Capital gains tax in the Philippines is usually the tax people worry about when selling a house, lot, condominium unit, or unlisted shares of stock. The most common problem is that sellers hear “6% tax,” assume it is based on their actual profit, then discover at the BIR that the tax is computed on the higher value among the selling price, BIR zonal value, and assessor’s fair market value. This guide explains when capital gains tax applies, how it is computed, what documents are usually required, where to file, what deadlines matter, and the practical issues that often delay title or share transfers.

What Capital Gains Tax Means in the Philippines

In Philippine tax practice, capital gains tax, or CGT, is a final tax imposed on gains presumed or actually realized from the sale, exchange, or other disposition of certain capital assets.

A capital asset generally means property held by the taxpayer, but it does not include inventory, property held primarily for sale to customers in the ordinary course of business, depreciable business property, or real property used in trade or business. This distinction matters because a property classified as an ordinary asset is not taxed the same way as a capital asset.

For ordinary readers, the most important rule is this:

Not every sale of property is subject to capital gains tax. The first question is always: What kind of asset is being sold, and who is selling it?

Main Legal Basis for Capital Gains Tax

The principal legal basis is the National Internal Revenue Code of 1997, originally Republic Act No. 8424, as amended by later laws including the TRAIN Law, CREATE, and Republic Act No. 12214, also known as the Capital Markets Efficiency Promotion Act. The BIR’s current implementing regulations under RA 12214 cover amendments to several Tax Code provisions on passive income, capital gains, and securities. (Bureau of Internal Revenue)

For real property, the BIR’s Form 1706 guidelines apply to the onerous transfer of real property classified as a capital asset, whether taxable or exempt. For shares of stock not traded through the local stock exchange, the BIR’s Form 1707 guidelines apply. (Bir CDN)

When Capital Gains Tax Applies

Common transactions subject to CGT

Transaction	Usual tax treatment	Basic rule
Sale of a house, lot, or condominium classified as a capital asset	6% CGT	Based on the highest of selling price, BIR zonal value, or assessor’s fair market value
Sale of land/building classified as capital asset by a domestic corporation	6% CGT	Applies to land and/or buildings classified as capital assets
Sale of shares of stock not traded through the stock exchange	15% CGT	Based on net capital gains
Sale of listed shares through a stock exchange	Not CGT	Subject to stock transaction tax instead
Sale by a real estate dealer, developer, or seller of ordinary assets	Not CGT	Usually subject to regular income tax rules, creditable withholding tax, and possibly VAT

For real property located in the Philippines and classified as a capital asset, the 6% CGT applies to individual citizens, resident aliens, nonresident aliens, estates, trusts, and certain corporations, subject to specific Tax Code rules. BIR regulations distinguish capital assets from ordinary assets and state that ordinary real property sales are subject to different tax treatment. (Supreme Court E-Library)

Transactions commonly mistaken as CGT transactions

Some transfers may involve the BIR and a Certificate Authorizing Registration, but they are not automatically CGT transactions:

Donation of property is generally covered by donor’s tax rules, not CGT.
Inheritance or estate settlement is generally covered by estate tax rules, not CGT.
Sale of inventory by a real estate developer or dealer is usually an ordinary asset sale, not a capital asset sale.
Sale of listed shares through the PSE or another covered exchange is generally subject to stock transaction tax instead of CGT.

How to Compute Capital Gains Tax on Real Property

For real property classified as a capital asset, CGT is 6% of the highest among:

The selling price stated in the deed;
The BIR zonal value; or
The fair market value under the tax declaration issued by the city or provincial assessor.

The BIR Form 1706 guidelines expressly state that the 6% final tax is based on whichever is higher among the zonal value, the assessor’s fair market value, and the selling price or value of property received in an exchange. (Bir CDN)

Example

Suppose a Quezon City condominium is sold for ₱5,000,000.

Value source	Amount
Selling price in Deed of Sale	₱5,000,000
BIR zonal value	₱5,800,000
Assessor’s fair market value	₱4,200,000

The CGT base is ₱5,800,000 because it is the highest value.

CGT = ₱5,800,000 × 6% = ₱348,000

This is why underdeclaring the selling price usually does not reduce CGT if the zonal value or assessor’s value is higher. It can also create avoidable problems with banks, immigration records, estate planning, and future resale documentation.

Deadline for Filing and Payment

For real property, BIR Form No. 1706 must be filed and paid within 30 days following the sale, exchange, or disposition of the real property. Filing is made with an Authorized Agent Bank of the Revenue District Office having jurisdiction over the place where the property is located. (Bir CDN)

In actual BIR practice, the date that often triggers the 30-day period is the date of notarization of the Deed of Absolute Sale. A BIR official reminder reported by the Philippine Information Agency emphasized that many taxpayers incur penalties because they overlook the notarization date as the start of the 30-day period. (Philippine Information Agency)

For shares of stock not traded through the local stock exchange, BIR Form No. 1707 must be filed and paid within 30 days after each sale, barter, exchange, or other disposition.

