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Capital Gains Tax

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.

CAPITAL GAINS TAX FOR ONEROUS TRANSFER OF REAL PROPERTY

CLASSIFIED AS CAPITAL ASSETS (TAXABLE AND EXEMPT)

Tax Form

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

Documentary Requirements

Processing and Issuance of Approved ONETT Computation Sheet

(OCS) of Tax Due On Sale of Real Property

Mandatory Requirements:

TIN of Seller/s and Buyer/s indicated in a duly accomplished

TIN Verification Slip

Notarized Deed of Absolute Sale/ Deed of Transfer/Deed of

Consolidation/ Deed of Assignment/ Sheriff’s Certificate of
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Sale/Final Order of the Court Confirming the Sale/ Deed of

Partition/Certificate of Award; [One (1) original copy and two (2)
photocopies]

Certified True Copy/ies of the Tax Declaration of Real Property

at the time or nearest to the date of the transaction issued by
the Local Assessor’s Office for land and improvement
applicable to the taxable transaction; [One (1) original copy
and one (1) photocopy]

Certified True Copy/ies of Original/ Transfer/ Condominium

Certificate/s of Title (OCT/TCT/CCT); [One (1) original copy and
one (1) photocopy]

Any of the following applicable document if the person

transacting/signing is not one of the parties to the Deed of
Transfer with a copy of Government -Issued ID (with date of
birth and photo) of the parties to the transaction and the
authorized representative: [One (1) original copy and two (2)
photocopies]
a. Notarized Special Power of Attorney (SPA), if representing
individual taxpayer/s; or
b. Secretary's Certificate or Board Resolution, if representing
non-individual taxpayer/s

Other Additional Requirements, if applicable:

Certificate of No Improvement issued by the Assessor’s Office, if

the declared properties have no improvement; [One (1) original
copy and one (1) photocopy]

PSA Certified true copy of Marriage Certificate/Contract, if

transferor is married; [One (1) original copy for validation only
and one (1) photocopy]

Certification from the Philippine Consulate, or Apostille, if the

DOAS and SPA were executed abroad; [One (1) original copy
and one (1) photocopy]

Location Plan/Vicinity map, if the Tax Declaration of the

property does not indicate the exact location of the property;
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Sworn Letter of Intent to avail of the tax exemption on sale of

principal residence indicating therein that such tax exemption
has not been availed for the immediately preceding ten (10)
years prior to sale – in case of sale of principal residence; [One
(1) original copy and one (1) photocopy]

Certificate of Residency, in case of sale of principal residence;

[One (1) original copy and one (1) photocopy]

Proof of Purchase of new residence, if the DOAS presented on

the sale of principal residence was notarized eighteen (18)
months ago and claiming for tax exemption on sale of principal
residence; [One (1) original copy and one (1) photocopy]

Sales Invoice/Official Receipts, if the real property is classified

as “ordinary asset”; [One (1) original copy and one (1)
photocopy]

Contract to Sell and Schedule of Payments, if the purchase

price is paid through installment/deferred manner; [One (1)
original copy and one (1) photocopy]

Any of the following documents if real property is for or under

“Socialized Housing Program”:
a. Approved Subdivision Plans for the subject real property,
with Certificate from the Department of Human Settlement
and Urban Development (DHSUD) that said plan pertains to
Socialized Housing Project; or
b. Certification from DHSUD that the seller is engaged in
socialized housing project and that the price of lot/housing
unit is within the price ceiling for Socialized Housing pursuant to
RA 7279; [One (1) original copy and one (1) photocopy]

Certification from National Home Mortgage Finance

Corporation (NHMFC) that the subject property qualified as a
CMP project, if property is under CMP; [One (1) original copy
and one (1) photocopy]

Certified True Copy of the Articles of Incorporation of the

Community Association, together with the Master List of its
members, if the real property under the Community Mortgage
Program (CMP); [One (1) original copy and one (1) photocopy]
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Proof that the transferee is qualified beneficiary based on the

documents submitted to the RDO by the CMP Association, if
real property is under CMP; [One (1) original copy and one (1)
photocopy]

