REAL ESTATE TAXATION

Lecturer
GIGI CABANLAS-ROA, LLB, MBA, REB, REA,
REC

TAXES RELATED TO REAL

ESTATE TRANSACTIONS
CGT EWT

CAPITAL GAIN TAX

- EXPANDED WITHHOLDING

TAX
DST-

DOCUMENTARY STAMP

EST -

ESTATE TAX

VAT -

VALUE ADDED TAX

IT-

INCOME TAX

TAX

Republic Act No. 8424 Comprehensive Tax Reform

Program (CTRP)

An act amending the National Internal Revenue

Code (NIRC), as amended and for other
purposes.

Sec. 6 NIRC
Power
of
the
Commissioner
to
make
assessments
and
prescribe
additional
requirements for tax administration and
enforcement.

(E) Authority of the Commissioner to

prescribe Real Property Values
- The Commissioner is hereby authorized
to divide the Philippines into different zones
or areas and shall, upon consultation with
competent appraisers both from the private
and public sectors, determine the fair
market value of real properties located in
each zone area.

For purposes of computing any internal

revenue tax, the value of the property shall
be, whichever is the higher of:
(1) The fair market value as determined by
the commissioner of internal revenue.
(2) The fair market value as shown in the
schedule of values of the Provincial and
Assessors.

RECOMMENDED ZONAL
VALUE
DEPT ORDERS
1990
56-90
Dec.
1994 1st Revision 81-94
1997 2nd Revision 41-97
2006 3rd Revision 37-05

EFFECTIVITY
15/90
Oct. 5 /94
Oct. 12/97
June 4/06

MEMBERS OR PARTY TO THE

RECOMMENDATION OF ZONAL VALUE
Provincial/City Assessor
Realtors/Appraisers
BIR

Each will give their recommended values for

every section zones of lots located in the
city or municipality, using the Maps of
Locations and Actual Inspection of the
area.

The 1st two (2) highest recommended

values
Add then total divided by 2 equals the
final
value.
PUBLIC HEARING
Forward report to the Asset Valuation
Division
Ass. Service, BIR, Manila for review and
approval.

DEFINITION OF TERMS

Residential Land/ Building Principally

devoted to habitation

Commercial Land/building principally

devoted to commercial
purposes and generally for the
subject
of profit

Industrial
industry

- Devoted principally to
as capital

Agricultural Devoted principally to

raising of
crops such as rice, corn,
sugarcane, tobacco, etc. or to
pasturing, dairying, inland
fishing, salt making and other
agricultural
uses
including
timberland and forest land.

General Purpose Raw land undeveloped

and
underdeveloped area which has
potential for development into
residential,
commercials,
industrial, institutional, etc.
must be
less than 5,000 square
meters.

Vicinity
Means an area, locality,
neighborhood or district
about, near, adjacent,
proximate
or contiguous to
street being
located.

CLASSIFICATION LEGEND

RR
CR
GL
GP
APD
RC
CC
I
X
A
PS
CL

Residential Regular
Commercial Regular
Government Land
General Purpose
Area for Priority Development
Residential Condominium
Commercial Condominium
Industrial
Institutional
Agricultural
Parking Slot
Cemetery Lot

AGRICULTURAL LANDS
CODE
CLASSIFICATION
A1RICELAND IRRIGATED
A2RICE LAND UNIRRIGATED
A3UPLAND
A4COCOLAND
A5CITRUS LAND
A6FISHPOND
A7SWAMP
A8NIPA LAND
A9COTTON LAND
A10 COGON
A11 ABACA LAND

AGRICULTURAL LANDS
CODE
CLASSIFICATION
A12 ORCHARD
A13 PINEAPPLE LAND
A14 BANANA LAND
A15 PASTURE LAND
A16 CORN LAND
A17 SUGAR LAND
A18 TOBACCO LAND
A19 CACAO
A20 LANZONES

AGRICULTURAL LANDS
CODE
CLASSIFICATION
A21 DURIAN
A22 RAMBUTAN
A23 MANGO
A24 MANGROVE
A25 CAMOTE/CASSAVA
A26 BAMBOO LAND
A27 PEANUT LAND
A28 SOY BEANS LAND
A29 GRAPE VINEYARD
A30 PEPPER LAND

