Updated for the TRAIN and CREATE-era rules in force as of 2025. This guide explains the capital gains tax (CGT) on sales, exchanges, or other dispositions of real property located in the Philippines, with practical notes on filing, payment, and common pitfalls. It is written for individuals, estates/trusts, and corporations, including resident and non-resident taxpayers.

1) What exactly is “capital gains tax” on real property?

Capital gains tax (CGT) is a final tax imposed on the sale, exchange, or other disposition of real property located in the Philippines classified as a capital asset. Because it is a final tax, the CGT settles the tax on the transaction itself—the gain is no longer included in regular income subject to normal income tax.

Capital asset vs. ordinary asset (quick test):

Capital asset: Property not used in business and not held primarily for sale to customers (e.g., a family home or a vacant lot owned by an individual not engaged in real estate).

Ordinary asset: Inventory or property held for sale by a real estate dealer; or used in trade or business (e.g., office building, rental property, or any depreciable real property used in business).

The classification is at the level of the seller and per property. The same parcel can be a capital asset for one taxpayer and an ordinary asset for another.

2) Who is liable to pay CGT?

The seller/transferor is liable. CGT applies to:

Individuals (resident citizens, non-resident citizens, resident aliens, and non-resident aliens)
Estates and trusts
Corporations (domestic corporations and resident/non-resident foreign corporations) when the property disposed of is land and/or buildings classified as capital assets

If the property is an ordinary asset, the sale is not subject to CGT. Instead, the net gain is subject to regular income tax (for individuals) or corporate income tax (for corporations), and often creditable withholding tax (CWT) and possibly VAT if the seller is VAT-liable.

3) What transactions are covered?

CGT attaches to sales, exchanges, and other dispositions (e.g., dación en pago, pacto de retro, foreclosure, assignment of rights) of real property located in the Philippines that is a capital asset. It also applies whether the transaction is for cash, installment, or assumed mortgage, and whether the consideration is money or property (non-cash consideration is valued at fair market value).

Not covered by CGT (typical cases):

Donations (subject to donor’s tax, not CGT)
Succession (estate tax rules apply; no CGT on transfer to heirs)
Ordinary asset sales (taxed under regular income tax/VAT/CWT regimes)
Principal residence rollover that qualifies for exemption (see §8)

4) Tax base and the 6% rate

Standard rule (6% final tax)

Rate: 6%
Tax base: The higher of:
1. Gross selling price stated in the deed;
2. BIR zonal value (if any); or
3. Fair market value per latest tax declaration (assessor’s value).

CGT = 6% × (higher of GSP, zonal value, or assessed FMV)

Notes:

For corporations, the 6% final tax applies to land and/or buildings classified as capital assets. Other types of real property held as capital assets by corporations (e.g., improvements not constituting buildings) can have special treatment; in practice, most corporate CGT cases involve land/buildings.
Assumed mortgages or liens form part of the selling price.
Miscellaneous consideration (e.g., property received) is taken at fair market value.

5) Deadlines, forms, and where/how to file

A. Capital Gains Tax (CGT)

Form: BIR Form 1706 (Capital Gains Tax Return — Real Property)
When due: Within 30 days following the date of each sale/exchange/disposition.
- Installment sales: You may pay per installment (CGT in proportion to collections) by filing BIR Form 1706 within 30 days after each collection; alternatively, you can pay the full CGT upfront.
Where/how: File and pay through the BIR’s eFPS/eBIR (if enrolled/required), or at an Authorized Agent Bank/RCO having jurisdiction over the property or taxpayer, per BIR rules.
Proof for title transfer: The BIR issues an Electronic Certificate Authorizing Registration (eCAR) after CGT and Documentary Stamp Tax (DST) (and any other applicable internal revenue taxes) are paid and documentary requirements are met. The Registry of Deeds will not transfer title without the eCAR.

B. Documentary Stamp Tax (DST) on the deed of sale

Form: BIR Form 2000-OT (Other Than Oil & Gas)
Rate: ₱15 for every ₱1,000 (or fraction) of the consideration or FMV, whichever is higher → effectively 1.5%.
When due: On or before the 5th day following the close of the month when the deed was made/signed/accepted.

C. Local taxes and fees (paid after securing the eCAR)

Local Transfer Tax: Usually up to 0.5% of the tax base in provinces; up to ~0.75% in certain cities (e.g., Metro Manila cities).
Registration Fees: Registry of Deeds fee per schedule.
Real property tax (RPT) arrears/clearances may be required.

Order of operations (typical): Execute deed → Compute and pay CGT and DST → Secure eCAR → Pay local transfer tax and registration fees → Transfer title at the Registry of Deeds.

6) Filing in special modes of sale

A. Installment sales

Two options:
1. Proportional CGT as each installment is collected (file Form 1706 within 30 days after each collection); or
2. Pay full CGT upfront, computed on the full tax base (often chosen when buyer needs prompt title transfer).
eCAR timing: BIR practice varies. Many RDOs issue the eCAR upon full payment of the CGT (and DST). If paying proportionally, expect additional processing before eCAR release.

B. Foreclosure/pacto de retro/dación en pago

Treated as dispositions. The CGT base follows the higher-of rule (see §4), looking at the amount involved or fair market value.

7) Penalties for late filing/payment

Surcharge: 25% of the basic tax for late filing/payment; 50% if due to willful neglect or fraudulent filing.
Interest: Imposed per annum at the statutory rate set under the NIRC (which may change from time to time) computed on any unpaid amount from the due date until fully paid.
Compromise penalties: May be assessed under BIR schedules.

