TAXATION IN A NUTSHELL (Sec. 24D, NIRC)TAX ON SALE OF REALTY

Rules: 1. in the application of this income tax, determination of whether there is gain or loss is immaterial because GAIN IS PRESUMED. 2. If all the elements are present, the General rule (FIT) CGT OF 6% applies, except when the taxpayer is RFC or a NRFC. 3. Tax base is Gross selling price or the current fair market value, whichever is higher

RATEINDIVIDUALS CORPORATIONS

REQUISITES EXCEPTIONS NOTESRC NRC RA NRAE NRANE DC RFC NRFC

TAXPAYERS NITGITof35%

1. Real property must be located in the Phils.

2. It must be a capital asset3. The seller is any kind of

individual including a DC

If all the elements are present CGT applies, otherwise it is the NIT or GIT provided it is an income within and TXP is RC or DC, the others are exempt.

If seller is RFC and NRFC (the law is silent)

If Buyer is a government or any of its political subdivisions or agencies or GOCC’s – Seller has the option to apply CGT or NIT income tax.PROVIDED:

1. Property being is sold is a residential property;

2. Seller must inform the BIR within 30 days from the date of transaction;

3. Proceeds of the sale is fully utilized in acquiring or constructing a new principal residence within 18 months;

4. Historical cost will be carried over the newly acquired residence; and

5. The privilege can be availed only once every 10 years.

NOTE: RR – 13-99, The barangay captain must certify that the property being sold was used for residential purposes.

Applicability of tax in Involuntary Sales, i.e. Foreclosures:

1. If property is not redeemed - Not subject to CGT because There is no change if ownership.

2. If redeemed – subject to CGT. The tax base would the amount of the highest bidder.

RATE OF TAX 6% Capital Gains Tax provided all the requisites are present

( including estates and trusts)

PROPERTY INVOLVED

Any kind of real property under the Civil Code

Landor

Buildingsonly

HoldingPeriod

( Se. 39B, NIRC)

HP is not applicable to the following:

1. Sale of realty which is a capital assets (Only applicable to capital personal property)

2. Sale of Shares of stock which is a capital assets3. Properties of the Corporation

Holding period – is the length of time where the TXP held the property (Capital assets which are personal properties)

1. Held more than 12 mos – 50% of net capital gains is exempt while the other 50% is taxable.

2. Held for less than 12 mos. – 100% of net capital gains is taxable.

Tax law supplements /©joel ofilan 2015 Page 1