REAL ESTATE TAXES

TBB

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 1. Capital Gains Tax
2. Creditable Withholding
REAL ESTATE
TAXES Tax
3. Estate Tax
4. Donor’s Tax
BIR (RA 8424 – TRA)
5. Documentary Stamps Tax
6. Value-Added Tax
 Capital Asset Vs Ordinary Asset

CAPITAL ASSET
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 asset.
ORDINARY ASSET
Shall refer to all real properties specifically excluded from the definition of capital
assets; namely
✔ 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
✔ Real property held by the taxpayer primarily for sale to customers in the ordinary
course of his trade or business
✔ Real property used in trade or business of a character which is subject to the
allowance for depreciation.
✔ Real property used in trade or business of the taxpayer.
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What is Ordinary Asset?
□ Composition:
■ Properties constituting inventories for
sale; and
■ Properties used in connection with trade,
business or source of income
□ Sale is subject to withholding tax

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 APPLICABLE TAXES ON SALE, EXCHANGE OR OTHER
DISPOSITION OF REAL PROPERTY (BIR)

IN CASE OF INDIVIDUAL CITIZENS/RESIDENT ALIENS

✔ Capital gains presumed to have been realized from the sale, exchange,
or other disposition of real property located in the Philippines classified as
capital assets, shall be subject to the six percent (6%) capital gains tax
imposed under Sec. 24(D)(1) or 25(A)(3) of the Code, as the case may be,
based on the gross selling price or current fair market value as determined
in accordance with Sec. 6(E) of the code whichever is higher.
✔ The sale of real property located in the Philippines, classified as ordinary
assets, shall be subject to the creditable withholding tax (expanded),
based on the gross selling price or current fair market value as determined
in accordance with Section 6(E) of the Code, whichever is higher, and
consequently, to the ordinary income tax based on the net taxable income.

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Capital Gains Tax
□ 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.
□ Applicable to citizens, resident &
non-resident aliens

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Capital Gains Tax
□ Rate - 6%
□ When filed and paid – within 30 days from
date of notarization of Deed of Sale
■ Installment sale of capital asset –rules on
ordinary asset apply ⇨ creditable withholding tax
□ Penalty – 25% of tax payable after said
period
□ CGT is a final withholding tax

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Installment sale
□ Installment sale – initial payments in
the year of sale including down
payment do not exceed 25% of the
selling price
□ Deferred payment basis – payments
in the year of sale exceed 25%
■ Considered a cash sale and CGT is due

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Basis for Valuation of Property
□ Tax base - gross selling price (GSP)
or FMV shown in SMV of
Provincial/City Assessor or ZV
whichever is higher
□ If no ZV – tax base is GSP or FMV
shown in the latest tax declaration
□ If there is improvement in property –
FMV per latest tax declaration

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Tax Declaration
□ If Tax Dec more than 3 years from
date of sale or disposition, secure
latest tax declaration or certification
from Assessor that the same tax dec
is still the latest

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Ante-dated Sale
□ A deed of sale submitted beyond 90
days from date of notarization
□ CGT based on rules applicable at time
of submission of document plus
penalty
□ Delay only in presentation proved –
CGT based on rules applicable at time
of notarization plus penalty

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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) now DHSUD or Housing & Urban
Development Coordinating Council (HUDCC)
□ If not registered, proof by offer of satisfactory
evidence of at least six (6) taxable consummated
sales during the year
□ Registration as habitually engaged in real estate
business with the Local Government Unit or the
Bureau of Internal Revenue, etc.

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 Real Properties Acquired by Banks

▪ IMPORTANT NOTE

Real properties acquired by banks through foreclosure

sales are considered as their ordinary assets.
However, banks shall not be considered as habitually
engaged in the real estate business for purposes of
determining the applicable rate of withholding tax.
Therefore, banks are liable for payment of the 6%
capital gains tax.

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Notes:

□ In the case of taxpayer who changed its real

estate business to a non-real estate business,
real properties held by these taxpayer shall
remain to be treated as ordinary assets.
□ 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.

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 Real Properties Not Used/
Abandoned or Have Become Idle
□ Taxpayer engaged in real estate business
■ Real properties formerly forming part of the
stock in trade – treat as ordinary assets
■ Real properties formerly being used in the trade
or business – treat as ordinary assets
□ Taxpayer not engaged in real estate business
■ Real properties formerly being used in the trade
or business – treat as ordinary assets
□ Automatically converted into capital assets upon
showing proof that the same have not been used in
business for more than two years prior to the
consummation of the taxable transactions involving said
properties

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□ 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.
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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. 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.

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□ 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
property in trade or business, shall be
considered 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.
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□ iii) The real property received in an
exchange shall be treated as ordinary
asset 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 exchange.
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Conditionally exempt from CGT
Sale of principal residence of the
individual taxpayer (natural person)
provided;
□ the proceeds thereof is used to acquire or
construct a new principal residence within 18
months from the date of sale
□ 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;

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□ The Commissioner 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; and
□ If 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.

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Duty of Buyer/Transferee of
Principal Residence
□ Withhold from the seller and deduct from the agreed selling
price/consideration the 6% capital gains tax
□ Deposit CGT 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.
□ Buyer & Seller then file jointly the Final Capital Gains Tax
Return with no amount stated but indicating that the supposed
CGT due is in an escrow account to satisfy future CGT liability
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New Principal Residence Not
Acquired or Constructed
□ If after 30 days after the lapse of the 18-month
period, Seller/transferor fails to submit documentary
evidence that he has utilized the proceeds of sale or
disposition of his old principal residence to
acquire/construct his new principal residence, he shall
be treated as deficient in payment of CGT and shall be
assessed for deficiency CGT inclusive of penalties and
the 20% interest per annum computed from the 31st
day after the date of sale/ disposition of the said
principal residence

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Option Not to use 6% CGT
Sale of real property (capital asset) to
the government or any of its political
subdivisions or to GOCC – seller has
option to use the 6% final tax rate
(CGT) or the graduated income tax
rate

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Other Exempt Transactions
□ Sale of raw land
■ Exemption allowed in socialized housing projects
under the 1992 UDHA (RA 7279)
□ Sale or disposition of property to
■ An entity exempt 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

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Quick Quiz
□ An individual taxpayer sold one
of the lots he inherited for P1-M.
How much should he pay as
capital gains tax?