8) Principal residence “rollover” exemption (individuals)

A full CGT exemption is available to an individual who sells a principal residence and fully reinvests the proceeds in the acquisition or construction of a new principal residence within 18 months from the sale, subject to strict conditions:

Use: The property sold must be the seller’s principal residence.
Notification: Notify the BIR within 30 days from the sale of the intention to avail of the exemption.
Reinvestment window: Acquire or construct a new principal residence within 18 months from the date of sale.
Frequency cap: Once every 10 years.
Partial reinvestment: If not all proceeds are used, the unutilized portion is subject to 6% CGT (pro-rata).
Documentary proof: Keep contracts, receipts, permits, and proof of occupancy to substantiate the claim.

The exemption is personal to individuals (not available to corporations). Failing any requirement above typically voids the exemption.

9) Sales to the government (individual sellers)

If an individual sells a capital-asset real property to the national government, a GOCC, or a local government unit, the seller may elect either:

the 6% CGT on the higher-of tax base, or
the regular graduated income tax on the net gain (which could be beneficial if the actual gain is small relative to the selling price or FMV). The election is irrevocable per transaction and should be evidenced in the return/covering documents.

10) Ordinary asset sales (for contrast)

If the property is an ordinary asset (e.g., by a real estate dealer, or used in business), the sale is not subject to the 6% CGT. Instead:

Net gain is taxed under graduated income tax (individuals) or corporate income tax (corporations).
Creditable Withholding Tax (CWT) generally applies (rates vary by seller classification and location).
VAT may apply if the seller is VAT-registered and the sale is in the ordinary course of trade.
DST still applies.

11) Documentary checklist (typical eCAR processing)

BIR Form 1706 (proof of CGT payment)
BIR Form 2000-OT (proof of DST payment)
Notarized Deed of Sale/Disposition (with complete details)
Titles: Original/Transfer Certificate of Title (OCT/TCT) / Condominium Certificate of Title (CCT)
Latest Tax Declaration (land and/or improvement)
BIR Zonal Value printout/verification, if applicable
TINs and valid IDs of all parties; SPA if via attorney-in-fact
Real Property Tax (RPT) clearance / latest receipts
Proof of consideration (acknowledgment receipts; for non-cash, valuation documents)
For principal residence exemption: BIR 30-day notice, proof of reinvestment within 18 months, and once-in-10-years declaration

RDOs may require additional documents (e.g., marriage certificate, proofs of address/use, corporate secretary’s certificate, board resolutions, court orders, or extrajudicial settlement papers).

12) Worked examples

Example 1: Simple sale by an individual (capital asset)

Deed shows ₱5,000,000 selling price.
Zonal value is ₱5,400,000; assessor’s FMV is ₱4,900,000.
Tax base = ₱5,400,000 (higher of the three).
CGT = 6% × ₱5,400,000 = ₱324,000 (due within 30 days from sale).
DST ≈ 1.5% × ₱5,400,000 = ₱81,000 (due by the 5th day following the close of the month of sale).

Example 2: Installment sale (proportional CGT)

Total price ₱10,000,000; down payment ₱2,000,000; 4 equal annual installments of ₱2,000,000 each.
Higher-of base determined at sale is ₱10,500,000 (zonal value).
Option: Pay 6% × 10,500,000 = ₱630,000 upfront; or pay proportionally:
- On down payment: ₱630,000 × (2,000,000/10,000,000) = ₱126,000 (file Form 1706 within 30 days of collection);
- Same proportional method for each subsequent installment.

Example 3: Principal residence rollover (partial reinvestment)

Sold principal residence for ₱8,000,000; higher-of base ₱8,500,000.
Within 18 months, only ₱6,000,000 is reinvested in a new principal residence; ₱2,000,000 not reinvested.
Taxable portion = (Unutilized ÷ Proceeds) × Base = (2,000,000 ÷ 8,000,000) × 8,500,000 = ₱2,125,000.
CGT = 6% × ₱2,125,000 = ₱127,500.

13) Practical tips & common traps

Always compare deed price, zonal value, and assessor’s value—use the highest.
Mind the 30-day CGT deadline and the DST monthly cut-off; late filings trigger surcharges and interest.
Check classification (capital vs. ordinary) before signing. If the property was used in business (e.g., rented out or used as office), it may be an ordinary asset, changing the entire tax treatment.
Installments & eCAR: If the buyer needs title transferred early, consider paying the full CGT upfront to avoid processing delays.
Government acquisition: Run the numbers—graduated tax on net gain may beat 6% on gross base if the profit margin is thin.
Principal residence exemption: File the 30-day notice, track the 18-month reinvestment, and remember “once every 10 years.”
Assumed mortgages and non-cash consideration count toward the tax base.
Keep an audit trail: notarized deed, official receipts, bank proofs, valuation documents, and RPT clearances.

14) Quick reference

Rate: 6% of higher of (deed price, zonal value, assessed FMV)
Who pays: Seller/transferor (individuals, estates/trusts, corporations) when capital asset
Form & deadline (CGT): BIR Form 1706, within 30 days from sale (or each installment collection if paying proportionally)
DST: Form 2000-OT, ≈1.5%, due by the 5th day after the month-end of execution
eCAR: Issued by BIR upon full payment of internal revenue taxes and submission of complete documents
Local transfer tax: Typically ≤0.5% provinces, ≤~0.75% in cities; plus Registry of Deeds fees
Exemption: Principal residence rollover (individuals) — 30-day notice, 18-month reinvestment, once every 10 years, partial reinvestment → tax on the unutilized portion
Sales to government (individuals): Elect 6% CGT or graduated tax on net gain

Disclaimer

This article provides a comprehensive overview for planning and compliance purposes. Specific facts (property classification, residency, corporate structure, and local ordinances) can materially affect the outcome. For transactions of consequence, obtain advice based on your exact documents and timelines.