TAXES INVOLVING LOT

ACQUISITION
 CAPITAL GAINS TAX (CGT)
 CREDITABLE WITHHOLDING TAX (CWT)
 VALUE-ADDED TAX (VAT)
 DOCUMENTARY STAMP TAX (DST)
CAPITAL GAINS TAX
- SALE ON CAPITAL ASSET -
CAPITAL GAINS TAX

 A tax that is imposed on earnings the seller has gained

from the sale of capital assets. It is charged at a flat tax
rate of 6% of the gross selling price, and must be paid
within 30 days after each transaction.
CAPITAL ASSET

 Means property held by the taxpayer under Sec.

39(A)(1) of NIRC, but does not include-
a) stock in trade of the taxpayer or other property of a kind which
would properly be included in the inventory if on hand at the close
of the taxable year;

b) property held by the taxpayer primarily for sale to customers in the

ordinary course of his trade or business;

c) property used in the trade or business of a character which is

subject to the allowance for depreciation provided in Subsection
(F) of Sec. 34 of the Code;

d) real property used in trade or business of the taxpayer.

ORDINARY ASSET

 Refers to all properties specifically excluded from the

definition of capital assets under Sec. 39(A)(1) of the
Code.
CAPITAL ASSET VS. ORDINARY ASSET

 CAPITAL GAINS TAX / DOCUMENTARY STAMP TAX

- Capital Asset

 CREDITABLE WITHHOLDING TAX / DOCUMENTARY STAMP

TAX
- Ordinary Asset
WHO ARE CONSIDERED ENGAGED IN
REAL ESTATE BUSINESS?

 A taxpayer whose primary purpose is engaging in business , or

whose Articles of Incorporation states that’s its primary purpose is
to engage in real estate business (real estate dealers, real estate
developers or real estate lessors)
WHO ARE THOSE REAL ESTATE:
DEALER
any person engaged in
buying and selling or
exchanging real properties
and holding himself out as a
full or part-time dealer in
real estate
DEVELOPER
any person engaged in the
business of developing real
properties into subdivisions,
or building houses on
subdivided lots, or
constructing residential or
commercial units,
townhouses, and other
similar units, and offering
them for sale or lease
LESSOR
any person engaged in the
business of leasing or renting
real properties and holding
himself out as a lessor of real
properties being rented out
or offered for rent
WHO PAYS FOR THE CAPITAL GAINS TAX?

 It is always the SELLER who pays for the Capital Gains Tax and not
the buyer, as long as the seller is not engaged in the real estate
business. Otherwise, the property sold would be considered as an
ordinary asset, making the seller not eligible to pay CGT.
TAX BASE

Whichever is higher between:

1. Gross Selling Price

2. Fair Market Value (FMV)

a. FMV as determined by the Commissioner or Zonal Value

b. FMV as shown in the schedule of values of the Provincial and City Assessor
HOW DO YOU CALCULATE CAPITAL
GAINS TAX?

Example:

A 200 square meter residential lot in Cebu City is being put up for sale for P3,000,000.00.
The owner is a person not engaged in the real estate business. The property’s Gross Selling
Price is higher than its Fair Market Value as determined by the City Assessor or by the
Bureau of Internal Revenue’s Zonal Value, thus, it will be used as the base for computing
the Capital Gains Tax, which is 6% of its gross selling price.
CREDITABLE
WITHHOLDING TAX
- SALE ON ORDINARY ASSET -
CREDITABLE WITHHOLDING TAX

 A tax which is withheld by the buyer/ withholding agent

from his payment to the seller for the sale of the seller’s
ordinary asset or services, and which tax is creditable
against the income tax payable of the seller.

 Must be paid on or before the 10th of the following

month from the date of transaction
WITHHOLDING TAX RATE

 Under the tax rules, the following are the percentages to be

withheld:

1.5% with a selling price of P500,000.00 or less

3% with a selling price of more than P500,000.00 but not more than P2,000,00.00

5% with a selling price of more than P2,000,000.00

6% where the seller / transferor is not habitually engaged in the real estate
business
THE SELLER IS HABITUALLY ENGAGED WHEN:

 Seller is registered with HLURB or HUDCC

 If not registered, show proof that the seller is engaged

in real estate business, such as:

 consummation of at least 6 taxable real estate

transactions, regardless of amount in the preceding year
HOW DO YOU CALCULATE CREDITABLE
WITHHOLDING TAX?

