Capital Gains Tax (CGT) is a final tax imposed by the Philippine government on the profit realized from the sale, exchange, or disposition of capital assets. It forms part of the broader taxation framework under the National Internal Revenue Code (NIRC) of 1997, as amended, particularly under Section 24(B) for individuals and Section 27(D)(2) and Section 28(A)(3) for corporations. The tax applies only to capital assets, which are properties held by the taxpayer not in the ordinary course of business, as distinguished from ordinary assets such as inventory or property used in trade or business.

In the Philippines, CGT primarily covers two major categories of capital assets: (1) real properties located in the Philippines, and (2) shares of stock in domestic corporations, whether listed or unlisted on the Philippine Stock Exchange (PSE). Other capital assets, such as bonds, jewelry, or personal property, may also be subject to CGT if they meet the criteria, but real property and shares of stock constitute the vast majority of transactions that trigger the tax.

The applicable tax rates are as follows:

For the sale of real property classified as a capital asset: six percent (6%) of the higher of the gross selling price or the current fair market value (zonal value determined by the Bureau of Internal Revenue or the fair market value per the assessor’s office).
For the sale of shares of stock in a domestic corporation not listed and traded through the PSE: fifteen percent (15%) on the net capital gain (selling price less cost basis).
For shares listed and traded through the PSE: one-half of one percent (0.5%) stock transaction tax on the gross selling price, which effectively replaces the CGT.
For non-resident aliens or foreign corporations, the same rates generally apply, with additional rules on withholding and sourcing.

CGT is a final tax, meaning the seller (or transferor) is directly liable for its payment, and the amount cannot be credited against other income taxes. The buyer or transferee has no withholding obligation in most cases, except in specific scenarios involving government entities or certain exempt transactions.

Exemptions and Special Rules

Certain transactions are exempt from CGT or qualify for relief:

Sale of the principal residence of a natural person taxpayer, provided the proceeds are fully utilized to purchase or construct a new principal residence within eighteen (18) months from the date of sale. A portion of the gain may be exempt proportionally if only part of the proceeds is reinvested. The exemption is claimed by filing the necessary application with the BIR.
Transfers by way of inheritance, donation, or those made in contemplation of death.
Sales or exchanges pursuant to a court order or government requisition.
Sales to the government or its instrumentalities under certain conditions.
Transactions involving low-cost or socialized housing units as defined under applicable laws.

Mergers, consolidations, or transfers of property in exchange for stock that qualify as tax-free exchanges under Section 40(C) of the NIRC are also exempt, subject to BIR approval and compliance with documentary requirements.

When CGT Becomes Due

The tax accrues upon the consummation of the sale, exchange, or disposition. For real property, the CGT return must be filed and the tax paid within thirty (30) days from the date of the sale or disposition. For unlisted shares of stock, the same thirty-day period applies. Failure to pay within the prescribed period incurs a 25% surcharge, plus interest at 12% per annum (or the prevailing rate under applicable revenue regulations) and compromise penalties.

Where to Pay Capital Gains Tax: Jurisdiction of the Bureau of Internal Revenue

All payments of CGT are administered and collected by the Bureau of Internal Revenue (BIR), the national agency under the Department of Finance tasked with the enforcement of internal revenue laws. Payment is not made to local government units (LGUs) such as cities or municipalities; real property taxes and transfer taxes (documentary stamp tax and transfer tax) are separate obligations handled by LGUs and the Registry of Deeds, but CGT remains a national tax.

The specific location for filing the return and paying the tax depends on the nature of the capital asset:

