BIR Tax Computation for a 3 600 m² Real Property in the Philippines
A practitioner-oriented guide (2025 edition)
1. Identify the Legal Character of the Asset
| Question | Why it matters | Key rules | Typical evidence |
|---|---|---|---|
| Capital vs. Ordinary asset? | Determines if the seller pays 6 % Capital Gains Tax (CGT) or graduated income tax + 12 % VAT | Sec. 39 & Sec. 24 NIRC; Rev. Regs. No. 07-2003 | Articles of incorporation, SEC registration, recent audited FS, actual use |
| Location & zoning? | Affects zonal value and local transfer taxes | Local zoning ordinances, BIR Revenue District Office (RDO) zonal schedules | Certified tax declaration & zoning certificate |
| Nature of transaction? | Sale, barter, donation, partition, expropriation, inheritance each trigger different taxes | NIRC Titles II, III, IV; R.A. 10963 (TRAIN) | Deed of Sale, Deed of Donation, extrajudicial settlement, compromise agreement |
Shortcut: Most individual owners who are not engaged in real-estate business treat land and buildings held > 2 yrs as capital assets. Caveat: If the taxpayer is habitually engaged in the business (or the property is used in trade), the land is an ordinary asset even if held >2 yrs.
2. Determine the Applicable National Taxes
| Tax | Rate | Tax base (higher of…) | When due | BIR Form |
|---|---|---|---|---|
| Capital Gains Tax (if capital asset) | 6 % | Selling Price (SP) OR BIR-published Zonal Value (ZV) OR Provincial Assessor’s Fair Market Value (FMV) | Within 30 days from notarisation | 1706 |
| Creditable/Final Withholding (sale to Gov’t) | 15 % of gross | Same base as CGT | On or before 10th day following month of withholding | 1606 |
| Value-Added Tax (if ordinary asset) | 12 % | Net selling price (less VAT) or gross receipts | File monthly 2550M & quarterly 2550Q | 2550M/Q |
| Documentary Stamp Tax | ₱ 15/₱ 1 000 → 1.5 % | Whichever of SP, ZV, FMV is highest | On or before 5th day of next month | 2000-OT |
| Estate Tax (inheritance cases) | 6 % | Net estate (FMV or ZV) | Within 1 yr of death | 1801 |
| Donor’s Tax (donations) | 6 % | Net gifts above ₱ 250 000 | Within 30 days of donation | 1800 |
3. Compute an Illustrative Sale
Facts (fictional):
- Area = 3 600 m² residential lot in Cavite
- Agreed selling price (SP) = ₱ 11 000 000
- BIR Zonal Value (ZV) = ₱ 3 200 / m² → ₱ 11 520 000
- Assessor FMV = ₱ 2 800 / m² → ₱ 10 080 000
- Seller is an individual not in real-estate business ⇒ asset is capital
| Step | Computation |
|---|---|
| 1. Choose the tax base | Highest of three values = ₱ 11 520 000 (ZV) |
| 2. Capital Gains Tax | 6 % × ₱ 11 520 000 = ₱ 691 200 |
| 3. Documentary Stamp Tax | 1.5 % × ₱ 11 520 000 = ₱ 172 800 |
| 4. Local Transfer Tax (province, 0.5 %) | 0.5 % × ₱ 11 520 000 = ₱ 57 600 |
| 5. Registration Fee (RoD) | Graduated schedule—roughly ₱ 19 000 for this value |
| 6. Notarial Fee (1 %) | Usually capped; assume ₱ 20 000 |
Bottom-line cash outlay: ₱ 960 600 (national + local) ≈ 8.35 % of the ZV. Parties often split local taxes and incidental fees by contract, but national taxes are always the seller’s obligation (except VAT, which is typically passed to the buyer).
4. Special Rules for Large-Area Land (≥ 1 500 m²)
VAT Exemption Ceilings
Post-TRAIN (2025 indexation):
- Residential lot ≤ 1 500 m² and selling price ≤ ₱ 2 800 000 ⇒ VAT-exempt.
