PRESS STATEMENT

05 April 2017

BIR clarifies computation of capital gains tax on sale of real properties

The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular
(RMC) No. 35-2017 to clarify the imposition of Capital Gains Tax (CGT) on the sales,
exchanges, or transfers of real properties classified as capital assets.

Under the Tax Code, a final tax of six percent (6%) shall be imposed on capital gains
PRESUMED to have been realized by the SELLER from the sale, exchange or other
disposition of real properties classified as capital assets located in the Philippines,
including pacto de retro sale and other forms of conditional sales.

The six percent (6%) CGT is based on the gross selling price or fair market value or
zonal value of the subject property, WHICHEVER IS HIGHER.

The foregoing implies that in order to be liable for the payment of CGT, there must
be presumed gain from the sale, exchange or disposition of real property. The mere
issuance of tax declaration without any sale, exchange, or disposition is not subject
to CGT. Likewise, there must be transfer of ownership that resulted from the sale,
disposition or conveyance of the real property.

The payment of the CGT is dependent and is a direct consequence of the sale,
transfer, or exchange.

Accordingly, mere issuance of tax declaration in the absence of any sale, exchange,
or other forms of conveyance is not subject to CGT. (reytdlc)
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(original signed)
Please refer to: REYMARIE T. DE LA CRUZ, Chief, PIED, 9817251

Approved for Release: For the Commissioner of Internal Revenue:

(original signed)
GAUDENCIO A. MENDOZA, JR., Chief Legal Counsel

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