Certificate of Exemption/BIR Ruling issued by the Commissioner

of Internal Revenue or his authorized representative, if claiming
tax exemption; [One (1) original copy and one (1) photocopy]

For Antedated Sales

Certified True Copy of Deed of Sale / Assignment / Exchange

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
[One (1) original copy and one (1) photocopy]

Processing and Issuance of Electronic Certificate Authorizing

Registration (eCAR) for Sale of Real Property

Mandatory Requirements:

Tax Returns filed with proof of payment such as: Revenue

Official Receipt (ROR); Duly Validated Bank Deposit Slip with
Certification from the Authorized Agent Bank (AAB) which
received the tax payment; Payment Confirmation/Reference
Number, if payment made thru e-Payment channel; Copy of
Tax Debit Memo used as payment; Certificate of Tax
Exemption; or Proof of eFiling if no payment returns; [One (1)
original copy and One (1) photocopy]

Proof of payment of Certification Fee and loose Documentary

Stamp Tax (all original copies)

Approved ONETT Computation Sheet (OCS) of Tax Due; [One (1)

original copy for validation only and One (1) photocopy]

Transfer document such as Deed of Absolute Sale, Deed of

Assignment etc.; [One (1) original copy for validation only and
One (1) photocopy]
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Any of the following applicable document, if the person

presenting is not the party who secured the OCS/ among the
parties to the transaction: [One (1) original copy and two (2)
photocopies]
a. Notarized Special Power of Attorney (SPA), if representing
individual taxpayer/s;
b. Secretary's Certificate or Board Resolution, if representing
non-individual taxpayer/s;
c. Certification from the Philippine Consulate, or Apostille, if
DOAS and SPA were executed abroad

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.

When and Where to File and Pay

The Capital Gains Tax Return (BIR Form No. 1706) shall be filed
electronically in any of the available electronic platforms [e.g., eBIR
Forms, tax returns filing application/solutions of Authorized
Taxpayer Service Providers (ATSPs)] and paid electronically through
the available ePayment Channels or manually through any
Authorized Agent Banks (AABs), Revenue Collection Officers (RCOs),
regardless of the Revenue District Office (RDO) which has
jurisdiction over the One-Time Transaction (ONETT), within thirty
(30) days following the sale, exchange or disposition of real
property.

When the return is filed with an AAB, taxpayer must accomplish and
submit BIR-prescribed deposit slip, which the bank teller shall Co-browse
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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.

The venue for the processing and issuance of eCAR, regardless of

where the tax return and the tax payments were made, shall be at
the RDO which has jurisdiction over the location of the property
subject of sale.

Taxpayers who will need BIR's assistance in the computation of tax

pertaining to ONETT are encouraged to proceed with the RDO
which has jurisdiction over the ONETT to secure approved ONETT
Computation Sheet.

For taxpayer’s convenience, the use of Electronic ONETT (eONETT)

System in the application for the issuance of OCS and eCAR may
be availed.

Tax Rate

For real property - 6%.

CAPITAL GAINS TAX FOR ONEROUS TRANSFER OF SHARES OF STOCKS NOT

TRADED THROUGH THE LOCAL STOCK EXCHANGE

Tax Form

BIR Form 1707 - Capital Gains Tax Return (For Onerous Transfer of
Shares of Stocks Not Traded Through the Local Stock Exchange)

Documentary Requirements

Processing and Issuance of Approved ONETT Computation Sheet

(OCS) of Tax Due On Sale of Shares of Stocks

Mandatory Requirements:

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TIN of Seller/s and Buyer/s indicated in a duly accomplished

TIN Verification Slip

Notarized Deed of Absolute Sale/ Deed of Transfer; [One (1)

original copy and two (2) photocopies]

Stock Certificate; [One (1) original copy and One (1) photocopy]

