf), 17-2003
(/images/bir_files/assessment_performance_and_monitoring_1/rr03_17.pdf), 30-2003
(/images/bir_files/assessment_performance_and_monitoring_1/rr03_30.pdf), 4-2008
(/images/bir_files/assessment_performance_and_monitoring_1/rr%20no.%204-2008.pdf), 6-2008
(/images/bir_files/assessment_performance_and_monitoring_1/rr%20no.%206-2008.pdf), 5-2009
(/images/bir_files/assessment_performance_and_monitoring_1/rr%20no.%205-2009.pdf), 6-2013
(/images/bir_files/assessment_performance_and_monitoring_1/Revenue%20Regulations%20No.%2006-2013.pdf), 6-2014
(/images/bir_files/assessment_performance_and_monitoring_1/RR%206-2014.pdf)

Revenue Memorandum Order (RMO) No. 15-2003 (/images/bir_files/assessment_performance_and_monitoring_1/rmo03_15.pdf)

Revenue Memorandum Circular (RMC) No. 50-2003 (/images/bir_files/assessment_performance_and_monitoring_1/rmc03_50.pdf), 43-

2018, 107-2018

OPM-AS-APMD 2017-06-06

OPM-AS-APMD 2017-06-01

[return to index]

CODAL REFERENCE

Sections 5 and 7 of Republic Act (RA) No. 10963 (Tax Reform Acceleration and Inclusion (TRAIN) Law), amending Sections 24 (C) and
27 (D) (2) of National Internal Revenue Code (NIRC) of 1997, respectively
Sec. 24 (C), Sec. 24 (D), Sec. 27 (D) (2), Sec. 27 (D) (5), Sec. 28 (A) (7) (c), Sec. 28 (B) (5) (c) and Sec. 39 (A) of the NIRC of 1997

[return to index]

FREQUENTLY ASKED QUESTIONS

1.) What is meant by capital asset?

Capital assets shall refer to all real properties held by a taxpayer, whether or not connected with his trade or business, and which are not
included among the real properties considered as ordinary assets under Sec. 39(A)(1) of the Code. [Sec. 2(a) of RR No. 7-2003] 

2.) What is meant by ordinary asset?

Ordinary assets shall refer to all real properties specifically excluded from the definition of capital assets under Sec. 39(A)(1) of the Code,
namely:

1. Stock in trade of a taxpayer or other real property of a kind which would properly be included in the inventory of the taxpayer if on
hand at the close of the taxable year; or
2. Real property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or
 3. Real property used in trade or business (i.e., buildings and/or improvements) of a character which is subject to the allowance for
depreciation provided for under Sec. 34(F) of the Code; or
4. Real property used in trade or business of the taxpayer.

Real properties acquired by banks through foreclosure sales are considered as ordinary assets. [Sec. 2(b) of RR No. 7-2003]

3.) What is meant by "Stock classified as Capital Asset"?

“Stock Classified as “Capital Asset” means all stocks and securities held by taxpayers other than dealers in securities. [Sec. 2(a) of RR
No. 6-2008]

4.) What is meant by "Dealer in Securities"?   

“Dealer in Securities” refers to a merchant of stocks or securities, whether an individual, partnership or corporation, with an established
place of business, regularly engaged in the purchase of securities and the resale thereof to customers; that is one, who as merchant buys
securities and re-sells them to customers with a view to the gains and profits that may be derived therefrom. "Dealer in securities" means
any person who buys and sells securities for his/her own account in the ordinary course of business (Sec. 3.4, SRC). [Sec. 2(b) of RR No.
6-2008]

5.) What is meant by real property?

Real property shall have the same meaning attributed to that term under Article 415 of Republic Act No. 386, otherwise known as the
Civil Code of the Philippines. [Sec. 2(c) of RR No. 7-2003]

6.) What does a real estate dealer refer to?

A real estate dealer shall refer to any person engaged in the business of buying and selling or exchanging real properties on his own
account as a principal and holding himself out as a full or part-time dealer in real estate. [Sec. 2(d) of RR No. 7-2003]

7.) What does a real estate developer refer to?

Real estate developer shall refer to any person engaged in the business of developing real properties into subdivisions, or building
houses on subdivided lots, or constructing residential or commercial units, townhouses and other similar units for his own account and
offering them for sale or lease. [Sec. 2(e) of RR No. 7-2003]

8.) What does a real estate lessor refer to?

Real estate lessor shall refer to any person engaged in the business of leasing or renting real properties on his own account as a
principal and holding himself out as a lessor of real properties being rented out or offered for rent. [Sec. 2(f) of RR No. 7-2003]

9.) Who are considered engaged in the real estate business?

