When you sell real property in the Philippines classified as a capital asset, the sale is subject to a 6% capital gains tax and a documentary stamp tax of ₱15 for every ₱1,000 (about 1.5%), both computed on the higher of the selling price, the BIR zonal value, or the fair market value. The capital gains tax return is filed within 30 days of the sale, and the documentary stamp tax by the fifth day of the following month.
Before a sold property can be transferred to the buyer, the Bureau of Internal Revenue (BIR) must be paid. Two taxes dominate a typical sale of a house, lot, or condominium: the capital gains tax and the documentary stamp tax. This commentary explains how each is computed, when it is due, who pays, and why the process ends at the BIR before it can continue at the Registry of Deeds.
Capital Gains Tax: 6% on Capital Assets
Capital gains tax (CGT) is a final tax of 6% on the sale, exchange, or disposition of real property located in the Philippines that is classified as a capital asset — property not used in trade or business, such as a family home, an inherited lot, or idle land. The 6% is computed on the higher of the gross selling price, the BIR zonal value, or the fair market value in the assessor’s schedule of values. It is reported on BIR Form 1706, and by law it is the seller’s tax, although parties may agree otherwise.
A key distinction: property held as an ordinary asset — for example by a real-estate dealer or developer, or property used in business — is not subject to the 6% CGT. Instead it is subject to creditable withholding tax and regular income tax, and possibly VAT.
Documentary Stamp Tax
The documentary stamp tax (DST) on a deed of sale or conveyance of real property is ₱15 for every ₱1,000 (or fractional part) of the tax base — roughly 1.5% — again computed on the higher of the consideration or the fair market value. It is reported on BIR Form 2000-OT.
The Deadlines
The two taxes have different due dates, and both are strict:
- Capital gains tax: filed and paid within 30 days following the sale, using BIR Form 1706.
- Documentary stamp tax: filed and paid on or before the fifth day of the month following the month the deed was signed and notarized, using BIR Form 2000-OT.
Missing these deadlines results in a surcharge (25% or 50%), interest, and compromise penalties, so the taxes should be arranged as soon as the deed is notarized.
Getting the eCAR: the Key to Transferring Title
Once the CGT and DST are paid and the documents submitted, the BIR issues an electronic Certificate Authorizing Registration (eCAR). Without the eCAR, the Registry of Deeds will not cancel the seller’s title or issue a new one to the buyer. The buyer must also pay the local transfer tax to the provincial or city treasurer and the registration fees at the Registry of Deeds to complete the transfer.
Who Pays What, and the Home Exemption
By default, the seller shoulders the CGT while the buyer commonly pays the DST, transfer tax, and registration fees — but this is a matter of agreement and can be reversed in the contract. There is also an important relief: the sale of a taxpayer’s principal residence can be exempt from the 6% CGT if the entire proceeds are used to acquire or build a new principal residence within 18 months, the BIR is notified within 30 days of the sale, and the exemption has not been used in the last 10 years. Any unused portion of the proceeds is taxed.
Frequently Asked Questions
Who pays the capital gains tax when selling property? By law the 6% capital gains tax is the seller's liability, though the parties may agree on who shoulders it. The buyer commonly pays the documentary stamp tax, transfer tax, and registration fees, but this too is a matter of agreement.
How is the 6% capital gains tax computed? It is 6% of the highest among the gross selling price, the BIR zonal value, and the fair market value in the assessor's schedule of values. It is a final tax, filed within 30 days of the sale using BIR Form 1706.
What is the documentary stamp tax on a property sale? The documentary stamp tax on a deed of sale is 15 pesos for every 1,000 pesos of the tax base, roughly 1.5%, based on the higher of the price or fair market value, filed using BIR Form 2000-OT.
Can I avoid capital gains tax when selling my home? The sale of your principal residence can be exempt if you use the entire proceeds to buy or build a new principal residence within 18 months, notify the BIR within 30 days of the sale, and have not used the exemption in the last 10 years.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you are selling or buying property and want the taxes and title transfer handled correctly, our firm can guide you through the BIR and Registry of Deeds. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.