Tax Treatment and Reporting for Sales of Memorial Lots in the Philippines

Last updated: general guidance based on the National Internal Revenue Code (NIRC), BIR regulations, and local government tax ordinances as commonly applied. This is an educational overview, not legal advice.

I. What exactly is being sold?

“Memorial lots” are typically spaces within memorial parks or cemeteries intended for interment. The way the contract is structured drives the tax results:

Transfer of land ownership (titled parcel or condominium-style columbarium unit). The buyer receives ownership over identified real property.
Assignment of interment rights/use rights only (no transfer of titled land). The buyer acquires the perpetual (or long-term) right to use a designated lot, vault, or niche, but the developer/park usually retains title to the land and common areas.

Why this matters: Philippine tax law distinguishes real property from personal/intangible property and ordinary vs. capital assets. Memorial-lot contracts often fall into the second bucket (interment rights), which changes income-tax characterization, VAT, and local transfer-tax exposure.

II. Parties commonly involved (and why their status matters)

Developers/park operators selling lots as part of regular trade or business. Their inventory or rights are ordinary assets.
Individuals (retail buyers) re-selling a lot/right they previously acquired for family use (not in business). Their lot/right is usually a capital asset (unless they are habitually selling).
Brokers/agents arranging sales for a fee. Their commissions are subject to separate income and business taxes.

Each party’s tax base, rate, and reporting obligations differ.

III. Income tax characterization

A. If what’s sold is real property (ownership transfers)

Seller is an individual or corporation not engaged in real-estate business; asset is a capital asset
- Capital Gains Tax (CGT) of 6% on the higher of gross selling price or fair market value (typically the zonal value or assessed value), payable by the seller.
- CGT is final; net gain/loss computation is generally not used for the tax itself.
Seller is engaged in real-estate business; asset is an ordinary asset
- No CGT. Instead, regular income tax applies on net income (gross sales less cost and allowable deductions).
- Creditable withholding tax (CWT) may apply at source, depending on the buyer and transaction type (see Section VII).
- Value-Added Tax (VAT) analysis also applies (see Section IV).

Red flag for memorial parks: Many developers do not convey titled land; if no real property is transferred, CGT generally does not apply. Don’t force a CGT framework onto a “right to inter” contract.

B. If what’s sold is a right to inter/use (personal or intangible property)

No real property CGT.
Tax treatment depends on the seller’s status:
- Developer/park operator (in business): Regular income tax on net income; VAT generally applies (Section IV).
- Occasional individual seller (not in business): Report ordinary income (gain) under regular individual income tax rates; generally no VAT if not in the course of trade or business.

IV. VAT, percentage tax, and registration

A. VAT on sales by developers/park operators

Sales of memorial lots or interment rights by developers are generally treated as sale of services or rights in the ordinary course of trade or business and are subject to VAT (assuming the seller is VAT-registered or required to be VAT-registered).
Unlike “residential lot” exemptions/thresholds, memorial lots are not residential real property; do not rely on residential VAT exemptions.

B. VAT for occasional resales by individuals

If a private individual not engaged in business assigns an interment right occasionally, the transaction is typically outside the scope of VAT (no VAT, no percentage tax), but income tax on any gain still applies.

C. Non-VAT taxpayers

A seller engaged in business but below the VAT threshold may be subject to percentage tax instead of VAT. Check current statutory thresholds and rates applicable at the time of sale.
If the business later exceeds the VAT threshold, mandatory VAT registration applies prospectively.

Practical tip: Memorial-park developers almost always fall into the VAT regime; retail resellers normally do not—unless they are habitually selling lots.

V. Documentary Stamp Tax (DST)

A. If there is a deed of sale or conveyance of real property

DST on deeds of sale of real property applies, computed on the consideration or fair market value (whichever is higher) at the statutory schedule under NIRC Sec. 196.

B. If the deal is an assignment of rights (personal/intangible)

No DST under Sec. 196 (which targets real property deeds), but DST may still arise under other provisions depending on the instrument (e.g., assignment, quitclaim, or similar). Careful instrument review is needed to determine whether any other DST head applies.

Practice note: Many memorial-park transfers are documented as “Assignment of Interment Rights” plus park-operator approval. Counsel should evaluate whether the instrument falls within a DST-taxable category.

VI. Local transfer taxes and Real Property Tax (RPT)

Local Transfer Tax (LTT). Provinces, cities, and Metro Manila LGUs impose a tax on sale, donation, or barter of real property (rates vary by LGU within NIRC/LGC caps).
- Applies when there is an actual transfer of real property ownership (i.e., titled land/units).
- Generally does not apply to pure assignments of interment rights where no land title changes hands.
RPT (Amilyar).
- If title to land transfers to the buyer, the buyer becomes liable for RPT from the year following transfer (subject to LGU rules).
- Where title remains with the developer, RPT typically stays with the developer; the right-holder usually pays park maintenance or perpetual care fees instead.