Answer: P60,000.00
(P 1,000,000 x 6%)
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□ A taxpayer sold an office building
where he conducts business for
P5M. How much is the capital
gains tax?
Answer: NONE
- property is classified as ordinary asset;
transaction is subject to creditable withholding tax

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□ A real estate developer sold a
subdivision house & lot package
for P4-M. How much CGT
should he pay?

Answer: NONE
(property is classified as ordinary asset; transaction is subject to
creditable withholding tax)

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Valuation of Condominium
□ Ground floor of a condominium
project shall be considered as
commercial
□ Additional 20% added to an
established residential zonal value
(BIR Ruling 2-98)

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Sale of Vacant Lot
□ FMV based on market value per
Assessor’s AV or BIR zonal value,
whichever is higher
□ Documents required in paying CGT
■ Original and 2 photocopies of the Deed of
Sale
■ Photocopy of owner’s certificate of title
■ Certified true copy of tax declaration
■ Seller’s affidavit of no improvement
■ Assessor’s certificate of no improvement
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 Foreclosure Sale
(1) In case the mortgagor exercises his right of redemption within
one year from the issuance of the certificate of sale, no capital
gains tax shall be imposed because no capital gains has been
derived by the mortgagor and no sale or transfer of real property
was realized.
(2) In case of non-redemption the capital gains tax on the
foreclosure sale shall become due based on the bid price of the
highest bidder but only upon the expiration of the one-year
period of redemption and shall be paid within 30 days from the
expiration of the said one-year redemption.
(3) Creditor bank as the statutory seller is liable to pay the CGT
based on bid price

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Other Cases
□ Exchanges of capital assets by the
individual owners are subject to CGT
□ Partition of estate among heirs is not
subject to capital gains tax because
there is neither a sale, exchange or
disposition of property
□ Donation of land under CARP (RA
6657) is exempted from CGT

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Certificate Authorizing
Registration (CAR)
□ Certification issued by the
Commissioner or his duly authorized
representative attesting that the
transfer and conveyance of land,
buildings/ improvements arising from
sale, barter or exchange have been
reported and the taxes due inclusive
of the documentary stamp tax, have
been fully paid
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 Validity of CAR
□ One (1) year from date of issue.
□ In case of failure to present the same to the
Registry of Deeds (RD) within the one (1)
year period, the same shall be presented for
revalidation to the District Office where the
CAR was issued. The revalidation shall be
good for another one-year period, after
which the CAR losses its validity. (RMO
15-2003)

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Basic docs required in filing CGT

1. TIN of buyer & seller

2. Notarized Deed of Sale or Exchange
3. TCT/OCT/CCT
4. Tax Declaration on the lot and/or improvement during
nearest time of sale
5. “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
6. Copy of BIR Ruling for tax exemption confirmed by BIR, if
applicable
7. Duly approved Tax Debit Memo, if applicable
8. “Sworn Declaration of Interest” as prescribed under
Revenue Regulations 13-99, if the transaction is
tax-exempt
9. Documents supporting the exemption

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NEXT STOP – WITHHOLDING TAX
Withholding Tax
□ - Expanded Withholding Tax is a kind of
withholding tax which is prescribed only for
certain payors and is creditable against the
income tax due of the payee for the taxable
quarter/year.
□ - Final Withholding Tax is a kind of withholding
tax which is prescribed only for certain payors
and is not creditable against the income tax
due of the payee for the taxable year. Income
Tax withheld constitutes the full and final
payment of the Income Tax due from the
payee on the said income (example: capital
gains tax)
 WITHHOLDING TAX: Disposition
of Real Property

• Taxpayers Habitually Engaged in the Real Estate

Business

Registration with the HLURB or HUDCC as a real estate dealer or

developer shall be sufficient for a taxpayer to be considered as
habitually engaged in the sale of real estate.
If the taxpayer is not registered with the HLURB or HUDCC as a real
estate dealer or developer, 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 (6) six taxable real estate sale transactions,
regardless of amount
 WITHHOLDING TAX: Disposition of Real
Property (Seller/ Transferor Habitually
Engaged in Business
• Income Payments Subject to Creditable Withholding Tax

Real property, other than capital assets, sold by an individual,

corporation, estate etc. and the seller/transferor is habitually
engaged in the real estate business is subject to withholding tax in
accordance with the following schedule:
Selling price P 500,000 and below 1.5%
More than 500,000 but
not more than P2,000,000 3.0%
More than P2,000,000 5.0%
Seller must show proof of registration with HLURB or HUDCC to
be considered habitually engaged.
 FINAL WITHHOLDING TAX : Disposition of Real
Property (Seller NOT Habitually Engaged in
Business)

□ Sale of property worth P1.5M

and above considered ordinary
asset by a natural person not
habitually engaged in real
estate business 7.5%
□ Sale of ordinary asset by a
Corporation not habitually
engaged in real estate
Business 7.5%
 Tax Base: Withholding Tax –
Disposition of Real Property
□ Gross Selling Price (GSP) or the
total amount of consideration or
the FMV, whichever is higher
Expanded Withholding Tax

□ 10% of gross commissions or

service fees of real estate
brokers
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NEXT STOP – ESTATE & DONOR’S TAX
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Estate Tax

