Gains in

Dealings of
Properties
BAM 127: Income Taxation for BA
Module #11
 Gains in Dealings of
Properties
• The sale, exchange, and other
disposition of real property
capital assets in the Philippines
is subject to a tax of 6% of the
selling price or the fair value,
whichever is higher.
 Gains in Dealings of
Properties
• Under the NIRC, the fair value of the real
property is whichever is higher of the:
a. Zonal Value, which is the value
prescribed by the Commissioner of
Internal Revenue; and
b. Fair Market Value, as shown in the
schedules of market values of the
Provincial and City Assessors
 Gains in Dealings of
Properties
Illustration:
• Black Panther disposes a vacant lot for
P3,000,000. The lot has an Assessor’s fair
value of P2,800,000, a zonal value of
P3,200,000, and an appraisal value of
P3,500,000. What is the capital gains
tax?
 Gains in Dealings of
Properties
Highest between SP and FV P 3,200,000.00
Multiply by CGT Rate 6% ,
Capital Gains Tax P 192,000.00

General Rule: All sale, exchange or

disposition of real properties categorized
as capital asset is subject to 6%
Capital Gains Tax.
 Gains in Dealings of
Properties
Exceptions:
1. Properties outside the Philippines;
2. Properties held by Foreign Corporation – Regular
Income Tax;
3. Real properties of an individual sold to government –
Alternative Tax Rule
4.Exemptions under special laws;
4.1 Sale pursuant to CARP; and
4.2 Sale of Socialized Housing Units.
5. Sale of Residential House and Lot (NIRC)
 Gains in Dealings of
Properties
Requisites for the Exemption of Sale of Residential
House and Lot
1. Must be Resident of the Philippines (Citizen or Alien);
2. Must be the principal residence of the taxpayer;
3. Must utilized the proceeds to acquire a new principal
residence;
4. Must notify the BIR within 30 days;
5. Must be within 18 months after sale;
6. Must be availed only once in every 10 years; and
7. Must hold an escrow account in favor of the
government for the CGT.
 Gains in Dealings of
Properties
BIR Tax Clearance
No registration of any document
transferring real property shall be
effected by the Registry of Deeds unless
the Commissioner or his duly authorized
representative has certified that such
transfer has been reported and the
capital gains has been paid.
 Additional Info

Where can I find the capital gains law?

It’s under the National Internal Revenue Code of
the Bureau of Internal Revenue (BIR). The
sections dedicated to the capital gains law are
found under sections 24C, 24D, 27D(2), 27D(5),
28(A)(7)(c), 28(B)(5)(c), and 39A.
 Additional Info
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.
When to file
Capital Gain Tax Return is required to be filed
not later than thirty 30 days from the date of
taxable transaction.