Question & AnswerQ&A (REVENUE REGULATIONS NO. 14-2000)
The scope covers the collection of capital gains tax, if any, presumed from the sale, exchange, or disposition by a natural person of his "Principal Residence," to streamline and make efficient the collection as provided under Section 244 in relation to Section 24(D) of the National Internal Revenue Code of 1997.
"Principal Residence" refers to the dwelling house, including the land on which it is situated, where the husband and wife or an unmarried individual and members of his family reside. Temporary absence due to travel, studies, work abroad, or similar circumstances does not mean abandonment. The residence must have permanency and the intention to return.
Only the dwelling house owned by the individual shall be treated as the Principal Residence entitled to exemption from capital gains tax, unless both the landowner and dwelling owner actually reside there, in which case both are treated as Principal Residence.
The property is treated as the Principal Residence only to the extent of the proportionate share of those co-owners actually occupying the property as their Principal Residence. Others who do not occupy will not get the capital gains tax exemption.
The residential address shown in the latest income tax return filed by the vendor immediately preceding the date of sale shall be conclusive of his true residential address for the regulations' purposes, despite any contrary certification from Barangay Chairman or Building Administrator.
Conditions include: (1) Depositing the tax amount under an Escrow Agreement with an AAB for up to 18 months; (2) Filing the Capital Gains Tax Return within 30 days from the sale; (3) Post reporting compliance to prove use of proceeds for a new Principal Residence within 18 months; (4) Exemption can only be availed once every 10 years; (5) Compliance with documentary requirements.
It is an agreement between the Revenue District Officer, Seller/Transferor, and the Authorized Agent Bank where the six percent capital gains tax is deposited in an interest-bearing account and released only upon certification that the proceeds have been used to acquire or construct a new Principal Residence within 18 months.
Documents include: proof of documentary stamp tax payment; sworn statement from Barangay Chairman or Building Administrator; duplicate deed of conveyance; certified xerox copy of Transfer Certificate of Title or Condominium Certificate; certified xerox copy of latest Tax Declaration; and Building or Occupancy Permit if constructed on or after 1990.
The seller/transferor will be assessed for deficiency capital gains tax with 20% interest per annum. The escrowed tax money plus interest will be applied against the deficiency tax. If insufficient, the taxpayer remains liable for the balance.
The tax exemption may only be availed once every ten (10) years.
Any Barangay Chairman or Building Administrator who falsely certifies the property as the Principal Residence when it is not, shall be punished under the penalty of perjury, at the court's discretion.
Any other violation may result in a fine of not more than One Thousand Pesos (P1,000.00), or imprisonment of not more than six (6) months, or both, at the discretion of the court, as provided by Section 275 of the Tax Code.
Compliance with the preliminary conditions for exemption under Sec. 3(1) (Escrow Agreement) and (2) (filing Capital Gains Tax Return) is sufficient basis for the RDO to issue the CAR or TCL stating the sale is exempt from capital gains tax subject to post-reporting compliance.
The historical or adjusted cost basis of the old Principal Residence sold shall be carried over as the cost basis of the new Principal Residence.