Capital Gains Tax

 

Capital Gains Tax ( for real property – 6% ); is payable within 30 days after each sale, exchange, transfer or other disposition of real property.  On installment sales wherein both Seller/Developer and Buyer have agreed on a long term basis ( 30 days or more ), Capital Gains Tax is payable upon receipt of 24% of total contract price. Take note that failure to pay Capital Gains Tax on the prescribed date results in penalty surcharge.

Documentary Stamps Tax ( for real property – 1.5% )  is payable within five (5) days after the close of the month when the taxable document was made signed, issued, accepted or transferred.

The value of the real property will be based on the selling price, fair market value as determined by the Commissioner (zonal value) or the fair market value as shown in the schedule of values of the Provincial or City Assessor, whichever is higher.

If there is no zonal value, the taxable base is whichever is higher of the gross selling price per sales documents or the fair market value that appears in the latest tax declaration.

Case Study :

A recent transaction in Metro Manila on a sale of a real property was done in January 2015.  The Buyer paid 50% down payment and the full balance  in 120 days.  Upon receipt of the 50% down payment, the Capital Gains Tax was paid and receipt of payment was also received by the bank.  Since there was no Deed of Absolute Sale yet and only a Contract to Sell, the sale could not be filed yet with the Bureau of Internal Revenue.

Sixty days into the transaction, the Zonal Value of that particular Revenue District office went up by 50% which naturally alarmed the Seller. Upon verification with the corresponding Revenue District  office where the property was located, it was ruled that the basis of Zonal Value on a Sale is when the Deed of Absolute Sale is “notarized” and  submitted to the Bureau of Internal Revenue.

Now this is an important ruling that everyone needs to be aware of as it used to be that the  Bureau of Internal Revenue accepted the Zonal Value based on the date the Contract to Sell was made specially when the Capital Gains Tax and Documentary Stamp Tax were both already paid.  This also applies to installment payments wherein 24% of the contract amount is already paid by the Buyer to the Seller.

NET EFFECT – now the Seller/Developer has to pay the difference on the “New Zonal Value” and the “Old Zonal Value”. Quite a revision !!!  The bigger issue is who shoulders the difference. 

Also, please take note that on the fine line of a Contract to Sell, particularly Condominiums,  some developers pass on the Creditable Withholding Tax and Value Added Tax to the Buyer. In addition, some developers also pass on the payment of the Real Estate Taxes due on the land of the Mother Title of the Condominium to the Buyer which should really be for the Developer’s Account.

Note:   Capital Gains Tax, Transfer Tax and any other expenses related to the sale of Camella Homes house and lot are already included in the selling price.  All for the account of the developer. The only expense that the buyer has to pay, is the water and electric meter prior to move-in.