- Your lot is 3 600 m², so regardless of price it can never be VAT-exempt if classified residential and sold as an ordinary asset.
Agricultural Land
- If tenanted or CARP-covered, transfer requires DAR clearance.
- Exemptions (e.g., CARP-related transfers) may cut certain taxes but NEVER CGT or DST.
Installment Sales over ₱ 1 500 000
- CGT is still computed on the full base upfront, not per installment.
- DST follows the same full-value rule.
5. Non-Sale Transactions Involving 3 600 m² Land
| Scenario | Core tax | Rate | Notes |
|---|---|---|---|
| Exchange for shares (tax-free Sec. 40 C) | No CGT if control transferred; DST still applies | CGT deferred | File BIR Form 1707-A |
| Partition among co-owners | DST on excess value adjudicated to a party | 1.5 % of excess | CGT nil if merely a partition |
| Donation to heir while donor alive | Donor’s Tax | 6 % | Zonal/Assessor FMV basis ≤ 30 days |
| Expropriation by the Government | Final WHT | 15 % | Government files 1606; seller need not file 1706 |
6. Procedural Checklist (Seller’s perspective)
Secure Certified True Copy of TCT/CCT and latest Tax Declaration.
Request CENOMAR (if individual), articles (if corporation) for classification.
Compute Zonal Value via RDO schedule; get certified copy if values are unclear.
Have the Deed Notarised → triggers the 30-day CGT clock.
Pay CGT (BIR 1706) at AAB / eFPS within 30 days.
Pay DST (BIR 2000-OT) on or before 5 th day of the month following notarisation.
Submit CAR Application (Certificate Authorizing Registration) with:
- Paid returns & eFPS confirmations
- Original TCT/CCT, tax clearance, SPA if needed
Claim CAR (target: 10–15 working days RDO).
Pay Local Transfer Tax within 60 days at LGU Treasurer.
Register Deed & CAR at Registry of Deeds; secure new TCT/CCT.
Update Real Property Tax (RPT) records at Assessor & Treasurer.
7. Penalties for Late or Wrong Payment
| Infraction | Surcharge | Interest | Compromise |
|---|---|---|---|
| Late CGT or DST filing | 25 % of tax | 12 % p.a. (2025), computed daily | ₱ 1 000–50 000 |
| Fraudulent return | 50 % | Same interest | Higher compromise range |
| Wrong classification (ordinary vs capital) | Deficiency VAT (12 %) plus output VAT and 25 % surcharge | - | BIR often audits within 3 yrs |
8. Practical Tips & Common Pitfalls
- Always compare SP, ZV, FMV—taxpayer must prove whichever is higher.
- Check BIR Rulings before applying Sec. 40 C exchanges; missteps = back taxes.
- Staggered payments? CGT is unaffected; but DST can sometimes be re-documented if the parties restructure.
- Inherited land: Pay Estate Tax first before any sale; otherwise CAR for sale will be denied.
- E-CAR “blocking”: Register of Deeds will reject if e-CAR QR code doesn’t match parcel.
- Notarisation date vs. “date of sale” is irrelevant—the 30-day CGT clock starts at notarisation.
- VAT threshold creep: The ₱ 2.5 M/₱ 1.5 M limits are CPI-adjusted every 3 yrs under TRAIN §34; track BIR advisories.
9. Summary Flow Diagram
- Classify asset and transaction → 2. Determine tax base → 3. Compute CGT or VAT + IT → 4. File CGT/DST → 5. Secure CAR → 6. Pay LGU transfer taxes → 7. Register title.
(For a printable checklist or an Excel calculator, just let me know.)
Disclaimer: This article is for general educational purposes as of May 30 2025. Tax laws, zonal values and local ordinances change; always consult the latest BIR Revenue Regulations and your local Treasurer or Assessor, or engage a Philippine tax professional for transaction-specific advice.