Proof of acquisition cost (any of these documents- Deed of

Sale, Previous eCAR issued, Copy of SEC Registration,
Subscription Agreement); [One (1) original copy and One (1)
photocopy]

Proof of valuation of shares of stock: [One (1) original copy and

One (1) photocopy]– any of the following:
a. if stock is not listed or traded – Latest Audited Financial
Statements of Issuing corporation with computation of book
value per share;
b. If stock is listed/traded – Price index from the PSE/latest FMV
as published in the newspaper at the time of transaction;
c. For club share- Price published in newspapers on the
transaction date or nearest to the transaction date

Any of the following applicable document if the person

transacting/signing is not one of the parties to the Deed of
Transfer with a copy of Government-Issued ID (with date of
birth and photo) of the parties to the transaction and the
authorized representative: [One (1) original copy and two (2)
photocopies]
a.) Notarized Special Power of Attorney (SPA), if representing
individual taxpayer/s
b.) Secretary's Certificate or Board Resolution, if representing
non-individual taxpayer/s

Other Applicable Documents:

PSA Certified true copy of Marriage Certificate/Contract, if

transferor is married; [One (1) original copy for validation only
and One (1) photocopy]

Proof of DST paid on original issuance, if the shares of stock

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One (1) photocopy]

Proof of claimed deductions such as official receipt and/or

invoices, if claiming expenses/deductions; [One (1) original
copy and one (1) photocopy]

Certification from the Philippine Consulate, or Apostille, if

Transfer Document and SPA were executed abroad; [One (1)
original copy and One (1) photocopy]

Certificate of Exemption/BIR Ruling issued by the Commissioner

of Internal Revenue or his authorized representative, if claiming
tax exemption [One (1) original copy and One (1) photocopy]

Certified True Copy of Deed of Sale / Assignment / Exchange

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
[One (1) original copy and one (1) photocopy]- applicable for
Antedated Sales

Processing and Issuance of Electronic Certificate Authorizing

Registration (eCAR) for Sale of Shares of Stocks

Mandatory Requirements:

Tax Returns filed with proof of payment such as: Revenue

Official Receipt (ROR); Duly Validated Bank Deposit Slip with
Certification from the Authorized Agent Bank (AAB) which
received the tax payment; Payment Confirmation/Reference
Number, if payment made thru e-Payment channel; Copy of
Tax Debit Memo used as payment; Certificate of Tax
Exemption; or Proof of eFiling if no payment returns; [One (1)
original copy and One (1) photocopy]

Proof of payment of Certification Fee and loose Documentary

Stamp Tax (all original copies)

Approved ONETT Computation Sheet (OCS) of Tax Due; [One (1)

original copy for validation only and One (1) photocopy]

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Transfer document such as Deed of Absolute Sale, Deed of

Assignment etc.; [One (1) original copy for validation only and
One (1) photocopy]

Any of the following applicable document, if the person

presenting is not the party who secured the OCS/ among the
parties to the transaction: [One (1) original copy and two (2)
photocopies]
a. Notarized Special Power of Attorney (SPA), if representing
individual taxpayer/s;
b. Secretary's Certificate or Board Resolution, if representing
non-individual taxpayer/s;
c. Certification from the Philippine Consulate, or Apostille, if
DOAS and SPA were executed abroad

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.

When and Where to File and Pay

The Capital Gains Tax Return (BIR Form No. 1707) shall be filed
electronically in any of the available electronic platforms [e.g., eBIR
Forms, tax returns filing application/solutions of Authorized
Taxpayer Service Providers (ATSPs)] and paid electronically through
the available ePayment Channels or manually through any
Authorized Agent Banks (AABs), Revenue Collection Officers (RCOs),
regardless of the Revenue District Office (RDO) which has
jurisdiction over the One-Time Transaction (ONETT), within thirty
(30) days after each sale, barter, exchange or other disposition of
shares of stock not traded through the local stock exchange.