Taxpayers who are considered engaged in the real estate business shall refer collectively to real estate dealers, real estate developers
and/or real estate lessors. A taxpayer whose primary purpose of engaging in business, or whose Articles of Incorporation states that its
primary purpose is to engage in the real estate business shall be deemed to be engaged in the real estate business. [Sec. 2(g) of RR No.
7-2003]

10.) Who are considered not engaged in the real estate business?

“Taxpayers not engaged in the real estate business” refer to persons other than real estate dealers, real estate developers and/or real
estate lessors. [Sec. 2(g) of RR No. 7-2003]

11.) Who are considered habitually engaged in the real estate business?
Real estate dealers or real estate developers who are registered with the Housing and Land Use Regulatory Board (HLURB) or HUDCC. If
the taxpayer is not registered with the HLURB or HUDCC as a real estate dealer or developer, he/it may nevertheless be deemed to be
engaged in the real estate business through the establishment of substantial relevant evidence (such as consummation during the
preceding year of at least six (6) taxable real estate sale transactions, regardless of amount; registration as habitually engaged in real
estate business with the Local Government Unit or the Bureau of Internal Revenue, etc.). However, banks shall not be considered as
habitually engaged in the real estate business for purposes of determining the applicable rate of withholding tax imposed under Sec.
2.57.2(J) of RR No. 2-98, as amended. [Sec. 3(a) (4) of RR No. 7-2003]

12.) How can you determine whether a particular real property is a capital asset or an ordinary asset?

a) “Real properties shall be classified with respect to taxpayers engaged in the real estate business as follows:

i)  All real properties acquired by the real estate dealer shall be considered as ordinary assets.

ii) All real properties acquired by the real estate developer, whether developed or undeveloped as of the time of acquisition, and all
real properties which are held by the real estate developer primarily for sale or for lease to customers in the ordinary course of his
trade or business or which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year and
all real properties used in the trade or business, whether in the form of land, building, or other improvements, shall be considered as
ordinary assets.

iii) All real properties of the real estate lessor, whether land, building and/or improvements, which are for lease/rent or being offered
for lease/rent, or otherwise for use or being used in the trade or business shall likewise be considered as ordinary assets.

iv) All real properties acquired in the course of trade or business by a taxpayer habitually engaged in the sale of real property shall
be considered as ordinary assets. A property purchased for future use in the business, even though this purpose is later thwarted
by circumstances beyond the taxpayer’s control, does not lose its character as an ordinary asset. Nor does a mere discontinuance
of the active use of the property change its character previously established as a business property.” [Sec. 3(a) of RR No. 7-2003]

b) In the case of taxpayer not engaged in the real estate business, real properties, whether land, building, or other improvements, which
are used or being used or have been previously used in trade or business of the taxpayer shall be considered as ordinary assets. [Sec.
3(b) of RR No. 7-2003]

c) In the case of taxpayers who changed its real estate business to a non-real estate business, real properties held by these taxpayers
shall remain to be treated as ordinary assets. [Sec. 3(c) of RR No. 7-2003]

d) In the case of taxpayers who originally registered to be engaged in the real estate business but failed to subsequently operate, all real
properties acquired by them shall continue to be treated as ordinary assets. [Sec. 3(d) of RR No. 7-2003]

e) Real properties formerly forming part of the stock in trade of a taxpayer engaged in the real estate business, or formerly being used in
the trade or business of a taxpayer engaged or not engaged in the real estate business, which were later on abandoned and became idle,
shall continue to be treated as ordinary assets. Provided however, that properties classified as ordinary assets for being used in business
by a taxpayer engaged in business other than real estate business are automatically converted into capital assets upon showing of proof
that the same have not been used in business for more than two (2) years prior to the consummation of the taxable transactions
involving said properties. [Sec. 3(e) of RR No. 7-2003]

f) “Real properties classified as capital or ordinary asset in the hands of the seller/transferor may change their character in the hands of
the buyer/transferee. The classification of such property in the hands of the buyer/transferee shall be determined in accordance with the
following rules:

i) Real property transferred through succession or donation to the heir or donee who is not engaged in the real estate business with
respect to the real property inherited or donated, and who does not subsequently use such property in trade or business, shall be
considered as a capital asset in the hands of the heir or donee.

ii) Real property received as dividend by the stockholders who are not engaged in the real estate business and who do not
subsequently use such real property in trade or business, shall be treated as a capital asset in the hands of the recipients even if
the corporation which declared the real property dividends is engaged in real estate business.
 iii)The real property received in an exchange shall be treated as ordinary asset in the hands of the transferee in the case of a tax-
free exchange by taxpayer not engaged in real estate business to a taxpayer who is engaged in real estate business, or to a
taxpayer who, even if not engaged in real estate business, will use in business the property received in the exchange.” [Sec. 3(f) of
RR No. 7-2003]

g) In the case of involuntary transfers of real properties, including expropriations or foreclosure sale, the involuntariness of such sale
shall have no effect on the classification of such real property in the hands of the involuntary seller, either as capital asset or ordinary
asset as the case may be. [Sec. 3(g) of RR No. 7-2003]

13.) What is the basis in the valuation of real property? 