AGRICULTURAL LANDS
CODE
CLASSIFICATION
A31 MINERAL LAND
A32 NON METALLIC MINERAL LAND
A33 COAL DEPOSIT
A34 AFRICAN OIL LAND
A35 RUBBER LAND
A36 FOREST LAND/TIMBER LAND
A37 HORTICULTURAL LAND
A38 SALT BEDS
A39 SEA SHORE
A40 RESORT

AGRICULTURAL LANDS
CODE
CLASSIFICATION
A41 SANDY/STONY
A42 PRAWN POND
A43 SORGHUM
A44 IPIL IPIL
A45 KANGKONG
A46 ZARATE
A47 VEGETABLE LAND
A48 COFFEE
A49 MOUNTINOUS/HILLY AREAS
A50 OTHER AGRICULTURAL LAND
* Agricultural/Raw land not less than 5,000 square
meters

3rd REVISION
STREET/
SUBDIVISION

VICINIT
Y
CLASS

Barangay 56,
Section
Puntod
3

Don Julio Pacana

Rd

CR

RR

Escobido St.

RR

All Others

RR

Barangay 56,
Puntod

I
Section
4

Corrales Ext.

CR

RR

J.Pacana St.

CR

BIR

ASSESS APPRAIS
OR
ER/
REALTOR

FINAL

8,000. 4,730.0
00
0 7,000.00 7,500.00
4,000. 4,730.0
00
0 2,000.00 4,365.00
2,000. 1,270.0
00
0 1,600.00 1,750.00
1,500. 1,270.0
00
0 1,000.00 1,385.00
10,000 4,730.0 10,000.0 10,000.0
.00
0
0
0

24,000 3,040.0 15,000.0 19,500.0

.00
0
0
0
19,200 3,040.0 12,000.0 15,600.0
.00
0
0
0
22,500 4,730.0 15,000.0 18,570.0
.00
0
0
0

3rd REVISION
STREET/
SUBDIVISION

VICINIT
Y
CLASS

Barangay 55,
Puntod

Section
5

Gaabucayan Ext

CR

RR

Corrales Ext.

CR

RR

All other Streets

CR

Lots along road to

Agora

RR

RR

CR

BIR

ASSESSO APPRAISE
R
R/
FINAL
REALTOR

18,000.
15,000.0 16,500.
00 4,730.00
0
00
14,400.
12,000.0 13,200.
00 4,730.00
0
00
24,000.
15,000.0 19,500.
00 4,730.00
0
00
19,000.
12,000.0 15,500.
00 4,730.00
0
00
5,000.0
5,000.0
0 3,040.00 5,000.00
0
3,000.0
3,020.0
0 3,040.00
500.00
0
8,000.0
5,000.0
0 4,730.00 5,000.00
0
5,000.0
5,000.0
0 4,730.00 5,000.00
0

STREET/SUBDIVISI VICINIT CLASSIFICATI

ON
Y
ON

2006
3RD
REVISION

1997
2ND
REV.
ZV/SQ.
M.

1994
1ST
REV.
ZV/SQ.
M.

Barangay 54

Along Super
Highway

Section
1
CR

1,500.0 1,300.0
0
0

Along Burgos Ext.

CR

745.00

850.00

M.Vega St

CR

754.00

850.00

All Others Streets

CR
Section
Duncan Subd.
2
RR
Section
Barangay 55
1

445.00

390.00

350.00

300.00

NHA Puntod

RR

500.00

All other Streets

RR
Section

100.00

80.00

STREET/SUBDIVI VICINIT CLASSIFICATI

SION
Y
ON

Barangay 55

Section
4

1997
1994
2ND
REV. 1ST REV.
ZV/SQ.M ZV/SQ.M
.
.

Corrales Ext

CR

1,320.00 1,150.00

J.Pacana St.

CR

1,700.00 1,500.00

Gaabucayan St

RR

1,450.00 1,250.00

Guanco Subd.