When the return is filed with an AAB, taxpayer must accomplish and
submit BIR-prescribed deposit slip, which the bank teller shall Co-browse
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6/24/25, 1:31 PM Bureau of Internal Revenue

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.

The venue for the processing and issuance of eCAR, regardless of

where the tax return and the tax payments were made, shall be at
the RDO which has jurisdiction over the residence of the seller.

Taxpayers who will need BIR's assistance in the computation of tax

pertaining to ONETT are encouraged to proceed with the RDO
which has jurisdiction over the ONETT to secure approved OCS.

For taxpayer’s convenience, the use of Electronic ONETT (eONETT)

System in the application for the issuance of OCS and eCAR may
be availed.

Tax Rates

Current rate

Taxpayer Tax Legal Effectivity

type rate basis date

Individual 15% R.A. No. January 1,

10963 or 2018 to

Domestic TRAIN present

Corporation Law

Foreign 15% R.A. No. April 11,

Corporation 11534 or 2021 to

CREATE present

Law

Old rate

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Taxpayer type Tax rate Legal basis Effectivity date

Individual Not over R.A. No. 8424 or January 1, 1998 to

₱100,000.00 NIRC of 1997 December 31, 2017
Domestic - 5%
Corporation On any
amount in
Foreign excess of
January 1, 1998 to
Corporation ₱100,000.00
April 10, 2021
- 10%

ANNUAL CAPITAL GAINS TAX FOR ONEROUS TRANSFER OF SHARES OF

STOCKS NOT TRADED THROUGH THE LOCAL STOCK EXCHANGE

Tax Form

BIR Form 1707A - 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

Current rate

Taxpayer Tax Legal Effectivity

type rate basis date

Individual 15% R.A. No. January 1,

10963 or 2018 to
TRAIN present
Law
Domestic
Corporation
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Foreign 15% R.A. No. April 11,

Corporation 11534 or 2021 to

CREATE present

Law

Old rate

Taxpayer type Tax rate Legal basis Effectivity date

Individual Not over R.A. No. 8424 or January 1, 1998 to

₱100,000.00 NIRC of 1997 December 31, 2017
Domestic - 5%
Corporation On any
amount in
Foreign excess of
January 1, 1998 to
Corporation ₱100,000.00
April 10, 2021
- 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

RELATED REVENUE ISSUANCES

Revenue Regulations (RR) Nos. 2-1998, 8-1998, 4-1999, 13-1999,

07-2003, 3-2017, 30-2003, 4-2008, 6-2008, 5-2009, 6-2013, 6-
2014, 11-2018, 2-2021, 2-2021, 5-2021, 4-2024

Revenue Memorandum Order (RMO) No. 15-2003

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Revenue Memorandum Circular (RMC) No. 50-2003, 43-2018, 107-

2018, 56-2024

OPM-AS-APMD 2017-06-06

OPM-AS-APMD 2017-06-01

OM 41-2023

CODAL REFERENCE

Section 7 of Republic Act (RA) No. 11534 or Corporate Recovery

and Tax Incentives for Enterprises Act (CREATE Law) amending
Section 28 of the National Internal Revenue Code (NIRC) of 1997,
as amended

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

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

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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?

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

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

Current rate

Taxpayer Tax Legal Effectivity

type rate basis date

Individual 15% R.A. No. January

10963 1, 2018 to
or present
Domestic
TRAIN
Corporation
Law

Foreign 15% R.A. No. April 11,

Corporation 11534 or 2021 to
CREATE present
Law

Old rate

Taxpayer type Tax rate Legal basis Effectivity

date

Individual Not over ₱100,000.00 R.A. No. 8424 or January 1, 1998

- 5% NIRC of 1997 to December
Domestic 31, 2017
On any amount in
Corporation
excess of ₱100,000.00

Foreign Corporation - 10%

January 1, 1998
to April 10,
2021

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

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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
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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?

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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.

Copyright © Bureau of Internal Revenue.

All Rights Reserved

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