• Tax on the right of the deceased person

to transmit his/her estate to his/her
lawful heirs and beneficiaries at the time
of death and on certain transfers which
are made by law as equivalent to
testamentary disposition
• A TRANSFER TAX, NOT A TAX ON
PROPERTY
• Applicable Tax Rate – law in force at time
of decedent’s death51
Tax Rates (Effective January 1,
1998 up to Present)
If the Net Estate is
The Tax Of the
Over But not Over Shall be Plus Excess Over

P 200,000.00 Exempt

P 200,000.00 500,000.00 0 5% P 200,000.00

500,000.00 2,000,000.00 P 15,,000.00 8% 500,000.00

2,000,000.00 5,000,000.00 135,000.00 11 % 2,000,000.00

5,000,000.00 10,000,000.00 465,000.00 15 % 5,000,000.00

10,000,000.00 1,2l5,000.00 20 % 10,000,000.00

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Estate Tax Return
• Requirement
■ In all cases of transfers subject to tax or
where though exempt from tax, the gross
value of the estate exceeds P200,000, or
regardless of the gross value of the estate
where said estate consists of registered or
registrable property for which clearance
from the BIR is required as a condition
precedent for the transfer of ownership (BIR
Form 1801)
■ When the gross estate exceeds P2M, it
shall be supported with a statement duly
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certified by a CPA.
Time & Place of Filing
• The Estate Tax Return should be filed
within six (6) months from decedent's
death. However, the Commissioner may, in
meritorious cases, grant extension not
exceeding thirty (30) days.
• The Estate Tax Return should be filed with
the Accredited Agent Bank, Revenue
District Office, Collection Officer or duly
Authorized Treasurer of the city or
municipality in which the decedent was
domiciled at the time of death. If the
decedent has no legal residence in the
Philippines, the return
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RDO No. 39, South Quezon City.
 Time & Place of Filing
• The Estate Tax imposed shall be paid at the time
the return is filed by the executor or administrator
or the heirs. However, when the Commissioner
finds that payment on the due date of the Estate
Tax or of any part thereof would impose undue
hardship upon the estate or any of the heirs, he
may extend the time for payment of such tax or
any part thereof not to exceed five (5) years, in
case the estate is settled through the courts or two
(2) years in case the estate is settled
extra-judicially. However, if an extension for
payment is granted, the executor, administrator or
beneficiary shall furnish a bond in an amount, not
exceeding double the amount of the tax and with
such sureties as the CIR deems necessary,
conditioned upon the payment of the said tax in
accordance with the terms of the extension.
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Taxable Net Estate & Tax Due

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Gross Estate
For resident alien decedents/citizens:
a) Real or immovable property, wherever located
b) Tangible personal property, wherever located
c) Intangible personal property, wherever
located

For non-resident decedent/non-citizens:

a) Real or immovable property located in the
Philippines
b) Tangible personal property located in the
Philippines
c) Intangible personal property - with a situs in
the Philippines
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Excluded from Gross Estate
• GSIS proceeds/ benefits
• Accruals from SSS
• Proceeds of life insurance where the beneficiary is
irrevocably appointed
• Proceeds of life insurance under a group insurance taken
by employer (not taken out upon his life)
• War damage payments
• Transfer by way of bona fide sales
• Transfer of property to the National Government or to any
of its political subdivisions
• Separate property of the surviving spouse
• Merger of usufruct in the owner of the naked title
• Properties held in trust by the decedent
• Acquisition and/or transfer expressly declared as not
taxable

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Basis for Valuation of Property
• The properties subject to Estate Tax shall be appraised
based on its fair market value at the time of the
decedent's death.
• The appraised value of the real estate shall be whichever
is higher of the fair market value, as determined by the
Commissioner (zonal value) or the fair market value, as
shown in the schedule of values fixed by the Provincial or
City Assessor.
• If there is no zonal value, the taxable base is the fair
market value that appears in the latest tax declaration.
• If there is an improvement, the value of improvement is
the construction cost per building permit or the fair
market value per latest tax declaration.

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Allowable Deductions from
Gross Estate

For Resident Decedent

• Expenses, losses, indebtedness and taxes
a) Funeral Expenses (actual or allowable,
whichever is lower)
□ CA 466 - 5 % of gross estate (up to Dec. 31, 1972)
□ PD 69 - 5 % of gross estate but not exceeding
P50,000 (Jan. 1, 1973 to July 27, 1992)
□ RA 7499 - 5 % of gross estate but not exceeding
P100,000 (July 28, 1992 to December 3l, 1997)
□ RA 8424 - 5% of gross estate but not exceeding
P200,000 (Jan. 1,1998)
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Allowable Deductions from
Gross Estate (contd)

b) Judicial expenses of the testamentary/

intestate proceedings
c) Valid claims against the estate,
provided:
□ Instrument duly notarized
□ Loan contracted w/in 3 years before death of
decedent, administrator/executor submits
statement showing disposition of proceeds of
the loan
d) Claims against insolvent person
e) Unpaid mortgages/indebtedness
f) Unpaid taxes
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Allowable Deductions from
Gross Estate (contd)

g) Casualty losses
h) Property previously taxed
i) Transfer for public purpose
j) Share of surviving spouse
k) Medical expenses - those incurred by the
decedent within one (1) year prior to
his/her death which shall be
substantiated with receipts
(NOTE: Amount allowable as deduction depends
on the law prevailing
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the decedent).
Allowable Deductions from
Gross Estate (contd)
l) Family Home - fair market value but not
to exceed P1,000,000.00
m) Standard Deduction - an amount
equivalent to
P1,000,000.00 (applicable only for death
occurring after the effectivity of RA 8424
which is January 1, 1998.)
n) Amount received by the heirs under
Republic
Act No. 4917 (applicable only for death
occurring after the effectivity of RA 8424
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which is January 1, 1998)
Allowable Deductions from
Gross Estate (contd)
For Non-Resident Decedent/Non-Citizen
• Expenses, losses, indebtedness, taxes
• Property previously taxed
• Transfer for public use
• Share in the conjugal property