RR

900.00

All other Streets

Section
Barangay 55
5

650.00

550.00

Gaabucayan Ext

CR

845.00

550.00

Corrales Ext

CR

1,300.00 1,150.00

2006
3RD
REVISION

STREET/SUBDIVIS VICINIT CLASSIFICATI

ION
Y
ON

Section
6

1997
1994
2ND
REV. 1ST REV.
ZV/SQ.M ZV/SQ.M
.
.

Corrales Ext
Gasoline Depot
AR

1,450.00 1,250.00

Mendoza Ext.

RR

410.00

350.00

All other Streets

RR
Section
Barangay 55
7

185.00

150.00

All other Streets

RR
Section
Barangay 55
1

J. Pacana St.
Macabalan

CR
All other Streets

125.00

100.00

900.00

600.00

Barangay 55

2006
3RD
REVISION

CGT CAPITAL GAIN TAX

IMPOSED

UPON ALL PERSONS Natural

or Judicial, Whether Resident or Non
Resident, including estates and trusts
who:
Sell
Exchange or
Dispose
of Real Property located in the
Philippines classified as CAPITAL
ASSET

The term SALE includes:

Pacto de Retro Sales and

Other forms of Conditional Sales
TAX BASE IS THE HIGHER OF:
Gross Selling Price
Fair Market Value as indicated in the
latest Tax Declaration, or
Zonal Value as determined by the CIR.

 CAPITAL

ASSETS Means property held

by the taxpayer (whether or not
connected with his trade or business)
but does not include:

Stocks in trade of the tax payer, or

Other property of a kind which would
properly be included in the inventory
of the tax payer if on hand at the close
of the taxable year

Property held by the tax payer for sale to

customers in the ordinary course of his
trade or business or

Property used in the trade or business of a

character which is subject to depreciation,
or

Real Property used inn trade or business

of the taxpayer.

The Transaction maybe taxable at the rate

of 6% or exempt

PRINCIPAL RESIDENCE
Capital Gain Tax provided:

Exempt

from

Sale of Principal Residence is made by

Natural person

The proceeds is fully utilized in acquiring

or constructing a new principal residence
with 18 months calendar months from the
date of sale

CIR is duly notified within 30 days by the

taxpayer from the date of sale thru a
prescribed return (FORM 1706) and
SWORN DELCLARATION OF INTENT.

Said tax exemption can be

availed of only once in 10 years.
(Effective November 2000)

No
full
utilization
of
the
proceeds of the sale that portion
of the gain presumed to have
been realized from the sale or
disposition shall be subject to
capital gain tax.

TO DETERMINE TAXABLE
PORTION

GSP/FMV (AT TIME OF SALE WHICHEVER IS

HIGHER)x
UNUTILIZED AMOUNT = TAXABLE
PORTION
GSP

PRINCIPAL RESIDENCE
Shall refer to the dwelling house,
including the land on which it is situated,
where the husband and wife or an
unmarried individual, whether
or not
qualified as head of family, and member of
his family reside. Actual occupancy of such
principal residence shall not be considered
interrupted or abandoned by reason of the
individuals temporary absence there from
due to travel or studies or work abroad or
such other similar circumstances. Such
Principal Residence must be characterized
by permanency in that it must be the
dwelling house in which, whenever absent,
the said individual intends to return.

PROOF:
Certification from the Brgy.
Captain
Residential Address shown in
the latest ITR
Certification by Bldg.
Administrator In Case
condominium unit.

WHEN AND WHERE TO FILE

CAPITAL GAIN TAX RETURN
Form 1706 shall be filed in triplicate by the
seller with the AAB or the CA of the RDO
having jurisdiction over the place where the
property is located.

Filed within 30 days following each sales,

exchange or disposition of real property.

One return shall be filed for every real

property sold, exchanged or disposed (for
cash sale or foreclosure sale) or every
installment sales.

Pay as you file

Capital Gain Tax Final Tax, Gross
Sales of seller is no longer
included in his/her gross income
for income tax purposes.