Step-by-Step Process for Real Property CGT

1. Confirm if the property is a capital asset

Before signing or notarizing the deed, confirm whether the property is a capital asset or ordinary asset.

A family home, inherited residential lot, or personally owned condominium is commonly a capital asset. A subdivision lot sold by a developer, a property held by a real estate dealer, or property used in business may be an ordinary asset.

This affects not only the tax rate, but also the BIR form, withholding tax treatment, VAT exposure, and documentary requirements.

2. Check the title, tax declaration, and zonal value

Before notarization, gather:

Certified true copy of the Transfer Certificate of Title or Condominium Certificate of Title;
Latest tax declaration for land and improvements;
Real property tax clearance;
BIR zonal value for the exact location, classification, and property type;
Government IDs and TINs of seller and buyer;
Authority documents if a party is represented by an attorney-in-fact.

For properties with buildings, the BIR will look for the tax declaration of the improvement. If the land has no building, the BIR may require a Certificate of No Improvement or a sworn declaration of no improvement.

3. Prepare and notarize the Deed of Sale

The deed should clearly state:

Full names, civil status, citizenship, and addresses of the parties;
TINs of the seller and buyer;
Accurate title number and technical description;
Purchase price and payment terms;
Who will shoulder CGT, documentary stamp tax, transfer tax, registration fees, broker’s commission, and unpaid real property taxes;
Spousal consent or co-owner signatures, if needed.

Although parties often agree privately that the buyer will shoulder some taxes, the BIR process still follows tax rules and documentation requirements. The BIR Form 1706 guidelines state that the buyer/transferee shall withhold from the seller and deduct from the agreed selling price the 6% CGT based on the highest applicable value. (Bir CDN)

4. File BIR Form 1706 and pay CGT

File and pay within 30 days from the sale, exchange, or disposition. Payment may be made through Authorized Agent Banks or available electronic payment channels. The BIR guidelines also mention payment through AAB e-payment channels, credit/debit/prepaid cards, and mobile payments. (Bir CDN)

5. Pay documentary stamp tax

For a sale of real property, documentary stamp tax, or DST, is separate from CGT. Under Section 196 of the Tax Code, deeds of sale and conveyances of real property are subject to DST of ₱15 for every ₱1,000, or fractional part thereof, of the consideration or value. In practical terms, this is commonly computed as 1.5%. (Supreme Court E-Library)

6. Secure the eCAR from the BIR

The electronic Certificate Authorizing Registration, or eCAR, is the BIR document proving that the required transfer taxes have been processed for registration purposes.

The BIR has an Electronic One-Time Transaction System, or eONETT, for transactions involving sale and/or donation of real or personal properties. (eONETT)

Once the application is approved, the taxpayer secures the eCAR from the BIR office. In practice, complete and clean documents may move faster, while cases involving old deeds, missing tax declarations, unsettled estates, incorrect TINs, or inconsistent names can take much longer.

7. Pay local transfer tax

After BIR processing, the parties usually proceed to the city or provincial treasurer to pay local transfer tax.

Under Section 135 of the Local Government Code, provinces may impose a transfer tax on sale, donation, barter, or other transfer of real property ownership at a rate not exceeding 50% of 1%, or 0.5%, of the consideration or fair market value, whichever is higher. The Register of Deeds requires proof of payment before registration. (Supreme Court E-Library)

Cities may impose taxes that provinces or municipalities may impose, and city rates may exceed the provincial or municipal maximum by not more than 50%, which is why city transfer tax is commonly up to 0.75% depending on the local revenue ordinance. (Supreme Court E-Library)

8. Register the transfer with the Registry of Deeds

The Land Registration Authority lists basic registration requirements such as the original deed or instrument, certified copy of the latest tax declaration, owner’s copy of title, BIR CAR, real property tax clearance, and proof of payment of transfer tax. (Land Registration Authority)

After registration, the buyer follows up the new title and then updates the tax declaration with the city or municipal assessor.

