TAXATION 2

The two most common transactions subject to CGT are

• Sale of real property classified as a capital asset

• Sale of shares of stock not traded or listed on the Philippine Stock Exchange (PSE)

Capital Asset (Subject to CGT)

• Not used in business or trade

• Not included in inventory

Ordinary Asset (Not subject to CGT)

• Used in business or held for sale in the ordinary course

• Included in inventory or subject to depreciation

Real property

(land/buildings) is considered a capital asset unless it is used in business, held for sale, or included in inventory

CGT on Sale of Real Property (Capital Asset)

Tax Rate

6% of the higher of:

• Gross Selling Price (GSP)

• Fair Market Value (FMV)

• Zonal Value (BIR-assigned value)

Who pays

• Seller (individual or corporation), unless otherwise agreed in the contract

Deadline

File and pay within 30 days after the sale using BIR Form 1706 (for individuals) or 1707 (for corporations)

Where to pay:

Authorized Agent Bank (AAB) or Revenue Collection Officer (RCO) of the RDO where the property is located

CGT on Sale of Shares of Stock (Unlisted, Capital Asset) Tax Rate:

• 15% of net capital gain for individuals (resident or non-resident) and domestic corporations

• For foreign corporations: 5% on gains up to ₱100,000, 10% on excess

Exemptions

Sale of Principal Residence (Individuals Only)

You may be exempt from CGT on the sale of your principal residence if ALL these conditions are met

• Proceeds are fully used to acquire or build a new principal residence within 18 months from the sale

• Notify the BIR within 30 days from the sale of your intention to avail of the exemption

• Exemption can only be availed once every 10 years

• The historical cost of the old property is carried over to the new one

• Only the portion of the gain used for the new residence is exempted