The value of the real property will be based on the selling price, fair market value or zonal value as determined by the Commissioner of
Internal Revenue or the fair market value as shown in the schedule of values of the Provincial or City Assessor, whichever is higher.

If there is no zonal value, the taxable base shall be the gross selling price per sales documents or the fair market value that appears in
the latest tax declaration, whichever is higher.

If there is an improvement, the FMV, based on the latest tax declaration at the time of the sale or disposition, duly certified by the
City/Municipal Assessor shall be used. No adjustments shall be added on the said value, provided that the tax declaration bears the
upgraded fair market value of the said property pursuant to Section 219 of Republic Act No. 7160, otherwise known as the Local
Government Code of 1991 and the last paragraph of the Local Assessment Regulations No. 1-92 dated October 6, 1992.

However, in case the tax declaration presented was issued three (3) or more years prior to the date of sale or disposition of the real
property, the seller/transferor shall be required to submit a certification from the City/Municipal Assessor whether or not the same is still
the latest tax declaration covering the said real property. Otherwise, the taxpayer shall secure its latest tax declaration and shall submit a
copy thereof duly certified by the said Assessor. (RAMO 1-2001)

14.) What is meant by "Net Capital Gains"?

"Net Capital Gains" means the excess of the gains from sales or exchanges of capital assets over the losses from such sales or
exchanges. [Sec 2(o) of RR 6-2008]

15.) What are the rules for the determination of amount and recognition of gain or loss in the sale, barter, or exchange of shares of
stock not traded through the Local Stock exchange?

A. “Determination of Selling Price. — In determining the selling price, the following rules shall apply:

a.1) In the case of cash sale, the selling price shall be the total consideration per deed of sale.

a.2) If the total consideration of the sale or disposition consists partly in money and partly in kind, the selling price shall be sum of
money and the fair market value of the property received.

a.3) In the case of exchange, the selling price shall be the fair market value of the property received.” [Sec. 7 (c) (c.1) RR No. 6-2008]

a.4) “Where property, other than real property referred to in Section 24(D), is transferred for less than an adequate and full
consideration in money or money's worth, then the amount by which the fair market value of the property exceeded the value of the
consideration shall be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year:
Provided, however, that a sale, exchange, or other transfer of property made in the ordinary course of business (a transaction which
is a bona fide, at arm’s length, and free from any donative intent) will be considered as made for an adequate and full consideration
in money’s worth.” (Sec. 16, RR No. 12-2018)

B.) Definition of "fair market value" of the Shares of Stock.

b.1) “In the case of listed shares which were sold, transferred or exchanged outside of the trading system and/or facilities of the
Local Stock Exchange, the closing price on the day when the shares are sold, transferred, or exchanged. When no sale is made in
the Local Stock Exchange on the day when the Listed shares are sold, transferred, or exchanged, the closing price on the day
 nearest to the date of sale, transfer or exchange of the shares shall be the fair market value.” [Sec. 7 (c.2.1) RR No. 6-2008]

b.2) “In the case of shares of stock not listed and traded in the local stock exchanges, the value of the shares of stock at the time of
sale shall be the fair market value. In determining the value of the shares, the Adjusted Net Asset Method shall be used whereby all
assets and liabilities are adjusted to fair market values. The net of adjusted asset minus the liability values is the indicated value of
the equity.

The appraised value of real property at the time of sale shall be the higher of –

1.  The fair market value as determined by the Commissioner of Internal Revenue, or
2.  The fair market value as shown in the schedule of valued fixed by the Provincial and City Assessors, or
3.  The fair market value as determined by Independent Appraiser.” (Sec. 2, RR No. 6-2013)

b.3) In the case of a unit of participation in any association, recreation or amusement club (such as golf, polo, or similar clubs), the
fair market value thereof shall be its selling price or the bid price nearest published in any newspaper or publication of general
circulation, whichever is higher. [Sec. 7 (c.2.3) RR No. 6-2008]

C.) Determination of Gain or Loss from Sale or Disposition of Shares of Stock. — The gain from the sale or other disposition of Shares of
Stock. — The gain from the sale or other disposition of shares of stock shall be the excess of the amount realized therefrom over the
basis or adjusted basis for determining gain, and the loss shall be the excess of the basis or adjusted basis for determining loss over the
amount realized. The amount realized from the sale or other disposition of property shall be the sum of money received plus the fair
market value of the property (other than money) received, if any. [Sec. 7 (c.3) RR No. 6-2008]

16.) What are the applicable tax rates of Capital Gains Tax (CGT) under the National Internal Revenue Code of 1997, as amended by
Republic Act No. 10963/ TRAIN Law?