VII. Withholding tax (CWT/WHT) considerations

Capital asset sales of real property by individuals (i.e., subject to 6% CGT) are not subject to CWT; the seller pays CGT directly.
Sales of ordinary assets/rights by developers: creditable withholding tax may apply when the buyer is engaged in business and required to withhold on purchases from suppliers. The rate depends on current BIR regulations and seller classification.
Broker commissions/marketing fees: typically subject to CWT at prescribed rates on professional/commission income, plus VAT if the broker is VAT-registered.

Always confirm current CWT rates under the latest BIR Revenue Regulations (RR No. 2-98 as amended and subsequent issuances).

VIII. Timing and returns (common filings)

Deadlines and forms are periodically updated. Always check the latest BIR forms and eFPS/eBIR guidelines.

A. If CGT applies (real property capital asset)

BIR Form: CGT return (commonly BIR Form 1706).
When due: Within 30 days from the date of sale/transfer.
Basis: Higher of gross selling price or market value (e.g., zonal value or assessed value).

B. If VAT applies (developer/park operator)

BIR Form: Quarterly VAT return (currently BIR Form 2550Q).
When due: Quarterly, on or before the statutory deadline for the quarter.
Invoicing: Issue VAT official receipts for sale of services/rights, showing VAT separately.

C. Percentage tax (for non-VAT businesses, if applicable)

BIR Form: Percentage tax return (commonly 2551Q).
When due: Quarterly, by statutory deadlines.

D. DST

BIR Form: BIR Form 2000 (one-time transactions).
When due: Generally within the period prescribed for DST returns after the date of the instrument (check current rule—commonly within the month following the taxable document’s date).

E. Income tax (regular)

Individuals: Annual ITR (e.g., 1701/1701A depending on regime), with quarterly payments where applicable.
Corporations: Quarterly (1702Q) and annual (1702) corporate income-tax returns.

F. Certificate Authorizing Registration (CAR)

Required where a transfer of real property (with title) occurs. CGT/DST and other required taxes must be paid before the BIR issues a CAR, which the Register of Deeds requires to transfer title.
Not typical for pure assignments of interment rights without title transfer; instead, the park operator updates its internal registry after documentary checks and taxes/fees are settled.

IX. Zonal value, fair market value, and pricing nuances

For CGT and DST on real property, tax bases reference the higher of stated selling price and government-determined fair market value (often the BIR zonal value for the area, or the assessor’s value where zonal values are absent).
Memorial-park interment rights may not have zonal values because they are not titled realty parcels; in such cases, CGT/zonal value rules usually don’t apply—further indicating the transaction is not a CGT scenario.

X. Installment sales and financing

Developers often sell on installment with interest and separate perpetual care/maintenance fees.
- VAT is computed on each collection of the VATable consideration (if VAT-registered).
- Interest/penalties are generally VAT-exempt (being financial income) but subject to income tax.
Occasional resellers doing an installment deal should account for income tax on realized collections under their chosen method of accounting (cash vs. accrual), and no VAT if not in business.

XI. Transfers inter vivos vs. mortis causa

Donation of interment rights: May trigger Donor’s Tax (based on fair market value of the right) and potentially DST on the instrument, subject to exemptions (e.g., donations to qualified donee institutions).
Succession (inheritance): The value of the memorial lot/right may form part of the gross estate for Estate Tax purposes (subject to deductions/allowances). Internal park rules typically govern recognition of heirs; taxes (Estate Tax, possible DST on instruments) must be settled before updating the registry.

XII. Local fees and memorial-park charges

Perpetual care or maintenance funds/fees: Contractual and usually not a tax; treated as revenue to the park and an expense to the buyer. If charged by a VAT-registered operator, VAT typically applies to the service element.
Transfer/registry fees charged by the park on assignment or resale: Normally service fees; VAT treatment follows the operator’s tax status.

XIII. Common compliance pitfalls

Treating interment-right assignments as CGT transactions. If no real property is conveyed, using CGT/zonal value rules is often incorrect.
Ignoring VAT on developer sales. Memorial lots are not residential lots; residential VAT exemptions rarely apply.
Using deeds of sale of real property when the park will not transfer title. This can inadvertently trigger DST and local transfer taxes that should not apply.
Missing CAR where a titled unit/parcel is actually transferred. Without CAR, the Register of Deeds will not transfer title.
Incorrect withholding. Applying CWT to capital-asset sales (where CGT is due) or failing to withhold on ordinary-asset transactions from VAT-registered developers or on broker commissions.
Deadlines slippage. CGT and DST are time-sensitive. Penalties/interest accrue quickly.