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 Documentary Requirements
• Mandatory Requirements
• TINof Estate
• Photocopy of Death Certificate
• Deed of Extrajudicial Settlement/ Affidavit of Self Adjudication

• For Real Properties

• Certificate of Total Landholdings from the City and Provincial
Assessor
•Certified true copy of Tax Declaration issued by the Local
Assessor’s Office for land and improvement relevant to the date to
taxable transaction (date of death)
•TCT/OCT/CCT
•Sworn declaration of no improvement or Certificate of No
Improvement issued by the Local Assessor’s Office
•Vicinity map if zonal value cannot be readily determined.
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Donor’s Tax: Nature & Concept

Donation is an act of liberality whereby a

person disposes of gratuitously a thing or
right in favor of another (donee) who accepts
it. It is a voluntary transfer of property from
one person to another without any
compensation or consideration thereof.
Donor’s Tax or gift tax is a tax imposed on
the right or privilege of the donor to make a
gift. It is a tax on a donation or gift, hence an
excise tax.

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DONOR’S TAX

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 Requisites Of Valid Donation
Capacity of the Donor
Donative Intent
Acceptance by the Donee
Delivery of the gift to the donee either actually
or constructively

• A donor subject to tax may be a natural or juridical person

• Properties, whether real or personal, tangible or intangible may be
the object of donation. The discussion on estate taxation regarding
the valuation of estates are also applicable to donor’s taxation.

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 Classification of Donors

• Citizen or Resident Alien

• Non-Resident Alien

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 Composition of Gross Gift
A. Citizens/Resident Donor
1. Real Property – wherever located
2. Tangible Personal Property – wherever located
3. Intangible Personal Property – wherever located
B. Non-Resident Alien Donor
1. Real Property – located in the Philippines
2. Tangible Personal Property - located in the Philippines
3. Intangible Personal Property - located in the Philippines,
unless exempted under the principle of reciprocity

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VALUATION OF GROSS GIFT

If a donation is made in property, the fair

market value/zonal value, whichever is
higher, of such property at the time of
donation shall be the value of the gross
gift.

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 Deductions from Gross Gift
Dowries or gift by parents to children on account of marriage,
before its celebration or within one year thereafter to the extent of
P10,000
Gift to the National Government or of its agencies
Gifts made in favor of an educational and or charitable religious,
cultural or social welfare, corporation, foundation, thrust or
philanthropic organization or research institution or organization,
provided that not more than thirty percent 30% of said gifts shall be
used for administration purposes.
Encumbrance on the property donated if assumed by the donee in
the deed of donation.
Those specifically provided by the donor as a condition of the
donation that will diminish the value of the property received by the
donee.
Exempt donation under special laws
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 Basis and Rate of Tax
With the promulgation of RA 8424 which is the
Comprehensive Tax Reform Program of 1997 starting
January 1, 1998, where the donee is a relative, the
tax is based on the graduated rates of 0% to 15% of
net gifts.
However, where the donee or beneficiary is a
stranger, the tax payable by the donor shall be 30%
of the net gifts.
Gifts made during the same calendar year are
collated and the donor’s tax computed on the total
gifts during the year.
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For Donor’s Tax Purposes,
Relatives are:
ancestor and lineal descendants
brother, sister (whether by whole of half blood)
relative of consanguinity in the collateral lines
within the fourth degree of relationship. i.e. first
cousin; and
A legally adopted child is entitled to all rights
and obligations provided by law to legitimate
children.

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The 4th Degree of Consanguinity
2
A 1

1 3
B C 2

D
E F G 3
4

Example: D donated to F
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 Donor’s Tax Rates

Over But not The Tax Plus Of the

Over Shall Be Excess
Over
P 100,000 Exempt
P 100,000 200,000 0 2% P 100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 And Over 1,004,000
76 15% 10,000,000
Requirements for Donor’s Tax
The donor’s tax return (BIR Form 1800) is filed
by the person who transfers gift “inter vivos”
unless the transfer is exempt from donor’s tax
under Sec. 101 of the NIRC. A separate return
shall be filed for each gift made on different
dates during the year. However, only one
return shall be filed for several gifts made by
the donor to different donees on the same
date. If the gift involves conjugal/community
property, each spouse shall file separate return
corresponding to his or her respective share in
the conjugal or community property.
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Time and Place of Filing & Payment

✔ The Donor’s Tax Return shall be filed within 30 days

after the date the gift is made and the tax due
thereon shall be applied at the time of filing. Except
in cases where the Commissioner otherwise
permits, the return shall be filed and the tax paid to
an Authorized Agent Bank, the Revenue District
Officer, Revenue Collection Officer or duly
authorized Treasurer of the city or municipality
where the donor was domiciled at the time of the
transfer, or if there is no legal residence in the
Philippines, with the office of the Commissioner.

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 Exemptions from Donor’s Tax
• Donation of land for socialized housing
•Donation of land under the CARL (RA 6657)
•Donations to
▪ International Rice Research Institute
▪ Philippine-American Cultural Foundation
▪ Ramon Magsaysay Foundation
▪ Philippine Inventor’s Commission
▪ Integrated Bar of the Philippines
▪ Development Academy of the Philippines
▪ Aquaculture Department of the Southeast Asian Fisheries
Development Center of the Philippines
▪ National Social Action Council; and
• Donation of equipment, materials and services to the Task Force
on Human Settlement.
79
 Documentary Requirements
• Mandatory Requirements
- TIN of Donor and Donee
- Notarized Deed of Donation
- TCT/OCT/CCT
- Certified true copy of Tax Declaration issued by the Local
Assessor’s Office
- Vicinity Map if Zonal Value cannot be readily determined
- Sworn declaration of no improvement or Certificate of No
Improvement issued by the Local Assessor’s Office
- Proof that the donee is a qualified relative of the donor (e.g. Birth
Certificate, Marriage Contract, Baptismal Certificate)

80
• Additional Requirements, if applicable

- Proof of valuation of shares of

stocks
- Certificate of Deposit/Investment
- Certificate of Registration of Motor
Vehicle
- Special Power of Attorney- if the
signatory of the document is not
the owner of the property donated

81
Additions to Estate & Donor’s Tax
Levied for Violations
• A surcharge of 25% for each of the following
violations:
■ failure to file the return and pay on time
■ filing the return with person or office outside the
jurisdiction
■ failure to pay deficiency tax on prescribed time
■ failure to pay the full or part of the tax amount
on the return
• A surcharge of 50% is imposed in case of willful
neglect to file the return or when a false or
fraudulent return is filed
• Basic tax excluding surcharge
82
shall be the basis of
the 20% interest per annum
 SAMPLE
BOARD EXAM
QUESTIONS
83
□ Donation in favor of a legally adopted
child is subject to 30% donor’s tax.

