For citizens, resident aliens, and non-resident aliens (both engaged or not engaged in business), as follows:
- Sale, exchange or other disposition of real property located in the Philippines considered as capital asset:
- TRANSACTIONS AFFECTED – Sale or exchange or other disposition of real property located in the Philippines held as capital asset. Sale shall include “pacto de retro” sale and other conditional sales.
- PERSONS LIABLE TO THE TAX:
A. Every individual and domestic corporation
B. Estate and trust
RATE OF TAX – The final capital gain tax is 6% based on the gross selling price or fair market value of the property at the time of the sale, whichever is higher.
ALTERNATIVE TAXATION – In case of sale or other disposition of real property located in the Philippines held as capital asset by an individual to the Government or any of its political subdivisions or agencies or to a government owned or controlled corporation, the tax shall be either the capital gains tax of 6% or the graduated rates of 5% to 32%, at the option of the taxpayer.
GROSS SELLING PRICE – Means the amount of any money received plus the fair market value of property (other than money) received. Interest included in installment shall not form part of the amount realized but shall be treated as ordinary income.
PAYMENT OF TAX IN INSTALLMENT – The tax maybe paid in installment basis if the initial payments do not exceed 25% of the selling price.
FILING OF RETURN AND PAYMENT OF TAX
A. Cash sale – capital gains tax return is filed and payment of the tax is made within 30 days following each sale, exchange or other disposition of real property capital asset by the seller.
B. Installment sale – capital gains tax return shall be filed and the tax paid within 30 days following the receipt of such installment payment by the seller. The date shown in the instrument of sale shall be presumed to be the date of actual receipt unless the contrary is shown by the seller.
EXCEPTION FROM THE TAX – Requisites:
A. Seller is a natural person (individual);
B. Real property sold is his principal residence;
C. Proceeds of the sale is fully utilized in acquiring or constructing a new principal residence within 18 calendar months from the date of sale. Otherwise, any unused portion shall be subject to the capital gains tax, as follows:
Gross selling price or FMV at date of sale, whichever is higher
|Unutilized amount||= Taxable portion|
|x Gross selling price|
D. The BIR is duly notified of the taxpayer’s intention to avail of the tax exemption within 30 days from the date of sale through a prescribed return;
E. The tax exemption can only be availed of once every 10 years; and
F. The historical cost or adjusted basis of the real property (principal residence) sold shall be carried over to the new principal residence built or acquired.
JONATHAN RUIZ CPA, MIB