Short answer. Net profits are the increase in value of the community property — its market value at the dissolution of the regime, less its market value at the celebration of the marriage. It is a comparison of two valuations, not a tally of income earned during the marriage.
What the law says
the said profits shall be the increase in value between the market value of the community property at the time of the celebration of the marriage and the market value at the time of its dissolution
Family Code, Article 102 — Liquidating the Absolute Community. Read the full provision →
Two valuations, one subtraction
The formula the Code gives is deliberately simple. Take the market value of the community property at the celebration of the marriage. Take its market value at the dissolution of the regime. The increase in value between those two figures is the net profit. Nothing turns on tracing which spouse earned what, or on adding up salaries and business income over the years. The measure is the growth of the pool, taken at two points in time.
Why it is defined at all
The definition exists because certain provisions call for a share of net profits to be forfeited, and the article says so expressly: the computation is For purpose of computing the net profits subject to forfeiture in accordance with Articles 43, No. (2) and 63, No. (2). Without a stated formula, forfeiture of a share of profits would be an argument about accounting method in every case. The article removes that argument by fixing the method in advance.
What the formula does not do
It measures the increase in the community's value; it does not identify who caused it. A spouse who worked throughout the marriage and a spouse who did not are, on this formula, in the same position. It also means a community that ends worth less than it started produces no net profit to forfeit at all — the subtraction yields nothing to divide. That outcome follows from the text rather than from any judgement about the conduct of the marriage.
Where it fits in the liquidation
The formula sits inside the step dealing with the net remainder of the community property, which is otherwise divided equally between husband and wife unless the marriage settlements provided a different proportion or a valid waiver was made. Forfeiture operates on the profits so computed, not on the whole of a spouse's share. This is general information about how the Code defines the term, not advice on any particular liquidation or the grounds on which forfeiture may arise.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Brigido B. Quia vs. Rita C. Quiao, et al, G.R. No. 176556, July 4, 2012 — read the decision on LawPhil →
- Antonio A. S. Valdez vs. Rtc, Branch 102, Quezon City, et al, G.R. No. 122749, July 31, 1996 — read the decision on LawPhil →
- Lucila David and the Heirs of Rene F. Aguas, namely: Princess Luren D. Aguas, G.R. No. 241036, January 26, 2021 — read the decision on LawPhil →
- Noel Buenaventura vs. Court of Appeals, et al, G.R. No. 127358, March 31, 2005 — read the decision on LawPhil →
Related provisions
- Family Code, Article 102 — Liquidating the Absolute Community
- Family Code, Article 43 — Effects of Terminating a Subsequent Marriage
- Family Code, Article 63 — Effects of the Decree of Legal Separation