□ Answer: FALSE

□ Donation of land under CARL (RA 6657) is

not only exempted from donor’s tax but
also registration fees.

□ Answer: TRUE

84
MULTIPLE CHOICE
□ In payment of estate tax, an allowed deduction
to the gross estate of a decedent is funeral
expense which is:

⚪ 5% of gross estate or P200,000 whichever is

lower
⚪ 5% of gross estate or P200,000 whichever is
higher
⚪ 10% of gross estate or P200,000 whichever is
lower
⚪ 10% of gross estate or P200,000 whichever is
higher
⚪ None of the above

□
85
5% of gross estate or P200,000
□ Based on net gifts, the maximum rate of
donor’s tax is:

⚪ Ten Percent
⚪ Fifteen percent
⚪ Twenty percent
⚪ Twenty-five percent
⚪ Thirty percent

□ Thirty percent

86
□ The amount of family home equivalent to
the fair market value considered as
allowable deductions from the estate of
the decedent

⚪ P500,000.00
⚪ P1,000,000.00
⚪ P2,000,000.00
⚪ P750,000.00

□ P1,000,000.00
87
□ The estate tax return shall be filed with
the BIR within :

⚪ 60 days from death of decedent

⚪ 90 days from death of decedent
⚪ 120 days from death of decedent
⚪ 180 days from death of decedent

□ 180 days from death of decedent

88
NEXT STOP – ESTATE & DONOR’S TAX
Documentary Stamp Tax
□ A tax on documents,
instruments, loan agreements
and papers evidencing the
acceptance, assignment, sale
or transfer of an obligation,
right or property incident
thereto.
Documents/Papers not
Subject to DST
□ Policies of insurance or annuities made or
granted by a fraternal or beneficiary society,
order, association or cooperative company,
operated on the lodge system or local
cooperation plan and organized and conducted
solely by the members thereof for the exclusive
benefit of each member and not for profit
□ Certificates of oaths administered by any
government official in his official capacity or
acknowledgement by any government official in
performance of his official duty
□ Written appearance in any court by any
government official in his official capacity
Documents/Papers not Subject to DST
(contd.)
□ Certificates of the administration of oaths to any person
as to the authenticity of any paper required to be filed in
court by any person or party thereto, whether the
proceedings be civil or criminal
□ Papers and documents filed in court by or for the
national, provincial, city or municipal governments
□ Affidavits of poor persons for the purpose of proving
poverty
□ Statements and other compulsory information required
of persons or corporations by the rules and regulations
of the national, provincial, city or municipal government
exclusively for statistical purposes and which are wholly
for the use of the Bureau or office in which they are filed,
and not at the instance or for the use or benefit of the
person filing them
Documents/Papers not Subject to
DST (contd.)
□ Certified copies and other certificates
placed upon documents, instruments
and papers for the national, provincial,
city or municipal governments made at
the instance and for the sole use of
some other branch of the national,
provincial, city or municipal
governments
□ Certificates of the assessed value of
lands, not exceeding P200 in value
assessed, furnished by the provincial,
 Who is Liable for DST?
□ Both the person issuing and the person
to whom the document is issued may
be made liable for the tax.
□ If one party is exempt from the
payment of the DST the other party in
the document who is not exempt
becomes directly liable.
Time of Filing & Payment
□ Documentary Stamp Tax return shall
be filed within five (5) days after the
close of the month when the taxable
document was made signed, issued,
accepted or transferred. The
Documentary Stamp Tax shall be paid
upon filing of the return.
Documentary Stamp Tax Rates
Powers of Attorney
• For each document P5.00
Lease and other Hiring agreements of
memorandum or contract for hire, use or rent of
any land or tenements or portions thereof
• For the 1st P2,000 or fraction thereof P3.00
• For every P1,000 or fractional part P1.00
thereof in excess of the first P2,000 for
each year of the term of the contract or
agreement
Mortgages Pledges of lands, estate, or property and
Deeds of Trust

• For the 1st P5,000 or less of the amount P20.00

secured

• On each P5,000 or fractional part thereof in P10.00

excess of 5,000
□ Deed of Sale, instrument or writing and
Conveyances of Real Property (except
grants, patents or original certificate of
the government)
□
For the 1st P1,000 of
consideration or FMV,
whichever is higher P15.00

