1) The short legal answer

Under Philippine tax law, the seller (or transferor) of real property is the person liable to pay Capital Gains Tax (CGT) when the sale involves real property in the Philippines classified as a “capital asset.” The buyer is not the statutory CGT taxpayer.

But in real-world transactions, parties often ask “who should pay?” because the economic burden can be negotiated: the buyer can agree to shoulder CGT as part of the price, or pay it on the seller’s behalf at closing. Even then, BIR will still treat the seller as the liable taxpayer—meaning if CGT is not properly paid, the seller is typically the one exposed, and the transfer will be blocked because the BIR will not issue the needed clearance for registration.

Bottom line:

Legally liable: Seller (taxpayer).
Can parties agree buyer pays? Yes, as a contractual allocation of costs, but it doesn’t change who BIR considers the taxpayer.

2) When does CGT apply to real property sales?

CGT on real property applies when all are true:

The property is real property located in the Philippines, and
The seller is selling it as a capital asset (not used in trade/business as an ordinary asset), and
The transfer is an onerous transfer (sale/exchange/other disposition for value), including certain transactions treated like a sale.

The CGT rate (real property capital asset)

For most sales of Philippine real property classified as a capital asset, CGT is 6% of the tax base.

The CGT tax base

The 6% is imposed on the higher of:

the gross selling price / consideration stated in the deed, or
the fair market value (FMV) (commonly measured using the BIR zonal value and/or the assessor’s value in the tax declaration; practice is to use the highest relevant FMV basis).

Practical effect: you can’t avoid tax by “underdeclaring” the price—BIR will compute CGT using the higher value base.

3) Capital asset vs ordinary asset: the fork in the road (and why it matters)

This topic gets confusing because not all property sales use CGT.

A) “Capital asset” (CGT generally applies)

Generally includes real property not used in business, such as:

a personal residential house/lot not used in business,
inherited land held for personal investment,
property not held as inventory or used in a trade/business.

Tax: typically 6% CGT (final tax), plus other taxes/fees.

B) “Ordinary asset” (CGT generally does not apply)

Real property can be an ordinary asset if, for example:

it is used in the ordinary course of business, or
held primarily for sale to customers (e.g., real estate dealer/developer), or
used in business operations (depending on facts and the seller’s business).

Tax: generally regular income tax rules apply (and potentially VAT for sellers in the real estate business, depending on the transaction and thresholds), plus withholding tax mechanisms in many cases.

Why this matters for “who pays”: With ordinary assets, the buyer is often required to withhold a creditable withholding tax (as withholding agent) under specific rules—this is different from CGT where the seller is the taxpayer.

4) So who pays CGT in practice?

A) Default market practice (common, not mandatory)

In many Philippine private deals:

Seller pays: CGT, broker’s commission (often), some closing docs
Buyer pays: documentary stamp tax (DST), transfer tax, registration fees, notarial fees (often)

But this is not a rule—it’s just a common convention.

B) What the law effectively forces at closing

Even if parties agree “buyer will pay CGT,” the transaction usually still needs:

seller cooperation (signatures, tax documents), and
proof of payment filed properly so BIR issues the clearance needed to transfer title.

If CGT is unpaid or incorrectly paid, the BIR will not issue the Certificate Authorizing Registration (CAR) / eCAR, and the Registry of Deeds generally won’t transfer the title. That practical leverage is why many contracts structure the closing so CGT is paid (or escrowed) before release of documents.

5) How sellers actually “pay” CGT: the compliance flow (why buyers care)

A typical sequence:

Sign Deed of Absolute Sale (DOAS) (or other deed of conveyance).
Prepare supporting documents (IDs, TCT/CTC, tax declaration, SPA if any, etc.).
File CGT return and pay CGT to BIR (timelines are strict; late payment triggers penalties).
Pay Documentary Stamp Tax (DST) as applicable.
Apply for CAR/eCAR from BIR.
Pay local transfer tax at LGU.
Register deed at Registry of Deeds; pay registration fees.
Issue new TCT in buyer’s name; update tax declaration.

Why the buyer cares: without CAR/eCAR, title transfer stalls. So even though CGT is the seller’s tax, buyers often insist on controlling the payment step (escrow, direct payment, or closing conditionality).

6) Special cases that change the “CGT vs not CGT” answer

A) Sale of a principal residence (possible CGT exemption)

An individual seller of a principal residence may qualify for CGT exemption if requirements are met, commonly including:

proceeds are fully utilized to acquire/construct a new principal residence within a prescribed period,
proper notice/filings with BIR,
and the privilege is generally limited in frequency (commonly “once every so many years”).