CAPITAL GAIN TAX TOOK EFFECT

SEPTEMBER 7, 1979
1979-1985

TAX BASE
SELLING PRICE LESS COST OF
SALES/EXPENSES
= NET GAIN
100,000.00 10%
OVER
- 20%

CAPITAL GAIN TAX TOOK EFFECT

SEPTEMBER 7, 1979
1986

1990

TAX BASE
SELLING PRICE OR FAIR MARKET VALUE
WHICHEVER IS HIGHER x 5% = CAPITAL GAIN TAX
NO GAIN TAX/TAX ON GROSS SALE
SP-P 500,000.00
FMV 300,000.00

CAPITAL GAIN TAX TOOK EFFECT

SEPTEMBER 7, 1979

Effective 12/15/90
Zonal value took effect

TAX BASE
SELLING PRICE, OR FAIR MARKET VALUE
OR ZONAL VALUE WHICHEVER IS
HIGHER x 5% = CGT

Jan. 1, 1998
COMPREHENSIVE TAX REFORM ACT/RA 8424
SAME BASE BUT RATE OF TAX IS 6%

1979 -1985
SP
COST
EXPENSES
TOTAL
DEDUCTION
NET GAIN
CGT
100,000@10%
250,000@20%
100,000@20%
TOTAL TAX

ACTUAL
500,000
100,000
50,000

OVER/UNDER
500,000
100,000
200,000

150,000
150,000

300,000
200,000

10,000
50,000

10,000

60,000

20,000
30,000

1986 -1990
SP
FMV
TAX BASE
TOTAL TAX

ACTUAL
500,000
300,000

OVER/UNDER
300,000
300,000

500,000
5%
25,000

300,000
5%
15,000

January 1,
1991
SP, FMV, ZONAL
VALUE
SP
500,000
FMV
300,000
ZONAL VALUE
400,000
TAX BASE
500,000
5%

300,000
300,000
400,000
400,000
5%

January 1, 1998
SP, FMV, ZONAL VALUE
Whichever is higher rate is 6%

Q.
An 800 square meter lot with a
house, was sold for P3.5M. Per
tax declaration, the FMV of the
house is P1.5M and the lot is
P1.6 M. The zonal value of the
lot is P3,500/sq.m. The sale is
subject to capital gains tax.
Compute:
1. The Tax Base
2. The Capital Gain Tax
3. The Documentary Stamps Tax

ANSWER:
(1) Price per Deed of Sale
P3.50M
Zonal Value:
Lot(800sq.m. @ P3.500/sq.m.) P2.80M
Add: Lot improvement value
whichever is higher
(P3.50M-P2.80) (P0.70M)
Improvement value per tax declaration P1.50M 1.50 M
Total Zonal Value of the Property P4.30M

(1) Basis of the Capital Gain Tax is P4.30M

because it is higher than the contract
price.
(2) Capital Gain Tax:
6% of P4.30M P258,000
======
(3) Documentary Stamps:
1.5%of P4.30M P 64,500
======

CAPITAL GAIN TAX

PROBLEM:
Peter sold his residential house and
lot located at Capistrano St, Cagayan
de Oro City on July01, 2006 for P1M.
Area of the lot is 200 sq. meters and
the zonal value is P 4,000.00 per sq.
meter. City Assessors fair market
value for lot is P500,000.00 and for
building is P400,000.00. Brokers
commission is 5% of selling price.
Compute the Tax Base, CGT, DST, and
Commission of the broker.

SOLUTION:
1. TAX BASE:
Selling Price
P1,000.000
Zonal Value Lot
200 sq.m. x P4,000.00
P800,000
FMV Lot
500,000
FMV Building
400,000
ZONAL VALUE OF LOT(HIGHER)
800,000
VALUE OF BUILDING
200,000
LOT(WHICHEVER IS HIGHER)
P 800,000
BUILDING(WHICHEVER IS HIGHER)
400,000
TAX BASE
P1,200,000