Required Documents for Real Property CGT

The BIR may require additional documents depending on the transaction, but these are the usual core documents for a sale of real property classified as a capital asset:

Requirement	Practical notes
TIN of seller and buyer	TIN errors are a common cause of delay
Notarized Deed of Absolute Sale or Deed of Transfer	The notarization date usually starts the tax deadline
Certified true copy of title	OCT, TCT, or CCT, depending on property type
Certified true copy of tax declaration	Separate tax declarations may exist for land and building
SPA, if a representative signs or processes	Must be notarized; if executed abroad, apostille or consular authentication may be needed
Certificate of No Improvement or sworn declaration	Needed when land is declared as vacant
Official receipts and validated BIR returns	Proof of tax payment
Secretary’s Certificate or Board Resolution	Required if seller or buyer is a corporation
Location plan or vicinity map	Often needed when zonal value cannot be readily determined
Certificate of exemption or BIR ruling	Needed if claiming tax exemption

BIR Form 1706 guidelines specifically list TINs, notarized deed, tax declarations, title, SPA, sworn declaration or certificate of no improvement, proof of payment, corporate authority documents, and additional requirements such as consular certification or apostille for documents executed abroad. (Bir CDN)

Capital Gains Tax on Shares of Stock

For shares of stock not traded through the local stock exchange, the applicable return is generally BIR Form No. 1707. The return is filed by every natural or juridical person, resident or nonresident, for sale, barter, exchange, or other onerous disposition of shares of stock in a domestic corporation classified as capital assets and not traded through the local stock exchange.

The CGT rate for shares covered by Form 1707 is 15% of net capital gains for individuals and corporations.

Under RA 12214 and BIR Revenue Regulations No. 21-2025, capital gains rules on shares were updated, including treatment of shares of stock in domestic or foreign corporations not traded in a local or foreign stock exchange, while listed shares sold through covered exchanges are subject to stock transaction tax in lieu of CGT. (Bir CDN)

Common documents for CGT on shares

Requirement	Practical notes
BIR Form 1707	Filed within 30 days after each sale or disposition
TIN of seller and buyer	Required for BIR processing
Notarized Deed of Sale or Deed of Assignment	Should match stock certificate details
Photocopy of stock certificate	Needed to identify the shares transferred
Proof of acquisition cost	Important because tax is on net capital gains
Latest audited financial statements	Often required to compute book value for unlisted shares
Proof of payment	Validated return or deposit slip
SPA or Secretary’s Certificate	Required if represented or if a corporation is involved

The BIR Form 1707 guidelines list the stock certificate, proof of acquisition cost, latest audited financial statements with book value computation for unlisted shares, proof of payment, SPA, and corporate authority documents among the requirements.

Principal Residence Exemption

One important relief applies to the sale of a principal residence.

A principal residence is the dwelling house, including the land on which it sits, where the individual and family reside. Temporary absence due to travel, studies, work abroad, or similar circumstances does not automatically interrupt actual occupancy, provided the residence remains the home to which the person intends to return. (Bir CDN)

The exemption is not automatic. Under Revenue Regulations No. 13-99, the seller must file a sworn declaration of intent with the RDO having jurisdiction over the principal residence within 30 days from the sale, together with BIR Form 1706 and supporting documents. The proceeds must be fully used to acquire or construct a new principal residence within 18 calendar months, and the exemption may be availed of only once every 10 years. (Supreme Court E-Library)

If only part of the proceeds is used for the new principal residence, CGT may apply to the unutilized portion. This is why sellers planning to claim the exemption should prepare the replacement-home documents before the sale is finalized.

Special Issues for Filipinos Abroad and Foreigners

Sellers signing abroad

If the seller is abroad, the deed or SPA must be properly notarized and authenticated for use in the Philippines. BIR Form 1706 expressly lists certification from the Philippine Consulate or the Hague Apostille Convention if the document is executed abroad. (Bir CDN)

Common problems include:

SPA signed by only one spouse even though both must consent;
Apostille attached to the wrong document;
Foreign notarization without proper authentication;
Name mismatch between passport, title, tax declaration, and TIN records;
Expired or overly narrow SPA authority.

Foreigners selling Philippine property

A foreigner who legally owns a condominium unit, inherited land, or other property interest may still be required to comply with Philippine CGT and transfer procedures when selling.

However, CGT payment does not cure an invalid land transfer. The 1987 Constitution generally prohibits transfer of private lands except to Filipinos and corporations or associations qualified to acquire or hold lands of the public domain, with an exception for hereditary succession. It also recognizes that natural-born Filipinos who lost Philippine citizenship may acquire private land subject to legal limits. (Supreme Court E-Library)

For condominiums, RA 4726 allows condominium structures where common areas may be held through a condominium corporation, but transfers cannot cause foreign interest to exceed legal limits. (Lawphil)

Common Pitfalls That Delay CGT and Title Transfer

Notarizing the deed before the parties are ready

Once the deed is notarized, the 30-day BIR clock can start running. If the buyer has not prepared funds for taxes, or the seller has not gathered title and tax declaration documents, penalties may follow.