Real Properties (Land, Buildings, and Other Immovable Property)
The Capital Gains Tax Return (BIR Form No. 1706) must be filed with, and the tax paid to, the Revenue District Office (RDO) that has jurisdiction over the locality where the real property is situated. This is determined by the property’s address as reflected in the title or tax declaration.
- If the property spans multiple RDO jurisdictions (e.g., a large estate crossing city boundaries), the RDO covering the area with the higher zonal value or the principal portion of the property takes precedence.
- In the National Capital Region (NCR) or highly urbanized areas, specific RDO numbers are assigned (e.g., RDO No. 1 for Manila, RDO No. 39 for Makati, etc.). Taxpayers must verify the exact RDO using the BIR’s zonal value maps or by inquiring at the nearest BIR office.
- Payment may be made directly at the RDO’s collection counter or, more commonly, through any Authorized Agent Bank (AAB) within the same RDO’s jurisdiction. AABs include major universal and commercial banks accredited by the BIR (e.g., BDO, BPI, Metrobank, Land Bank).
- For taxpayers enrolled in the Electronic Filing and Payment System (eFPS), filing and payment can be done online through the BIR eFPS portal, but the electronic return must still be processed under the RDO of the property’s location.
Shares of Stock Not Traded in the PSE
The Capital Gains Tax Return for shares (BIR Form No. 1707) is filed with and paid to the RDO having jurisdiction over the seller’s principal place of business (for corporations) or legal residence/domicile (for individuals). If the seller is a non-resident, the RDO covering the place of the buyer’s principal office or the issuing corporation’s registered office may apply in certain cases.
- Payment follows the same channels: RDO collection counters, AABs within the applicable RDO, or eFPS.
Special Cases
- Non-Resident Citizens or Aliens: Payment is made through the RDO where the property is located (for realty) or through the RDO of the buyer or issuing corporation if no Philippine residence exists. A withholding agent may remit the tax in some instances.
- Estate or Trust Sales: The RDO of the decedent’s last residence or the trust’s principal place of administration governs.
- Installment Sales: Although the entire CGT is computed on the total consideration, the tax may be paid in installments corresponding to the collection of the selling price, provided a request for installment payment is approved by the BIR Commissioner. The filing and initial payment still occur within the 30-day period at the appropriate RDO.
- Judicial Sales or Foreclosures: The RDO of the property’s location remains the proper venue.

Documentary Requirements and Procedure

To effect payment and secure the necessary clearances:

Execute the Deed of Absolute Sale or Deed of Exchange, duly notarized.
Compute the tax using the higher of gross selling price or fair market value (zonal value published annually by the BIR Commissioner).
Prepare and file BIR Form No. 1706 (real property) or the appropriate form for shares, together with:
- Original and photocopies of the deed.
- Certified true copy of the Transfer Certificate of Title (TCT) or Original Certificate of Title (OCT).
- Tax Declaration and latest real property tax receipt.
- Proof of payment of documentary stamp tax.
- Sworn declaration of zonal value or BIR zonal valuation sheet.
- For principal residence exemption claims: BIR Form No. 1706 with attached application for exemption and proof of reinvestment.
Pay the computed tax at the designated RDO or AAB.
Obtain the stamped “Received” copy of the return and the Official Receipt or eFPS confirmation as proof of payment.
Present the proof of CGT payment to the Registry of Deeds for the issuance of the new title in the buyer’s name. The Registry of Deeds will not register the transfer without the BIR clearance or proof of CGT payment (Certificate Authorizing Registration or CAR).

The BIR issues a Certificate Authorizing Registration (CAR) upon verification that the tax has been fully paid. This CAR is indispensable for transferring title at the Registry of Deeds and for updating tax declarations with the local assessor’s office.

Penalties and Compliance

Late filing or payment incurs:

25% surcharge on the unpaid amount.
Interest at 12% per annum from the due date until paid.
Compromise penalty ranging from ₱1,000 to ₱25,000 depending on the violation.
Possible criminal prosecution under the NIRC for willful failure to pay.

The BIR conducts regular audits and cross-checks with Registry of Deeds records and bank reports to enforce compliance. Taxpayers are advised to retain all records for at least ten (10) years.

Recent Regulatory Framework

Revenue Regulations (RR) issued by the BIR, such as those updating zonal values, eFPS mandates, and procedures for electronic CAR issuance, govern the current implementation. Large taxpayers registered with the Large Taxpayers Service (LTS) or Large Taxpayers District Offices (LTDO) may have centralized filing options, but the jurisdictional rules based on property location or seller’s domicile still apply as the default.

In summary, the “where” of paying Capital Gains Tax in the Philippines is strictly tied to the Bureau of Internal Revenue’s Revenue District Offices, with the governing RDO determined by the physical location of real property or the seller’s residence/principal office for shares of stock. Proper identification of the correct RDO, timely filing of the prescribed BIR forms, and payment through authorized channels are essential to complete the transfer of ownership and avoid penalties. Compliance ensures the smooth transfer of title and full adherence to Philippine tax laws.