Tax Rules on Real Property Transactions

Section 2 imposes a final tax rate of 6% on capital gains presumed to have been realized by the seller from the sale, exchange or other disposition of real properties in the Philippines classified as capital assets.
Section 2 covers pacto de retro sales and other forms of conditional sales, when determined under the gross selling price or fair market value framework.
Section 2 requires determining the tax base using the gross selling price or fair market value, whichever is higher, with fair market value determined in accordance with Section 6(E) of the Tax Code of 1997 (including the authority of the Commissioner to prescribe real property values).
Section 2 provides an option where the disposition is made by individuals to the government, any of its political subdivisions or agencies, or government-owned or -controlled corporations.
Section 2 states that in such government-related dispositions, the taxpayer chooses either:
- the normal income tax rate under Section 24(A), or
- the final capital gains tax of 6% under Section 24(D)(1).

Section 3 requires that the Capital Gains Tax Return be filed within 30 days following each sale or disposition.
Section 3 requires the seller to file the return and make payment.
Section 3 requires payment to be made to an Authorized Agent Bank (AAB) located within the Revenue District Office (RDO) having jurisdiction over the place where the property being transferred is located.

Section 4 imposes a creditable withholding tax on the sale, transfer or exchange of real property classified as an ordinary asset.
Section 4 bases the creditable withholding tax on the gross selling price/total amount of consideration or the fair market value determined under Section 6(E) of the Tax Code of 1997, whichever is higher.
Section 4 provides that the creditable withholding tax is imposed upon the withholding agent/buyer.
Section 4 provides the applicable withholding-rate schedule depending on whether the seller/transferor is habitually engaged in real estate business (shown by proof of registration with the HLURB or HUDCC).
Section 4 requires applying the following withholding rates:
- 1.5% if selling price is P 500,000.00 or less (habitually engaged in real estate business);
- 3.0% if selling price is more than P 500,000.00 but not more than P 2,000,000.00 (habitually engaged in real estate business);
- 5.0% if selling price is more than P 2,000,000.00 (habitually engaged in real estate business);
- 7.5% if the seller/transferor is not habitually engaged in real estate business;
- Exempt if the seller/transferor is exempt from creditable withholding tax under Section 2.57.5 of Revenue Regulations No. 2-98.

Section 5 requires that creditable withholding taxes deducted and withheld be paid by the withholding agent/buyer upon filing of the return with an AAB.
Section 5 requires the AAB to be located within the RDO having jurisdiction over the place where the property being transferred is located.
Section 5 requires payment within 10 days following the end of the month in which the transaction occurred.
Section 5 requires taxes withheld in December to be filed on or before January 25 of the following year.

Section 6 requires that, upon presentation of the relevant return with bank validation evidencing full payment, the RDO shall issue the required authority for registration.
Section 6 requires presentation of the Capital Gains Tax Return or the Creditable Withholding Tax Return.
Section 6 requires accompanying bank validation evidencing full payment of the applicable capital gains tax or creditable withholding tax due.
Section 6 covers due taxes for the sale, transfer, barter, exchange or other disposition of real property classified as capital or ordinary assets, as the case may be.
Section 6 authorizes the Revenue District Officer (RDO) of the revenue district where the property being transferred is located to issue:
- a Tax Clearance (TCL) for registration for capital or ordinary assets transactions, or
- a Certificate Authorizing Registration (CAR) for registration.

Section 7 repeals, amends, or modifies any provisions of revenue regulations, revenue memorandum orders, revenue memorandum circulars, or any other BIR issuance inconsistent with these Regulations.
Section 8 provides that these Regulations take effect 15 days after publication in any newspaper of general circulation.
Adopted: 25 Aug. 1998.
Section 8 implements effectivity only after the required publication and the 15-day post-publication period.
The Regulations bear the signature of the Secretary of Finance, with recommendation for approval by the Commissioner of Internal Revenue.