2. CAPITAL GAIN TAX:

P1,200,000 x 6%

P72,000

3. DOCUMENTARY STAMPS TAX:

P1,200,00 x 1.5%
P18,000
4. BROKERS COMMISSION:
P1,000,000 x 5%
P50,000

PROBLEM: OVERPRICING
COMMISSION INSTEAD OF
STANDARD 5% COMMISSION
Arvin got Nick as his broker to sell his house and lot located
at Puntod, Cagayan de Oro City for P1M offering Nick a 5%
commission of the SP, but Nick requested Arvin that he will
overprice the sale for P1.2M and he will assume the CGT and
DST. Arvin approved the request happy to receive a net of
P1M having no problem for taxes and commission. Nick the
broker is happily computing his net commission after
deducting 6% CGT and 1.5% DST based on SP or a total of
P75,000 and a net of P125,000 instead of P50,000 If he
chose the 5% commission. But nick forgot to take into
consideration the BIR zonal value of the lot. When Nick went
to BIR office to process the papers for transfer, this is the
computation of the BIR Examiner.

SOLUTION:
SELLING PRICE P1,000,000
ZONAL VALUE OF LOT P2,000,000
2,000,000
FMV OF LOT
1,000,000
FMV OF BUILDING
500,000
500,000
TAX BASE
2,500,000
CGT 6% OF P2.5M
150,000
DST 1.5% OF P2.5M
37,000
TOTAL TAX DUE
187,000
NET COMMISSIONP
TOTAL OVER PRICE

12,500*
P 200,000

*IF 5% COMMISSION OF P1M

50,000
-12,500*
37,500

50,000

EXPANDED WITHHOLDING
TAX
ORDINARY ASSETS
-BIR FORM 1606
TAXABLE BASSE IS HIGHER OF :

The consideration stated in the sales

document, or
The fair Market Value indicated in the
latest tax declaration or
The zonal value as determined by the CIR

EXPANDED WITHHOLDING
TAX
In an exchange, the fair market value of the property
received in exchange, as determined in the Income Tax
Regulations shall be used.

TRANSACTION
TAX RATE
Registered with and certified by the HLRUB or
HUDCC as engaged in socialized housing projects
pursuant to RA 7279 the selling price of the house
and lot or lot only does not exceed P300,000
0%

TRANSACTION

TAX RATE

Not registered with the HLURB, seller habitually

engaged in real estate business:
with a selling price of Five hundred thousand
pesos (P500,000.00) or less
1.5%
with a selling price of more than five hundred
thousand pesos (P500,000) but not more than
two million pesos (2,000,000.00)
3.0%
with a selling price of more than two million
pesos (2,000,000.00)
5.0%

TRANSACTION

TAX RATE

A seller/transferor must show proof

registration with HLURB or HUDCC
to be considered as habitually engaged
in the real estate business:
Seller not habitually engaged in
the real estate business
6.0%

INSTALLMENT SALE-PAYMENT IN THE

YEAR OF SALE DO NOT EXCEED 25% OF
THE SELLING PRICE
TREATMENT:

IF THE BUYER IS NOT ENGAGED IN TRADE OR

BUSINESS
No withholding is required to be made on the
periodic installment payments
Applicable rate of tax based on the gross selling
price or fair market value of the property at the time
of the execution of the contract to sell, whichever is
higher, shall be withheld on the last installment.

INSTALLMENT SALE-PAYMENT IN THE

YEAR OF SALE DO NOT EXCEED 25% OF
THE SELLING PRICE

IF THE BUYER IS ENGAGED IN BUSINESS

Tax shall be deducted and withheld by the buyer from every
installment based on the ratio:
Actual Collection
Agreed upon consideration ( Contract to sell) x GSP
or FMV, whichever is higher, who shall file
BIR form 1606 shall be filed in triplicate by every withholding
agent/buyer on the:
1. Sale
2. Transfer or
3. Exchange of Real Property

WHEN AND WHERE TO FILE

File on or before the 10th day of the ff.

