Penalty for Late Capital Gains Tax (CGT) Payment on a Deed of Sale
Philippine legal primer – updated to 12 June 2025
1. Statutory foundation
| Provision | Key rule |
|---|---|
| NIRC § 24(D) (individual sellers) / § 27(D)(5) & § 28(A)(5) (corporate sellers) | 6 % CGT on the higher of the gross selling price (GSP) or zonal/FMV of a Philippine real property classified as a capital asset. |
| NIRC § 56(A)(1) | Filing/payment deadline: within 30 days from the date of sale, exchange or disposition (counted from notarization of the Deed of Absolute Sale). |
| NIRC § 248 | Surcharge: 25 % of the basic tax if the return/payment is late; 50 % if the failure is “willful or fraudulent.” |
| NIRC § 249, as amended by R.A. 10963 (TRAIN) | Interest: “double the legal interest rate for loans or forbearance” (Bangko Sentral circulars set the legal rate at 6 % p.a. since 1 July 2013) → 12 % p.a. simple interest on the unpaid tax, computed from the statutory deadline until full payment. |
| BIR Revenue Memorandum Order (RMO) 7-2015 (still followed, latest schedule in RMO 7-2023) | Compromise penalty (administrative, optional in lieu of criminal prosecution). Amount depends on the basic tax due (ranges roughly from ₱ 1,000 to ₱ 50,000 for CGT). |
Bottom line: The longer you wait, the bigger the triple hit—25 % (or 50 %) surcharge + 12 % yearly interest + a compromise-penalty ticket.
2. Timeline snapshot
- Day 0 – Deed of Sale notarized.
- Within 30 days – File BIR Form 1706 (soon labelled “BIR Form CGT 1706”) and pay CGT at any authorized agent-bank (AAB), the Bureau of the Treasury, or via eFPS/eBIRPay.
- Beyond 30 days – Return is automatically “late”; penalties in §§ 248–249 attach.
- Before transfer – Secure Electronic Certificate Authorizing Registration (eCAR). The Registry of Deeds will refuse title transfer without an eCAR showing all taxes + penalties paid.
3. Practical penalty computation
Illustration: • Deed notarized 1 January 2025. • GSP ₱ 2 000 000. Basic CGT = 6 % × ₱ 2 000 000 = ₱ 120 000. • Return filed and tax paid 1 July 2025 (≅ 6 months late).
| Component | Formula | Amount |
|---|---|---|
| Surcharge (25 %) | ₱ 120 000 × 25 % | ₱ 30 000 |
| Interest (12 % p.a.) | ₱ 120 000 × 12 % × 6⁄12 | ₱ 7 200 |
| Compromise penalty (per RMO 7-2015: basic tax > ₱ 100 k ≤ ₱ 500 k) |
Fixed | ₱ 5 000 |
| TOTAL DUE | ₱ 162 200 |
If the return were found fraudulent (e.g., suppression of selling price), the surcharge jumps to 50 % (₱ 60 000), interest still accrues, and criminal prosecution (tax evasion under NIRC § 254) becomes possible.
4. Detailed elements of the penalty regime
| Penalty type | Trigger & legal basis | Mechanics | Key notes |
|---|---|---|---|
| 25 % surcharge | Failure to file and/or pay on time (NIRC § 248(A)(1) & (3)) | One-time, computed on the basic CGT, added to the tax prior to interest. | Automatically imposed even if delay is just one day. |
| 50 % surcharge | Return filed with intent to evade or contains substantial under-declaration (> 30 %) (NIRC § 248(B)) | Replaces, not adds to, the 25 % surcharge. | Proof of fraud may come from price mismatch v. zonal value. |
| Interest (12 % p.a.) | Any unpaid tax after the statutory deadline (NIRC § 249) | Simple interest, not compounded, accrues monthly (pro-rated). | Interest keeps running until date of actual payment; no cap. |
| Compromise penalty | Administrative settlement of criminal liability (RMO 7-2015/RMO 7-2023) | Flat amount per schedule; seller can contest but BIR rarely waives unless force majeure. | Separate from surcharge & interest; payable to obtain eCAR. |
5. Procedural steps to “clean up” a late CGT filing
Compute basic CGT, surcharge, interest up to projected payment date, and schedule-based compromise penalty.
Prepare:
- BIR Form 1706 (manually or via eBIRForms).
- Signed computation sheet & request for compromise (if handled by tax agent).
- Deed of Sale, TCT/CCT, tax declarations & zoning valuation.