For each additional

P1,000 or fractional part
thereof in excess of P1,000 P15.00
 Foreclosure Sale
(1) In case the mortgagor exercises his right of
redemption, the transaction shall only be subject to
the P15.00 documentary stamp tax.
(2) In case of non-redemption, the corresponding
documentary stamp tax shall be levied , collected
and paid by the person making, signing, issuing,
accepting or transferring the real property wherever
the document is made based on the bid price of the
highest bidder and shall be paid within 5 days after
the close of the month following the lapse of
one-year redemption period.
Deferred vs Installment Sale
□ Installment sale - the initial payments
in the year of sale do not exceed
twenty-five percent (25%) of the
gross selling price.
□ Deferred Basis - the initial payments
in the year of sale exceed twenty-five
percent (25%) of the gross selling
price.
■ Payment of DST shall accrue upon
execution of the Deed of Absolute Sale
implications of failure to
stamp taxable documents
□ The untaxed document will not be
recorded, nor will it or any copy thereof
or any record of transfer of the same be
admitted or used in evidence in court
until the requisite stamp or stamps have
been affixed thereto and cancelled
□ No notary public or other officer
authorized to administer oaths will add
his jurat or acknowledgment to any
document subject to Documentary
Stamp Tax unless the proper
documentary stamps are affixed thereto
and cancelled.
Documentary Requirements
□ 1) Photocopy of document(s) to which
the documentary stamp shall be affixed,
in case of constructive affixture of
Documentary Stamp Tax
□ 2) For metering machine users, a
schedule of the details of usage or
consumption of documentary stamp
□ 3) Proof of exemption under special law,
if applicable
□ 4) Duly approved Tax Debit Memo, if
applicable
 Update: RMC 76-2007

Additional Mandatory Requirements:

▪ Photocopy of Official Receipts issued by the seller, for
purposes of determining whether the sale of real
property is on cash basis, a deferred-payment sale or on
installment plan. The original copy of the official receipts
shall be presented to the BIR for authentication during
the processing of the application for Certificate
Authorizing Registration (CAR). If the seller is not
engaged in business, the acknowledgement receipts
issued by the seller to the buyer or any proof of payment
shall be presented.
 Update: RMC 76-2007

Additional Mandatory Requirements:

▪ For installment sales, present Deed of Conditional Sale
▪ Certified true copy of the original CAR (copy of the
Registry of Deeds) pertaining to the transfer of property
prior to the issuance of Certificate of Title which is the
subject of the current sale, or certification issued by the
Registry of Deeds indicating the serial number of the CAR,
date of issuance of the CAR, the Revenue District Officer
number that issued the CAR, the name of the Revenue
District Officer who signed the CAR, the type of taxes paid
and the amount of taxes paid per tax type.
PRACTICE BOARD EXAM
QUESTIONS
TRUE OR FALSE
The sale of the principal residence
is exempted from the CGT and
documentary stamps tax if the
proceeds will be used to acquire
a new family home.

FALSE (exempt only from capital

gains tax)
MULTIPLE CHOICE
□ The documentary stamp on lease of real estate
is P3.00 for the first P2,000.00 or fraction
thereof and additional

⚪ P0.50 for every P1,000 in excess of the first

P2,000
⚪ P1.00 for every P1,000 in excess of the first
P2,000
⚪ P1.50 for every P1,000 in excess of the first
P2,000
⚪ P2.00 for every P1,000 in excess of the first
P2,000

Answer: P1.00 for every P1,000 in excess of

the first P2,000
□ The documentary stamp tax on the sale of
property must be paid

⚪ Within thirty (30) days from the date of

notarization
⚪ Within five (5) days after the close of the
month of the date of sale
⚪ Within ten (10) days after the close of the
month of the date of sale
⚪ At the time of payment of capital gains tax

Answer: Within five (5) days after the close of

the month of the date of sale
The documentary stamp on every mortgage or
pledge of real estate is:

⚪ P20.00 for the 1st P5,000.00 plus P10.00

for every P5,000.00 thereafter
⚪ P10.00 for every P5,000.00 or fraction
thereof
⚪ P15.00 for every P5,000.00 or fraction
thereof
⚪ P2.00 on each P200.00 or fraction thereof
⚪ None of the above

Answer: P20.00 for the 1st P5,000.00 plus

P10.00 for every P5,000.00 thereafter
NEXT STOP – VALUE-ADDED TAX
Laws & Issuances
■ Revenue Regulations (RR) No. 16-2005,
“Consolidated Value-Added Tax Regulations of
2005,” implements Title IV of the Tax Code as
amended by Republic Act (RA) No. 9337 as well
as other provisions of the Tax Code pertaining to
the Value-Added Tax (VAT). It consolidates all
revenue regulations and other revenue
issuances previously issued on VAT, and
supersedes RR No. 14-2005 dated June 22,
2005. Signed on October 19, 2005 and took
effect on November 1, 2005.
□ REVENUE REGULATIONS NO. 4-2007
amended Certain Provisions of Revenue
Regulations No. 16-2005, As Amended,
Otherwise Known as the Consolidated
Value-Added Tax Regulations of 2005.
■ Inclusion of the words gross selling price in
threshold of VATable sales of residential lots &
residential house & lots & other residential
dwellings (took effect on February 1, 2006)
Value-Added Tax
□ A form of sales tax. It is a tax on
consumption levied on the sale of
goods and services and on the
imports of goods into the Philippines.
It is an indirect tax, which can be
passed on to the buyer.
□ If not shown separately, it is deemed
included in the selling price
Who Are Required To File VAT
Returns
□ Every person or entity who in the course of
his trade or business, sells or leases goods,
properties and services subject to VAT, if
the aggregate amount of actual gross sales
or receipts exceed One Million Five
Hundred Thousand Pesos (P 1,500,000.00)
for any twelve month period
A person required to register as VAT
taxpayer but failed to register
A person who imports goods
Professional practitioners
Professional Practitioners
□ Effective January 1, 2003, by virtue of RA 7716, "An Act
Restructuring the Value Added Tax (Vat) System & Repealing
Relevant Provisions of the NIRC, RA 9010 (imposing VAT) which
were implemented by RR 1-2003 and 3-2003, services of PPs are
also subject to either VAT or 3% Percentage Tax.
□ Pursuant to RR 16-2005, services of Professional Practitioners are
subject to VAT if gross professional fees exceed P1,500,000.00 for
a 12-month period and subject to 3% Percentage Tax if gross
professional fees total P1,500,000.00 and below for a 12-month
period.
□ "Professional Practitioners" include the following:
■ Certified Public Accountants
■ Insurance Agents (Life & Non-life)
■ Other Professional Practitioners required to pass the government
examination
Filing
□ Monthly VAT Declarations
■ Manual Filing - Not later than the 20th day following the
end of each month
■ Filing Through eFPS
Group A - within twenty five (25) days following the end of the month
Group B - within twenty four (24) days following the end of the month
Group C - within twenty three (23) days following the end of the month
Group D - within twenty two (22) days following the end of the month
Group D - within twenty one (21) days following the end of the month