A.  For Real Properties                  –             Six percent (6%)

B. For Shares of Stocks Not Traded in the Stock Exchange:

Effective January 1, 2018 to present (Republic Act No. 10963 or TRAIN Law)

A.  For Individual                     -              15 % 

B.  For Corporation:

        B.1 Domestic                        -              15 %

        B.2 Foreign:

                   B.2.1   Not Over P100,000                                              -              5.0 %

                   B.2.2   On any amount in excess of P100,000                    -              10 %

Effective January 1, 1998 to December 31, 2017 (Republic Act No. 8424/NIRC)

Not over P 100,000 – Five percent (5%)

On any amount in excess of P 100,000 – Ten percent (10%)

17.) Who/what are considered exempt from the payment of Final Capital Gains Tax?

Dealer in securities, regularly engaged in the buying and selling of securities

An entity exempts from the payment of income tax under existing investment incentives and other special laws
An individual or non-individual exchanging real property solely for shares of stocks resulting in corporate control
A government entity or government-owned or controlled corporation selling real property
If the disposition of the real property is gratuitous in nature
 Where the disposition is pursuant to the CARP law

18.) Who are conditionally exempt from the payment of Final Capital Gains Tax?

Natural persons who dispose their principal residence, provided that the following criteria are met:

The proceeds of the sale of the principal residence have been fully utilized in acquiring or constructing new principal residence within
eighteen (18) calendar months from the date of sale or disposition;
The historical cost or adjusted basis of the real property sold or disposed will be carried over to the new principal residence built or
acquired;
The Commissioner of Internal Revenue has been duly notified, through a prescribed return, within thirty (30) days from the date of sale
or disposition of the person’s intention to avail of the tax exemption;
Exemption was availed only once every ten (10) years;
In case there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been realized from
the sale or disposition will be subject to Capital Gains Tax.
In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from the seller and shall deduct from the agreed
selling price/consideration the 6% capital gains tax which shall be deposited in cash or manager’s check in interest-bearing account
with an Authorized Agent Bank (AAB) under an Escrow Agreement between the concerned Revenue District Officer, the Seller and the
Transferee, and the AAB to the effect that the amount so deposited, including its interest yield, shall only be released to such
Transferor upon certification by the said RDO that the proceeds of the sale/disposition thereof has, in fact, been utilized in the
acquisition or construction of the Seller/Transferor’s new principal residence within eighteen (18) calendar months from date of the
said sale or disposition. The date of sale or disposition of a property refers to the date of notarization of the document evidencing the
transfer of said property. In general, the term “Escrow” means a scroll, writing or deed, delivered by the grantor, promisor or obligor
into the hands of a third person, to be held by the latter until the happening of a contingency or performance of a condition, and then
by him delivered to the grantee, promise or obligee.

19.)  What is an Electronic Certificate Authorizing Registration (eCAR)?

The eCAR is an electronically generated Certificate Authorizing Registration issued by the Commissioner or his duly authorized
representative attesting that the transfer and conveyance of land, buildings/improvements or shares of stock arising from sale, barter or
exchange have been reported and the taxes due inclusive of the documentary stamp tax, have been fully paid.

20.)  What is Electronic Certificate Authorizing Registration System (eCAR System)?

The eCAR System is a stand-alone system developed and owned by the BIR for the automated creation of eCAR which is the basis for
transferring the real and personal properties from the transferor to the transferee after payment of the correct taxes and other dues that
allows monitoring through audit trails and generated reports.

21.) Are manually issued Certificate Authorizing Registration (CAR) that are outstanding and not yet presented to the Registry of Deeds
(RD) still valid?

All manually issued CARs that are outstanding and not yet presented to the RD are no longer valid. The said CARs shall be replaced with
an eCAR by the concerned Revenue District Offices or Large Taxpayers Divisions. For CAR involving multiple properties in which some of
the properties are already transferred in RD, only those untransferred property/ies shall be issued with an eCAR.

A certification fee shall be charged for each released eCAR issued/reprinted after affixture of Thirty Pesos (P30.00) Documentary Stamp
Tax (DST) on Certificates (RA 10963 or TRAIN Law) and the prescribed Certification Fee of One Hundred Pesos (P100.00) under
Executive Order No. 197 to the taxpayer/authorized representative.

[return to index]

 
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