XIV. Step-by-step checklists

A. Developer/park operator selling a memorial lot/right

Confirm contract nature (interment right vs. titled realty).
Register/maintain correct BIR registration (VAT or percentage tax).
Issue VAT Official Receipt (or Sales Invoice if applicable).
File VAT (2550Q) and income tax returns by due dates; withhold and remit taxes on commissions.
For titled property sales (rare in memorial parks), ensure CGT non-applicability (ordinary asset) and CWT compliance (if required), plus DST and CAR if a deed of sale of real property is used.

B. Individual reselling a memorial lot/right (no title transfer)

Verify the park’s transfer policy and required documents (e.g., assignment form, IDs, original contract, receipts).
Determine non-business status (occasional sale).
Compute gain (selling price minus cost/fees) and report in annual ITR; generally no VAT/no percentage tax.
Check for DST exposure on the assignment instrument (often none under Sec. 196; confirm instrument type).
Pay park transfer/registry fees as applicable.

C. Sale of a titled memorial unit/parcel (less common)

Treat as real property sale: check capital vs. ordinary asset status of the seller.
If capital asset (individual/corporation not in real-estate business): CGT 6%; DST; CAR; Local Transfer Tax; RPT clearance.
If ordinary asset (developer/real-estate business): regular income tax on net, VAT if applicable, CWT where required; DST on deed; CAR; Local Transfer Tax.

XV. Documentation & typical evidence

Contract to Sell / Deed of Absolute Sale / Assignment of Interment Rights
Official Receipts/Sales Invoices (VAT if applicable)
Park operator’s approval of assignment/transfer
Government IDs, TINs, and proof of payment of taxes/fees
For real property transfers: BIR CAR, Tax Clearance, RPT receipts, Transfer Tax receipt, TCT/CCT documents

XVI. Worked mini-examples (illustrative)

Example 1: Developer sells a memorial lot on installment (interment right). • The developer is VAT-registered. Collections each month are VATable; issue official receipts for each collection. • Interest on late payments is income but generally outside VAT. • The developer files VAT 2550Q quarterly and income tax returns; withholds on broker commissions.

Example 2: Individual resells a previously purchased interment right to another family. • No real property title passes; usually no CGT and no VAT. • Seller reports ordinary income (gain) in their annual ITR. • The park charges a transfer/registry fee (plus VAT if the park is VAT-registered). • Check whether the specific assignment instrument attracts DST under any head (often none under real-property DST).

Example 3: Rare titled niche unit conveys via deed of sale. • If the seller is not in real-estate business, CGT 6% applies on the higher of price or zonal/assessed value; DST on the deed; Local Transfer Tax; obtain CAR; transfer at the Register of Deeds. • If the seller is a developer (ordinary asset): no CGT; VAT may apply; CWT/DST per rules; CAR required for title transfer.

XVII. Governance, contracts, and consumer-protection overlays

Park by-laws and buyer’s rules typically govern resale/assignment, upkeep, design restrictions, and perpetual care funds.
Consumer and special laws (e.g., rules on pre-need plans if packaged, and advertising standards) may overlay tax compliance.
Anti-money laundering/KYC procedures can apply for larger cash transactions.

XVIII. Quick decision tree (high level)

Is title to real property transferred?
- Yes: CGT vs. ordinary asset rules; DST; CAR; LTT; VAT (if ordinary asset).
- No: Likely an interment right assignment → no CGT; check regular income tax and VAT only if seller is in business; consider DST only if another instrument-based head applies.
Is the seller in the course of trade or business?
- Yes: Regular income tax; VAT or percentage tax; possible CWT.
- No (occasional individual): Report ordinary income on any gain; typically no VAT/no percentage tax.
Are there broker commissions?
- Withhold and report CWT; apply VAT on commissions if broker is VAT-registered.

XIX. Record-keeping and audit readiness

Keep complete files: contracts, ORs/invoices, park approvals, IDs/TINs, proof of tax payments (CGT/DST/LTT), and, if applicable, the CAR.
For businesses: reconcile general ledger to VAT returns, subsidiary sales books, and withholding tax remittances.

XX. Final notes and cautions

Exact rates, thresholds, and forms (especially VAT thresholds, percentage-tax rates, DST computation mechanics, and CWT rates) are subject to amendments by law and BIR regulations.
The label of the contract does not control; substance governs tax treatment.
When in doubt—especially on whether CGT applies—examine whether any land title actually transfers. That single fact usually settles the framework.

Practical next steps

Review the contract and park rules to determine what is being transferred.
Map the transaction to the decision tree above.
Prepare the correct filings (CGT/DST/CAR if real property; or VAT/income tax/withholding if a business sale of rights).
Coordinate with the park operator and, for titled transfers, the Register of Deeds and LGU for local taxes.
Consider obtaining a BIR ruling or professional tax opinion for unusual structures or high-value deals.