month

Filed with any AAB or CA of the RDO having

jurisdiction over the place where the real
property is located

Pay as you file

ATTACHMENTS REQUIRED

Notarized Deed of Sale or exchange

Photocopy of the title
Certified true copy of the latest tax declaration (lot
and/improvement)
Lot only certification from Assessors Office that there
is no existing improvement on the lot being transferred
Proof of registration with HLURB or HUDCC, if applicable
Proof of tax payment
Tin of buyer and seller

Proof of registration with HLURB or HUDCC,

if applicable
Proof of tax payment
Tin of buyer and seller
These requirements must be submitted to
the revenue officer of the ONETT counter of
the RDO before a certificate authorizing
registration (CAR) can be released to the
taxpayer

 DOCUMENTARY

On Deed of Sale and Conveyances of Real

Property: P15/P1,000

BIR

STAMP TAX

Form 2000 shall be:

Filed within 5 days after the close of the
month when the taxable document is made,
signed, issued, accepted or transferred

Filed with the AAB or the CA of the RDO which

has jurisdiction over the residence or place of
business of the taxpayer

Pay as you file

Whenever one party to the taxable document
enjoys exemption from DST, the other party
who is not exempted shall be one directly liable
for the tax.

 ESTATE

TAX BIR FORM 1801

Filed by the executor or administrator, or

any of the legal age heirs of the decedent
whether resident or non resident of the
Phils., under any of the ff situations:

In all cases of the transfers subject to estate

tax or

Where though exempt from estate tax, the

gross value of the estate exceeds P200,000
or

Regardless of the gross value of the estate,

where the said estate consists of registrable
properties like real props, vehicles, shares
of stocks or other similar property for which
a clearance from the BIR is required as a
condition for transfer of ownership.

WHEN AND WHERE TO FILE

Filed within six (6) months from decedents death;

in meritorious cases, filing be extended by 30 days

Pay as you file

Pay to the AAB or the CA of the RDO which has

jurisdiction over the place of Domicile of the
decedent

If decedent has no legal residence in the Phils, file

in CIRs office

File only once

TAX BASE AND RATE

Schedule rate on the value of the net estate of

decedent determined as of the time of death of
decedent composed of all properties, real or
personal, tangible or intangible, located in and out of
the Phils.
In case of properties, the estate shall be appraised
at its fair market value as of the time of death
(higher of the FMV as indicated in the tax declaration
or the zonal value as determined by the CIR).

 ATTACHMENTS

CTC of Death Certificate

Notice of death duly received by the BIR if gross
estate exceeds P20,000 (2 months)
Any of the ff:
1. Affidavit of self adjudication
2. Deed of Extra Judicial Settlement of
the estate
3. Court Order, if judicially settled
4. Sworn declaration of all properties of the
estate

CTC of titles
CTC of Tax Declarations
Certificate of No Improvements From
Assessors Office
Certificate of Deposit
CR of vehicles
Certificate of Shares of stocks and proof of its
valuation
CPA statement as to the itemized assets,
deductions from the estate and the taxable with
the estate tax due

Certificate from Brgy. Captain as to claimed

family home
Duly notarized promissory note to support
Claims vs. Estate
Proof of Transfers for public use, Prop.
Previously taxed
Accounting of the proceeds of loan contracted
within 3 years prior to the death of decedent
Official receipts to support funeral expenses,
medical expenses.

COMPUTATION OF THE TAX

Gross Estate( Including family home,

AR,
Value of property mortgaged)
Less: Deductions from gross estate
1. Expenses, losses, indebtedness,
taxes
a. Actual funeral expenses or
5% of gross estate
(Whichever is lower)but not to
exceed
b. Judicial expenses of
testamentary or intestate
proceedings
c. Claims vs. Estate Loan must be
duly notarized and if loan
contracted within 3 years before
death, show disposition of loan

P5,000,000

P300,000
250,000
200,000

20,000

P1,000,000

d. Claims vs. insolvent persons(AR

must be included in GE)
50,000
e. Unpaid mortgages

200,000

f. Income tax Payable

5,000
g. Property tax Payable
5,000
h. Losses on acct of fires, storms,
etc.

