Capital Gains Tax and BIR Form 1706

One thing you have to remember about the disposition or transfer of real estate in the Philippines is Capital Gains Tax. It is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.

Within 30 days after the sale, exchange, transfer or other disposition of real property, remember that you are required to file BIR Form 1706 entitled Final Capital Gains Tax Return (For Onerous Transfer of Real Property Classified as Capital Assets -Taxable and Exempt, and pay the tax amounting to 6 percent of the net capital gain based on the selling price, fair market value or zonal value, whichever is higher.

In filing the return, the following documents are required to be attached:

1. One original copy and one photocopy of the Notarized Deed of Sale or Exchange
2. Photocopy of the Transfer Certificate of Title; Original Certificate of Title; or Condominium Certificate of Title
3. Certified True Copy of the tax declaration on the lot and/or improvement during nearest time of sale
4. “Certificate of No Improvement” issued by the Assessor’s office where the property has no declared improvement, if applicable or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees
5. Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable
6. Duly approved Tax Debit Memo, if applicable
7. “Sworn Declaration of Interest” as prescribed under Revenue Regulations 13-99, if the transaction is tax-exempt
8. Documents supporting the exemption

For more information, visit this page of the BIR website. You may also download BIR Form 1706 here.