When a person sells real property in the Philippines that is not used in a trade or business, the government takes a slice of the sale as capital gains tax on the seller, and the deed will not move at the registry until the tax has been paid and cleared. This page covers the capital gains side of that transaction; the documentary stamp tax on the deed itself is a separate obligation, treated on its own page.
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Compute the tax at six percent of the higher of gross selling price or fair market value
A final tax of six percent (6%) is imposed on the capital gains presumed to have been realized from the sale, exchange or other disposition of real property located in the Philippines that is classified as a capital asset. The base is the gross selling price or the current fair market value as determined by the Commissioner, whichever is higher.
Republic Act No. 8424, the National Internal Revenue Code of 1997, Section 24. Read the source →
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File the capital gains tax return within thirty days of each sale
The person liable for the tax on the sale of real property classified as a capital asset shall file a return within thirty days following each sale or other disposition. Each transaction is its own filing; a return that lumps several sales together is not what the Code contemplates.
Republic Act No. 8424, the National Internal Revenue Code of 1997, Section 24. Read the source →
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Pay through an authorized agent bank
Payment of the tax accompanies the return and goes through an authorized agent bank of the revenue district that has jurisdiction over the taxpayer, or where no bank is authorised there, through the Revenue District Officer or Revenue Collection Officer of that district.
Republic Act No. 8424, the National Internal Revenue Code of 1997, Section 56. Read the source →
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Understand the registry checkpoint
No registration of any document transferring real property will be effected by the Register of Deeds unless the Commissioner or a duly authorized representative has certified that the transfer has been reported and the capital gains tax or creditable withholding tax, if any, has been paid. This is the checkpoint at which the transfer certificate of title cannot move without a clearance from the tax authority. The certification lists the information required by regulation, and the Register of Deeds annotates the transfer on the new title.
Republic Act No. 8424, the National Internal Revenue Code of 1997, Section 58. Read the source →
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Claim the principal-residence exemption only if you meet all four conditions
A narrow exemption exists where the property sold is the seller's actual principal residence and the proceeds are fully used to acquire or construct a new principal residence within eighteen calendar months of the date of sale. Notice of intent to claim the exemption must reach the Commissioner within thirty days from the date of sale through a prescribed return, the historical cost of the property sold carries over to the new residence, and the exemption may be claimed only once every ten years. Partial reinvestment produces a partial exemption in the proportion actually reinvested.
Republic Act No. 8424, the National Internal Revenue Code of 1997, Section 24. Read the source →
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Know the penalty for filing or paying late
Failure to file on the prescribed date, filing with the wrong internal revenue officer, or failing to pay the tax when due, triggers a surcharge of twenty-five percent (25%) of the amount due. Willful neglect to file, or a false or fraudulent return, raises the surcharge to fifty percent (50%) of the tax or of the deficiency tax.
Republic Act No. 8424, the National Internal Revenue Code of 1997, Section 248. Read the source →
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Interest also runs on any unpaid amount
Unpaid amounts additionally carry interest at the rate of double the legal interest rate for loans or forbearance of any money in the absence of an express stipulation as set by the Bangko Sentral ng Pilipinas, from the date prescribed for payment until the amount is fully paid.
Republic Act No. 10963 (TRAIN), amending the NIRC, Section 249. Read the source →
The registry checkpoint is what makes the tax practically unavoidable — the buyer cannot get a clean title until the seller's capital gains tax has been cleared, so the tax is what the closing settles around. If the sale is of a principal residence and you intend to rely on the exemption, plan the notice and the reinvestment before signing the deed; the exemption is narrow and the notice deadline is strict.