Pay at AAB or online; secure BIR Form 0605 if paying interest beyond eBIRForms auto-calculation.
Submit documents to BIR RDO having jurisdiction over the property.
Secure eCAR (processing time ± 15 working days).
Register title at Registry of Deeds/LGU Assessor’s Office.
6. Case law & administrative issuances worth citing
| Citation (G.R. No.) | Holding relevant to late CGT |
|---|---|
| Spouses Pajonar v. CIR, 616 SCRA 305 (2010) | CGT attaches on the date of notarization of the sale, not on eventual buyer’s full payment or transfer in the registry. |
| Heirs of Vda. de Caro v. CA, 443 SCRA 177 (2004) | Non-payment of CGT bars title transfer; Registry correctly refused registration without a CAR. |
| BIR RMC 37-2019 | Implemented R.A. 11213 (Tax Amnesty Act). While general tax delinquencies could be settled at reduced rates, CGT on real-property sales was expressly excluded from the 2019 amnesty window. |
| BIR RMC 24-2020, 53-2020, 91-2020 | COVID-19 extensions: deadlines falling 16 March–19 June 2020 were tolled; penalties for filings within the extended period were condoned. |
7. Frequently-asked points of confusion
| Question | Clarification |
|---|---|
| Is the buyer liable for the penalties? | Statutorily, CGT is the seller’s tax, but BIR will not issue eCAR until somebody pays. In practice the buyer often advances the amount and nets it from the price. |
| Does signing an “installment sale” extend the 30-day period? | No. The sale is complete upon notarization. Only in a conditional sale where title transfer is suspended can the CGT be deferred (Rev. Regs. 13-99). |
| Can penalties be waived for “equitable reasons”? | Under RMO 20-2007 & RMO 7-2015, the Commissioner may abate surcharges/interest due to: (a) efiscalized BIR error; (b) force majeure; (c) such other meritorious cases. Documentary proof is strictly required and approval is discretionary. |
| What if the seller dies before paying CGT? | Estate is still liable; the 25 % surcharge and interest continue to accrue until the estate files and pays, but compromise penalties are often reduced in settlement negotiations. |
8. Interaction with other taxes & fees
- Documentary Stamp Tax (DST) – ₱ 15 for every ₱ 1 000 of consideration/FMVs; payable on or before the 5th day of the month following the notarization. Late DST incurs its own 25 % surcharge + 12 % interest + separate compromise penalty.
- Withholding Tax on Sale of Ordinary Assets – If the seller is habitually engaged in real-estate business, the sale may be treated as ordinary and creditable withholding tax (CWT) rules apply instead of CGT. Penalties mirror those for CGT.
- Local Transfer Tax & Registration Fees – LGUs impose transfer tax (generally 0.5 %–0.75 % of FMV) payable within 60 days; late payment surcharges/interest follow the Local Government Code (LGC §§ 168-257) schedule (up to 25 % surcharge + 2 % interest per month, capped at 36 months).
9. Compliance tips to avoid or mitigate penalties
- File “on account” within 30 days even if valuation documents are incomplete; pay any minimum CGT. Amend later to avoid the surcharge (interest runs only on the under-payment).
- Check BIR revenue issuances for extension bulletins (e.g., past pandemic, natural-disaster or system-downtime relief).
- Use the BIR Zonal Value “eZV” system to pre-compute FMV; over- or under-pricing leads to recalculations and possible 50 % fraud surcharge.
- Negotiate compromise—present proof of force majeure (e.g., hospital confinement, typhoon damage) for possible reduction or waiver under NIRC § 204.
- Document everything: official receipts, bank proofs, notarized sworn statements. A complete dossier accelerates eCAR release.
10. Take-away checklist
| 🔒 Deadline | Action | Consequences if missed |
|---|---|---|
| 30 days from notarization | File BIR Form 1706 & pay 6 % CGT | 25 % surcharge, 12 % p.a. interest, compromise penalty; no eCAR, no title transfer |
| On/Before 5th day of the month after notarization | File BIR Form 2000-OT & pay DST | Same penalties (separate computation) |
| 60 days from execution (LGU ordinances vary) | Pay local transfer tax | Up to 25 % surcharge + 2 % monthly interest (max 36 months) |
Rule of thumb: Pay CGT first, fast, and in full—it is the choke point of property conveyancing in the Philippines.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. Tax rules change and individual facts vary; consult a Philippine tax professional or the Bureau of Internal Revenue for guidance on your specific situation.