Assuming CGT is based on actual profit

For real property capital assets, the 6% tax is based on the highest applicable value, not the seller’s actual gain. Even if the seller bought high and sells low, CGT may still be due.

Missing improvement tax declaration

If a house exists on the land but only the land tax declaration is available, the BIR may require the building tax declaration before processing.

Treating an ordinary asset as a capital asset

Developers, dealers, and businesses selling real property used in business cannot simply choose CGT treatment. Misclassification can lead to assessments for income tax, withholding tax, VAT, surcharge, and interest.

Selling inherited property before settling the estate

If the registered owner is deceased, the heirs usually need to settle estate tax and execute proper estate settlement documents before or together with the sale process. Otherwise, the BIR and Registry of Deeds will not have a clean basis to transfer title.

Ignoring local government requirements

Even after BIR payment, the transfer can still be delayed by unpaid real property taxes, lack of tax clearance, unpaid local transfer tax, or assessor’s office requirements for new tax declaration.

Penalties for Late Filing or Payment

Late CGT filing or payment can trigger:

25% surcharge for failure to file and pay on time;
50% surcharge in cases involving willful neglect or false/fraudulent return;
Interest under the Tax Code;
Compromise penalties.

The BIR Form 1706 and 1707 guidelines both list surcharge, interest, and compromise penalties for late filing, wrong venue, nonpayment, deficiency tax, and fraudulent returns. (Bir CDN)

Frequently Asked Questions

How much is capital gains tax in the Philippines?

For real property classified as a capital asset, CGT is generally 6% of the highest among the selling price, BIR zonal value, or assessor’s fair market value. For covered unlisted shares of stock, CGT is generally 15% of net capital gains.

Who pays capital gains tax, the buyer or the seller?

In ordinary real estate practice, the seller is usually treated as the party economically responsible for CGT, but parties can agree differently in the deed. The BIR Form 1706 guidelines state that the buyer/transferee withholds from the seller and deducts the 6% CGT from the agreed selling price.

Is CGT based on actual profit?

For Philippine real property classified as a capital asset, no. The 6% CGT is based on a presumed gain and is computed using the highest applicable value. This means CGT can still be due even if the seller did not actually make a profit.

When is the deadline to pay CGT?

For real property, BIR Form 1706 must be filed and paid within 30 days following the sale, exchange, or disposition. In practice, the notarization date of the deed is critical because it is commonly treated as the date that starts the 30-day period.

Can I avoid CGT if I sell my family home and buy another home?

Possibly, but only if the sale qualifies under the principal residence exemption. The seller must file the required sworn declaration, comply with the 30-day filing requirement, use the proceeds to acquire or construct a new principal residence within 18 months, and meet the once-every-10-years rule.

Is a condominium sale subject to CGT?

Yes, if the condominium is classified as a capital asset. The CGT is computed using the highest among the selling price, BIR zonal value, and assessor’s fair market value. For foreign buyers or sellers, condominium ownership limits and corporate foreign ownership limits must also be checked.

Do foreigners pay capital gains tax when selling Philippine property?

Yes, if the transaction is subject to Philippine CGT. Tax obligations are separate from ownership restrictions. A foreigner who legally owns and sells a Philippine condominium or other lawful property interest may still need to file and pay the applicable taxes.

What happens if the deed was notarized years ago but CGT was never paid?

The BIR will usually compute the basic tax plus penalties, interest, and compromise penalties. Additional documents may also be required, especially for old or prior-period sales, such as certified true copies or notarization certifications from the proper court, executive judge, or National Archives, depending on the circumstances.

Do I need an eCAR to transfer the title?

Yes. The Registry of Deeds generally requires the BIR CAR/eCAR, proof of transfer tax payment, real property tax clearance, deed, title, and tax declaration documents before issuing a new title.

Is the sale of inherited property subject to CGT?

The inheritance itself is generally an estate tax matter. But if the heirs later sell the inherited property, the sale may be subject to CGT if the property is a capital asset. The estate settlement and the sale must be documented carefully so the BIR and Registry of Deeds can trace the transfer properly.

Key Takeaways

Real property CGT is usually 6% of the highest value, not 6% of actual profit.
BIR Form 1706 is due within 30 days for real property capital asset sales.
BIR Form 1707 is generally used for unlisted shares, with CGT generally at 15% of net capital gains.
The notarization date matters because it often starts the BIR deadline.
CGT is only one part of the transfer cost; DST, local transfer tax, registration fees, and real property tax clearance also matter.
An eCAR is essential before the Registry of Deeds can complete the title transfer.
Principal residence exemption is possible but strict: 30-day declaration, 18-month reinvestment, and once every 10 years.
Foreign sellers and Filipinos abroad must prepare authentication documents carefully, especially SPAs and deeds executed outside the Philippines.