□ Quarterly VAT Returns - Within 25 days following the close

of taxable quarter of the taxpayer (for manual filing); Within
30 days following the close of taxable quarter of the taxpayer
(for taxpayers filing through eFPS)
Output Tax vs Input Tax
□ Output Tax – VAT due on the sale or lease of
taxable goods or properties or services by any
person registered or required to register under the
Code
■ The amount collected by the seller/provider from
buyers/consumers which is to be remitted to the BIR
□ Input Tax – VAT due from or paid by a
VAT-registered person in the course of his trade or
business
■ The amount of VAT shouldered or already apid by the
taxpayer as buyer/consumer and collected by the
seller/provider
How to compute VAT
Output VAT = Selling Price x 12/112

Example:
How much is the output tax to be collected by the
seller if he sold a subdivision lot valued at P3.30M
inclusive of VAT? What is the price exclusive of VAT?

Answer:
Sales Price VAT inclusive P 3.300M
Less: Output VAT (P3.30M x 12/112) 0.354M)
Sales Price, VAT exclusive P 2.946M
Gross sales receipts of a VAT-registered developer were as follows:
P1.10M for January 2008 and P1.850M for February 2008. Purchases
from VAT-registered suppliers were P660T for January and P770T for
February. Compute for (1) Total Output VAT; (2) Total Input VAT; and
(3) VAT payable for the months of January to February 2008.

(1) Output VAT

November Output VAT: P1.10M x 12/112 P117,857
December Output VAT: P1.850M x12/112 198,214
Total Output VAT P316,071
========
(2) Input VAT
November Input VAT: P660T x 12/112 P 70,714
December Input VAT: P770T x 12/112 82,500
Total Input VAT P153,214
=======
(3) November VAT Payable: (P117,857 – P70,714) P 47,143
December VAT Payable: (P198,214 - P82,500) 115,714
Total VAT Payable P162,857
=======
VAT on Sale of Properties
□ Imposed and collected on every sale, barter
or exchange or transactions “deemed sale”
of taxable properties
□ Rate – 12% of the GSP or gross value in
money of the properties sold, bartered, or
exchanged or deemed sold in the
Philippines (BIR
GSP shall meanRR 16-2005)
the total amount of money or its
□ Note: equivalent which the purchaser
VAT previously 10%;pays theor12%
is rate
obligated to pay to the seller in consideration of
took effect
the sale,on February
barter or exchange1, 2006
of the goods or
properties, excluding VAT.
Coverage of Properties
□ For VAT purposes, “properties” refers
to all tangible and intangible objects
which are capable of pecuniary
estimation and shall include real
properties held primarily for sale to
customers or held for lease in the
ordinary course of trade or business.
(BIR RR 16-2005)
VATable Sales of Real Properties
□ Sale of real properties held primarily for
sale to customers or held for lease in the
ordinary course of trade or business
(VATable if aggregate amount of lease
exceeds P1.5M)
□ Sale of residential lot with GSP exceeding
P1.5M or residential house & lot or other
residential building with GSP exceeding
P2.5M where the instrument of sale (Deed
of Absolute Sale or Deed of Conditional
Sale) was executed on or after July 1, 2005
VATable Sales of Real Properties
(contd.)
□ Sale of real properties on installment plan - the seller
shall be subject to output VAT on the installment
payments received, including the interests and penalties
forSale
lateofpayment,
property byactually
a and/or constructively
received,
Real Estate subject
Dealer,tothe
the provisions of Sec.4.106-4
Initial payments refer to payments
hereof.
initial Correspondingly,
payments of which the buyer
w/c the ofreceives
Seller the property can
on or before
claim the input
in the year tax
of sale doinnot
the execution
same period
of theas the seller
instrument of sale
recognized
constitute 25%the of
output
grosstax.and payments he/she expects or is
■ ZV selling
higher price
than GSP – VAT is basedtoonreceive
scheduled % of actual
in cash or
property
collection (exclusive of VAT) over(other
agreed than evidence of
consideration
(exclusive of VAT) appliedindebtedness by the
to zonal value purchaser)
/ fair market
during
value of the property at the theofyear
time the when sale or
execution of the
Contract to Sell/Contractdisposition
of Sale at is made.
the Excludes
inception of the
contract mortgage on property sold except
when mortgage exceeds the costs
or other basis of property to Seller
Illustration (ZV/FMV higher than
GSP)
□ Installment sale of residential
house & lot or other residential
dwellings exceeding P1.0M
where the instrument of sale
was executed prior to
November 1, 2005 (subject to
10% output VAT)
VATable Sales of Real Properties
(contd.) Completed gift if the transferor
divests himself absolutely of
control over the property, i.e.
□ Pre-selling of real transfer
irrevocable estate of properties
corpus by
an/or
real estate irrevocable designation of
dealers
beneficiary
□ Transfer of property for sale, lease or
use in the ordinary course of trade or
business and the transfer constitutes
a completed gift - transfer is a
“deemed sale” and therefore VATable
VATable Sales of Real Properties
(contd.)
□ Sale of real property by a real estate
dealer on a deferred payment basis
(i.e. initial payments in the year of
sale exceed 25% of GSP) –
transaction treated as cash sales
which makes the entire selling price
taxable in the month of sale
VAT-Exempt Transactions in Real
Properties
□ Sale of real properties Housing
not primarily
projects intended
for homeless low-income
held for sale or lease to family
customers
beneficiaries,in
a
subdivision or a
the ordinary course ofcondominium
trade orregistered and
business; licensed by the (HLURB)
under BP Blg. 220, PD No.
□ Sale of real properties 957
utilized for
or any other similar law,
wherein the unit selling price
low-cost housing as defined byselling
is within the UDHA price
ceiling per unit of
1992 (RA 7279) and other related
P750,000.00 under RA 7279,
laws (RA 7835 & RA 8763); RA 7835 & RA 8763
VAT-Exempt Transactions in Real
Properties (contd)
□ Sale of residential lot not exceeding
P1.5M or residential house & lot not
exceeding P2.5M where the
instrument of sale (Deed of Absolute
Sale or Deed of Conditional Sale) was
executed on or after July 1, 2005
VAT-Exempt Transactions in Real
Properties (contd)
□ Sale of real properties utilized for
socialized housing as defined by
UDHA 1992 (RA 7279) and other
related laws (RA 7835 & RA 8763);
□ Lease of residential for
Refer to projects intended
units with
the underprivileged
monthly rental perand
unit of not
homeless more
undertaken
according to the
than P10,000 regardless
provisionsof the
of RA 7279,
amount of aggregate7835 rentals received
& 8763) wherein the
housing package selling
by the lessor during the
price year;
is P300,000 & below
VAT-Exempt Transactions in Real
Properties (contd)
□ Lease of residential units where the
monthly rental per unit exceeds Ten
Thousand Pesos (P10,000.00) but the
aggregate of such rentals of the
lessor during the year do not exceed
P1.5M subject to percentage tax
□ Commercial leases where the gross
receipts do not exceed P1.5M
A corporation is the lessor of a 16-door residential
apartment with a monthly rental as follows: 5 doors at
P8,000 each and 11 doors at P10,00 each. It incurred
P15,000 worth of VAT invoice expenses for repairs and
maintenance for February 2006. Compute VAT payable
for the month of February 2006.
Answer:
5 doors @ P8,000 x 12 months P 480,000 (exempt)
11 doors @ P10,000 x 12 months 1,320,000 (Vatable)
Annual Gross Income P1,800,000

