I. Nature and Scope of Capital Gains Tax

Capital Gains Tax (CGT) in the Philippines is a final withholding tax imposed on the gain realized from the sale, exchange, or other disposition of capital assets. It is governed primarily by Sections 24(D), 25(D), 25(E), 27(D)(5), and 28 of the National Internal Revenue Code (NIRC) of 1997, as amended by the TRAIN Law (RA 10963), CREATE Law (RA 11534), and the Ease of Paying Taxes Act (RA 11976).

The tax applies to two main categories of capital assets:

Sale of unlisted shares of stock (not traded through the Philippine Stock Exchange)
– 15% final tax on the net capital gain (selling price less cost or adjusted basis).
Sale or disposition of real property located in the Philippines classified as capital asset
– 6% final tax based on the higher of the gross selling price or the fair market value (zonal value or assessed value, whichever is higher).

CGT is a one-time tax. The tax is due and the corresponding return must be filed and paid within 30 days from the date of sale, exchange, or disposition (not from notarization of the deed). This rule is absolute and applies regardless of whether the sale is for cash or on installment.

II. Due Date and Mode of Payment

Type of Transaction	BIR Form	Due Date	Where to File/Pay
Sale of real property (capital asset)	1706	Within 30 days from date of sale/disposition	Authorized Agent Bank (AAB) or RDO
Sale of unlisted shares	1707	Within 30 days from date of sale/disposition	AAB or RDO
Sale of listed shares	N/A	Stock transaction tax (0.6%) withheld by broker	Broker withholds and remits

For real property transactions, no Certificate Authorizing Registration (CAR) or Electronic CAR (eCAR) will be issued by the BIR without full payment of the 6% CGT. The Register of Deeds will not allow transfer of title without the CAR/eCAR.

III. Civil Penalties for Late or Non-Payment of CGT

When CGT is paid after the 30-day prescriptive period, the taxpayer is automatically liable for the following civil penalties under Sections 248 and 249 of the NIRC (as amended by TRAIN Law):

1. 25% Surcharge

Imposed on the basic tax due (Section 248(A)).
This applies even if the taxpayer voluntarily pays late before any BIR assessment or investigation.
The only exception is when the late payment is due to a BIR-approved request for extension (which is almost never granted for CGT).

2. 12% Delinquency Interest Per Annum

(Section 249(B), as amended by TRAIN Law effective January 1, 2018)
Computed from the day following the due date until the date of actual payment.
Interest is computed on the basic tax plus the 25% surcharge.
Formula:
Interest = (Basic CGT + 25% surcharge) × 12% × (number of days late ÷ 365)

Note: Prior to TRAIN Law, the rate was 20%. The rate was permanently fixed at 12% by the Ease of Paying Taxes Act.

3. Compromise Penalty

Although not statutory, the BIR invariably imposes a compromise penalty for late filing/payment of the CGT return under Revenue Regulations No. 18-2013, RR 12-99, and subsequent issuances.

Current compromise penalty schedule commonly applied by Revenue District Offices:

Violation	Compromise Penalty
Late filing/payment of CGT on real property	₱2,000
Late filing/payment of CGT on unlisted shares	₱2,000
Failure to file CGT return (discovered by BIR)	₱5,000 – ₱25,000 depending on amount of tax

The compromise penalty is non-negotiable in most RDOs when settling late CGT obligations.

Total Penalty Formula (Standard Late Payment)

Total Amount Due = Basic CGT + (Basic CGT × 25%) + Interest + Compromise Penalty

Example 1: Late Payment of 6% CGT on Real Property

Gross selling price / FMV: ₱10,000,000
Basic CGT (6%): ₱600,000
Days late: 180 days
Surcharge (25%): ₱150,000
Interest: (₱600,000 + ₱150,000) × 12% × (180/365) ≈ ₱37,000
Compromise penalty: ₱2,000

Total payment required: ≈ ₱789,000 (instead of ₱600,000)

Example 2: Late Payment of 15% CGT on Unlisted Shares

Net capital gain: ₱5,000,000
Basic CGT (15%): ₱750,000
Days late: 365 days
Surcharge: ₱187,500
Interest: (₱750,000 + ₱187,500) × 12% × 1 year = ₱112,500
Compromise: ₱2,000

Total: ₱1,052,000

IV. Aggravated Penalties (50% Surcharge)

Under Section 248(B), the surcharge is increased to 50% if the late payment or non-filing is due to:

Willful neglect to file the return, or
False or fraudulent return filed with intent to evade tax.

In practice, the BIR upgrades the surcharge to 50% when the taxpayer is caught during a tax audit or third-party information matching (e.g., Register of Deeds reports the sale but no CGT was filed).

V. Criminal Penalties for Willful Evasion of CGT

Under Section 255 (failure to file return or pay tax) and Section 267 (willful failure to pay) of the NIRC:

Attempt to evade or defeat tax (Section 254): imprisonment of 6 years and 1 day to 12 years + fine of ₱50,000 to ₱500,000.
Willful failure to pay tax when due (Section 255): imprisonment of 6 years and 1 day to 12 years + fine of at least ₱100,000.

The Supreme Court has repeatedly upheld criminal convictions for deliberate non-payment of CGT on real property sales (e.g., Ungab v. People, G.R. No. 237298, 2020; People v. Kintanar, G.R. No. 196335, 2017).

VI. Special Rules and Exceptions

Installment sales of real property
If initial payments do not exceed 25% of the selling price, the CGT may be paid in installments corresponding to the collections received (Section 49(C), NIRC; RR 2-98).
However, the return (Form 1706) must still be filed within 30 days from the sale.
Late payment of any installment triggers the same 25% surcharge + 12% interest on that particular installment.
Deceased taxpayer’s estate
CGT on sale of inherited property must still be paid within 30 days from the date of sale. The executor/administrator is personally liable for penalties if payment is late.
Non-resident sellers
CGT is withheld at source (12% on real property, 0.6% or 15% on shares). If the withholding agent fails to withhold and remit on time, the withholding agent becomes liable for 25% surcharge + 12% interest + possible criminal liability.
No prescription for non-filing
If no CGT return was ever filed, the BIR can assess and collect the tax plus penalties at any time (Section 222, NIRC – no prescription in case of non-filing).

VII. Practical Consequences of Non-Payment

No transfer of title (real property) without CAR/eCAR.
Stock certificates of unlisted shares cannot be transferred on the books of the corporation without BIR clearance.
Accumulating interest continues indefinitely until full settlement.
BIR may issue a Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN), leading to collection through bank levy, garnishment, or auction of property.

VIII. How to Settle Late CGT Obligations

Compute the basic tax, surcharge, interest, and compromise penalty.
Prepare BIR Form 0605 (payment of penalties) and the appropriate tax return (1706 or 1707).
Pay through any Authorized Agent Bank, Revenue Collection Officer, or via GCash/PesoNet under the BIR’s ePayment channels.
Submit documents to the RDO for issuance of CAR/eCAR (for real property) or Certificate of CGT Payment (for shares).

Conclusion

Late payment of Capital Gains Tax in the Philippines is an expensive mistake. The combination of 25% surcharge, 12% per annum interest, and compromise penalty routinely increases the original tax liability by 30–70% or more, depending on the length of delay. In cases of deliberate evasion, criminal prosecution is a real and frequently enforced consequence.

Taxpayers are therefore strongly advised to strictly observe the 30-day deadline. The BIR does not grant extensions for CGT payment, and ignorance of the rule — or reliance on the buyer, broker, or notary public — is never accepted as a defense.