20,000

i. Losses due to theft, robbery

10,000

3. Bequests, devices, or transfers to

DSWD, Cultural or charitable
institutions

10,000

4. Vanishing Deduction(Property
previously taxed) 5 years
5. Family home(certified to by Brgy.
Capt., not to exceed P1M if conjugal
50% deducted)

500,000

6. Medical expenses incurred within 1

year prior to death, supported by
receipts

500,000

7. Standard Deduction
Total deductions
Net Estate

1,000,000
3, 570,000
1,430,000

Less: Net Share of SS

= 1,430,000/2
715,000
Taxable Net Estate

P
715,000

Estate Tax due:

32,200
P200,000
- Exempt
200k 500k
5% of Excess over 200k
500k 2M 15k
8% of Excess over 500k

VAT COMPUTATION
Sales
P500,000
Purchases 300,000
Output Tax 12% x 500,000
60,000
Input Tax 12% x 300,000
36,000
Input Tax Carried over previous qtr.
10,000
Output Tax

60,000

Less:
Input Tax fr. Previous qtr
10,000
Input Tax
36,000
Total Input Tax
46,000
Vat Due and Payable P14,000

COMPUTATION OF
EVAT/COMMISSION/EWT
Buyer's
Name

NET
TCP
EVAT
NTCP
RATE
EWT
COMM.
P1,200, P128,57 P1,071,42
P3,214. P28,928.5
Ma. Cristy
000
1.43
8.58
3% P32,142.86
29
7

Legend:
TCP
EVAT
NTCP
EWT

GROSS
COMM.

Total Contract Price

Expanded Value Added Tax
Net Total Contract Price
Expanded Withholding Tax

Formula:
TCP
-------------- = NTCP x12% = EVAT
112%
1,200,000
-------------- = P1,071,428.57x12% = P128,571.43
1.12

INCOME TAX

As Licensed Broker or Salesman, you

should also know your own tax obligation
and compliance with the BIR, not only with
DTI, HLURB and the local government.

Register you realty business with the BIR.

Keep
books
of
accounts
for
your
transactions and register with BIR.
Keep Official Receipts and register with BIR
File your return and pay tax with the BIR

Return
Monthly
Quarterly
Annual

Registered Non VAT

Percentage Tax
Income Tax
Final ITR

Registered
Vat(*)
VAT
VAT/ Income Tax
Final ITR

(*) Gross Receipts of P1.5M in any 12

months or calendar year.
It is not enough you were withheld a tax.
Tax withheld is not a final tax.
Tax withheld is creditable and deductible
from your VAT or income tax due.
Withholding
agents
are
regularly
submitting reports to the BIR. Names,
recipients of commissions and amount
received are indicated in the report. As
recipients of commissions, report your
receipts in your income tax return.

Personal Exemptions:
Married
- 50,000
Head of the Family - 50,000
Single
- 50,000
Additional Exemptions:
Dependent Children - 25,000 each (4)

PROBLEM SOLVING
Q.
Peter sold to Mikko (both naturalized Filipino citizens)
in June 2010, a residential lot for P960,000, exclusive
of mortgage to be assumed by Mikko amounting to
P100,000. Mikko gave a down payment of P160,000.
Both agreed that the balance will be paid in eight(8)
equal monthly installments beginning July 2010. Peter
realized a profit of Twenty five percent (25%) of cost.
Compute the following:
1. Selling Price
4. Gross Profit
2. Contract Price
5. GP for tax purposes
3. Initial Payment made 6. Taxable Income
(2010 -2011)

ANSWERS
1. SELLING PRICE
Cash payment to the seller
P 960,000
Add: Assumed Mortgage
100,000
Selling Price
P1,060,000
=======
2. CONTRACT PRICE
Selling Price
Less: Assumed Mortgage
Contract Price

P1,060,000
( 100,000)
P 960,000
========

ANSWERS
3. INITIAL PAYMENT MADE
Down Payment
P 160,000
Installments
(P100,000 x 6 mos. For July-Dec)
600,000
Initial Payment for Taxable Year P 760,000
=======
4. GROSS PROFIT
Selling Price P1,060,000
Less: Acquisition Cost
(P1.060M/125%)
( 848,000)
Gross Profit P 212,000
=======

ANSWERS
5. GROSS PROFIT RATE FOR TAX PURPOSES
Gross Profit = P212,000
Contract Price P960,000=22.08%
=====
6. TAXABLE INCOME FOR 2010 AND 2011
For 2010: P760,000x22.08%
P 167,808
=======
For 2011: P 200,000x22.08%
P
44,160
=======

Q.