February Output Vat (P10T x 11 units x 12/112)

P11,785.71
Less: Input VAT (70% of P11,785.71) 8,250.00
VAT payable for February 2006 P 3,535.71
========
Note: If the applicable input VAT is higher than the output VAT the
ceiling or the CAP of 70% shall be applied to the Output VAT.
Thus, the 30% shall be paid for the period. (BIR RR 16-2005).
VAT-Exempt Transactions in Real
Properties (contd)
□ Sales of real property to enterprises
duly registered and accredited with
Subic Bay Metropolitan Authority
(SBMA) pursuant to RA 7227 and
Philippine Economic Zone Authority
(PEZA);
VAT-Exempt Transactions in Real
Properties (contd)
□ Sales of real property to exempt
enterprises covered by international
agreements (e.g. Asian Development
Bank, International Rice Research
Institute, etc.)
NOTES:
□ Sales by real estate dealer
■ P1.5M and below – 3% tax on gross receipts
■ Above 1.5M – 12% VAT & expanded withholding
tax
□ Aggregate Income of Real Estate Broker
(w/in 12-month period
■ P1.5M & below – 3% tax on gross receipts
■ Above 1.5M – 12% VAT (required to register as
VAT taxpayer)
■ Gross commissions of RE brokers & their
salesmen are subject to 12% VAT
 SAMPLE
BOARD EXAM
QUESTIONS
TRUE OR FALSE
□ Amortization payments on a condominium unit
priced at P3million beginning January 1996 are
subject to E-VAT when the sale is on a deferred
payment basis.

□ FALSE (when sale is on installment basis)

□ House and lot packages with selling price of

P1.5 million and below are exempt from
payment of E-VAT.

□ TRUE
□ A real estate sale of P2 million by a
real estate dealer habitually engaged in
business is subject to both the E-VAT
and expanded withholding tax

□ TRUE
MULTIPLE CHOICE
□ The sale of a dealer of a residential
dwelling is not subject to E-VAT when
the price does not exceed:

⚪ P1,500,000.00 ⚪ P1,000,000.00
⚪ P2,500,000.00 ⚪ P3,000,000.00

□ P2,500,000
□ During the entire year of 2007, total receipts
from the lease of 30 residential units is
P2,200,000.00. How much is the output tax
for the year 2007?

⚪ P220,000.00 ⚪ P800,000.00
⚪ P264,000.00 ⚪ None of the above
⚪ P600,000.00

□ P 264,000
GENERAL REVIEW
□ If the property is an ordinary asset, what is the
applicable tax?

⚪ Capital gains tax

⚪ Percentage tax
⚪ Estate tax
⚪ Creditable withholding tax

□ Creditable withholding tax

□ A tax fixed on documents, instruments
and papers evidencing acceptance,
assignment or sale of a right, propety or
obligation:

□ Residence tax
□ Community tax
□ Documentary stamp tax
□ Value-added tax

□ Documentary stamp tax

□ A real estate property with license to sell and classified as
ordinary asset was sold for P2,200,000 inclusive of E-VAT. The
documentary stamp tax for the sale is

⚪ P33,000
⚪ 22,000
⚪ P30,000
⚪ P32,000

□ P30,000
Output Tax = P2,200,000 x 12/112 = P235,714.29
VAT-exclusive Price = P220,000 – P235,714.29 = P1,964,285.71
Documentary Stamp Tax = P1,964,285.71/ P1,000 = 1,964.29;
1,964 x 15 = P 29,460
P29,460 + 15 = P29,475 OR P30,000)
□ A real estate property with license to sell and classified
as ordinary asset was sold for P2,200,000 inclusive of
E-VAT. The creditable withholding tax for the sale is

⚪ P33,000
⚪ P60,000
⚪ P66,000
⚪ P110,000

□ P60,000 (3% tax based on selling price net of VAT

= P1,964,285.71 x 3% =P58,928.57 OR P60,000)
147