Example:

A 200 square meter residential lot in Cebu City is being put up for sale for 2,100,000.00.
The owner is engaged in the real estate business. The property’s Gross Selling Price is
higher than its Fair Market Value as determined by the City Assessor or by the Bureau of
Internal Revenue’s Zonal Value, thus, it will be used as the base for computing the
Creditable Withholding Tax.
5% with a selling price of more than
P2,000,000.00
VALUE-ADDED TAX
- IN RELATION TO CGT AND CWT -
WHEN IS THE SALE OF PROPERTY SUBJECT TO
VAT?

 If the seller is VAT-registered, the sale of his/her ordinary

asset shall be subject to VAT

Note: Compared to a capital asset subject to 6% CGT, an

ordinary
asset will be subject to CWT of as high as 6% plus
12% VAT
 WHEN IS THE SALE OF PROPERTY SUBJECT TO
VAT?

 In determining the transactions subject to VAT, the following

threshold must be considered:

2017 2018 2021

Residential vacant lot P1,919,500.00 and P1,500,000.00 and
below below
Residential house & lot P3,199,200.00 and P2,500,000.00 and
below below
Residential condominium P3,199,200.00 and P2,500,000.00 and
unit below below

Commercial properties are subject to VAT

HOW DO YOU CALCULATE CREDITABLE
WITHHOLDING TAX WITH VAT?

Example:

A 200 square meter residential lot in Cebu City is being put up for sale for P4,000,000.00.
The owner is engaged in the real estate business. The property’s Gross Selling Price is
higher than its Fair Market Value as determined by the City Assessor or by the Bureau of
Internal Revenue’s Zonal Value, thus, it will be used as the base (net of VAT) for
computing the Creditable Withholding Tax.
DOCUMENTARY STAMP TAX
DOCUMENTARY STAMP TAX

 A tax on documents, instruments, loan agreements and

papers evidencing the acceptance, assignment, sale or
transfer of an obligation, right or property incident thereto

 In the case of the sale of real estate properties, the rate

shall be 1.5% based on the highest among the (1) Selling
Price, (2) BIR zonal value, and (3) assessed value by the
city assessor

 Must be paid within 5 days after the close of the taxable

month when the document was made, signed, accepted
or transferred
HOW DO YOU CALCULATE DOCUMENTARY
STAMP TAX?

Example:

A 200 square meter residential lot in Cebu City is being put up for sale for P4,000,000.00.
The owner is engaged in the real estate business. The property’s Gross Selling Price is
higher than its Fair Market Value as determined by the City Assessor or by the Bureau of
Internal Revenue’s Zonal Value, thus, it will be used as the base for computing the
Documentary Stamp Tax.
CHECKLIST OF DOCUMENTS
NEEDED
CHECKLIST OF DOCUMENTARY REQUIREMENTS
FOR LOT ACQUISITIONS

 Notarized Deed of Absolute Sale

 TIN verification slip and ID of seller/s

 Certified True Copy/ies of the Tax Declaration issued by the Local

Assessor’s Office for land and improvement

 Certified True Copy/ies of Original/ Transfer/ Condominium Certificate/s

of Title (OCT/TCT/OCT)

 Certificate of No Improvement issued by the Assessor’s Office

 Financial Statement (for engaged in business sellers)

 Signed ONETT Computation from BIR

SUMMARY
SALE OF CAPITAL ASSET

TAX TYPE RATE DEADLINE FORM

Capital Gains Tax 6% of tax 30 days after each sale BIR Form
base of property 1706

Documentary P15.00 / within 5 days after the BIR Form

Stamp Tax P1,000.00 (or close of the taxable 2000-OT
1.5%) of tax month when the
base document was signed,
accepted or transferred
SALE OF ORDINARY ASSET

TAX TYPE RATE DEADLINE FORM

Creditable refer to On or before the 10th BIR Form

Withholding Tax schedule of day of the following 1606
withholding month in which the
rate withholding was made

Documentary P15.00 / within 5 days after the BIR Form

Stamp Tax P1,000.00 (or close of the taxable 2000-OT
1.5%) of tax month when the
base document was signed,
accepted or transferred
- END -