PROBLEM SOLVING

A 5 year old residential house with a floor area of 350

square meters was sold by Real Estate Broker
Gonzales Realty and its salesman, Pete for a total
contract price of P5.0M. The Market Value of the land
per tax declaration is P1.0M; however the BIR zonal
valuation has a rate of P2,500/sq. meter. The declared
market value of the residential building is P3.0M.
Compute the following:
1. Capital Gain Tax Due
2. Documentary Stamps
3. Transfer Fee

ANSWERS
1. THE CAPITAL GAIN TAX DUE AND PAYABLE
Total Consideration
P5,000.000
BIR zonal value:
Land (1,000 sq.m. @P2,500)
2,500,000
Add Building value:
a. Contract Price less Lot Zonal Value
P5.0M P2.5M=P2.50M
b. Tax declaration market value
P3.0M whichever is higher(BV)
3,000,000
Adjusted value of the property
P5,500,000
Capital Gain Tax: 6% of P5.50M =
P330,000
======
2. Documentary Stamps: 1.5% of P5.50M =P 82,500
======
3. Transfer Tax: of 1% x P5.50M =
P 27,500
======

PROBLEM SOLVING
Q.
Compute for the Capital Gain Tax, in a sale of a
condominium unit with the following information
gathered:

Value per Deed of Sale P3.0M

Zonal value of condominium unit- P22,500/sq.m.
Market value of condominium unit - P1.50M
Assessors value of land where the
condominium is built P2,500/sq.m.
Zonal value of land where
condominium project is built P5,000/sq.m.
Floor area of the condominium
unit sold P150 sq.m.

ANSWER

Capital Gain Tax {6% of P3.375M(150

sq.m.@P22,500)}
= P202,500
======

PROBLEM SOLVING

Q.
Arvin offered to sell to Gee his land located at
RER Subd., Cagayan de Oro City at a price of
P1.5M. Gee is interested of the property but
instead of offering to buy, she offered to
swap/exchange it with another property, a house
and lot located in Carmen, in the same city with
a land area of 300 sq.m. valued at P2,500/sq. m.
and an old house with a market value per tax
declaration of P900,000. Arvin agreed to Gees
offer and told the latter that both of them would
not have to pay the capital Gain Tax; however,
Gee objected since there was no money involved
in the transaction.
a.
Is Gee correct in objecting the payment of
Capital Gain Tax?
b. If Gee is wrong, who should pay the Capital

ANSWERS
a.

b.

No, Gee is not correct because exchange of real

between two individuals is subject to gains tax.
Both Arvin and Gee shall pay capital gains tax on
their respective properties computed, as follows:
Arvin: 6% of P 1.5M
90,000
========
Gee: Land (300sq.m. @ P2,500
750,000
Per Market Value House:
900,000
Tax Base of capital gain tax
1,650,000

PROBLEM SOLVING
Q.
Trifie, a licensed real state broker obtained
this net listing: an industrial lot for sale of
P6.0 M. She therefore had to sell the property
at a price that would be inclusive of the
capital gain tax, the documentary stamps and
the brokers commissions of 5%.
Compute the following :
(1)The gross Selling Price
(2) The capital gains tax to be paid
(3) The documentary stamps to be paid
(4) The gross commission to be shared by the
brokers.

ANSWERS
(1) Gross Selling Price:
P6.0 M/87.5% (100 12.5%)
P6,857,142.86
==========
(2) Capital Gains Tax:
6% of P6,857,142.86
P 411,428.57
==========
(3) Documentary Stamps Tax:
1.5% of P6,857,142.86
P 102,857.14
==========
(4) Brokers commission:
5% of P6,857,142.86
P 342,857.14
==========

THANK YOU