If only part of the proceeds is used, CGT can apply to the unutilized portion (and penalties may apply depending on compliance).

Who pays if exempt? No one pays CGT—but the seller still must comply with BIR documentation to obtain CAR/eCAR.

B) Sale to the government (often with tax options)

Certain sales to the government or its instrumentalities can involve special rules or options (depending on the seller’s status and the specific law/regulation applied). This can affect whether CGT is imposed or whether another income tax treatment applies.

C) Foreclosure / dacion en pago / transfers treated like sale

Some transactions that aren’t “plain sales” can still be treated as dispositions subject to CGT if the property is a capital asset, such as:

dacion en pago (property given to settle a debt),
certain foreclosure-related transfers,
exchanges.

The label is less important than the substance: a disposition for value can trigger tax.

D) Installment sales

Even if the price is paid over time, CGT (for capital assets) is typically computed on the tax base at the time of sale/disposition, not “as collections come in,” because CGT is a final tax tied to the act of transfer.

E) Sale by corporations vs individuals

Both can be subject to the 6% CGT on capital assets, but documentation and classification issues can differ. For business entities, whether the property is a capital or ordinary asset can be heavily fact-based.

7) Other taxes and costs at a glance (often confused with CGT)

Even when CGT is “the big one,” a property transfer commonly triggers:

Documentary Stamp Tax (DST) on the deed of conveyance (commonly computed on the higher of consideration/FMV).
Local Transfer Tax (LGU-imposed).
Registration fees (Registry of Deeds).
Notarial fees.
Unpaid real property taxes (RPT) and tax clearance requirements, if any.

Who pays these? Entirely negotiable by contract, but many deals follow local convention (buyer often shoulders DST/transfer/registration). What matters is what your deed/contract says.

8) Contract drafting reality: you can make the buyer pay, but do it cleanly

If parties agree the buyer will shoulder CGT, it’s best practice to reflect it clearly so it doesn’t become a dispute later.

Common approaches:

“Net of CGT” pricing: Buyer pays a higher price; seller pays CGT out of proceeds, ensuring seller remains compliant.
Buyer pays “for and on behalf of” seller: Buyer remits tax directly, but requires seller’s cooperation and proper documentation.
Escrow/holdback: Buyer withholds an amount equal to CGT from the price and releases it only after proof of BIR payment/CAR issuance.

Key caution: A sloppy clause like “buyer shall pay CGT” without mechanics can create deadlock (who files? whose TIN is used? what if BIR recomputes higher tax base?).

9) Practical “who should pay?” guidance (risk-based)

Even though it’s negotiable, here’s the risk logic many parties follow:

If you are the buyer

You want certainty of title transfer, so you want CGT paid correctly and on time.
Many buyers insist either:
- seller pays CGT before closing, or
- buyer controls payment through escrow/direct remittance.

If you are the seller

Since you are the liable taxpayer, you want:
- clear agreement on whether price is “gross” or “net of CGT,” and
- protection if buyer promised to shoulder CGT but fails to pay (because your title transfer and tax exposure are on the line).

10) A simple worked example

Contract price in deed: ₱5,000,000
BIR zonal/FMV basis used by BIR: ₱6,000,000
Tax base = higher value = ₱6,000,000
CGT = 6% × ₱6,000,000 = ₱360,000

Even if buyer and seller agree “buyer shoulders CGT,” the CGT is still computed the same way, and the filing/payment must still be completed properly to secure CAR/eCAR.

11) Common pitfalls that cause BIR delays (and deal problems)

Understated selling price vs zonal/FMV
Missing seller/buyer TIN details or mismatched names vs title
Unclear authority of signatory (SPAs, corporate signatories)
Late filing/payment (penalties accrue)
Principal residence “exemption” claimed without meeting documentation/usage rules
Property actually an ordinary asset (wrong tax return/treatment used)

12) Takeaways

CGT is the seller’s tax (seller is legally liable) for sales of Philippine real property classified as a capital asset.
Parties can agree the buyer shoulders it, but that’s a private allocation of cost—not a change in taxpayer.
The transaction typically cannot be registered without BIR clearance, so buyers commonly structure closing to ensure CGT is paid correctly.
Always confirm first whether the property is a capital asset or ordinary asset, because that determines whether CGT even applies.

If you want, paste the basic facts (seller type: individual/corp; property use; location; whether principal residence; price vs zonal; deal structure), and I’ll map the most likely tax treatment and a clean closing-cost allocation you can use in a deed or contract.