Capital Gains Tax (CGT) is a tax imposed on the sale, exchange, or transfer of real estate properties classified as capital assets in the Philippines. It is levied at 6% of the highest value between the selling price, zonal value, or fair market value of the property.

Who Needs to Pay CGT?

• Property sellers transferring real estate ownership
• Individuals or corporations selling capital assets
• Heirs or donors transferring ownership through succession or donation

How to Compute Capital Gains Tax

CGT Formula:

CGT = 6% × Higher of (Selling Price, Zonal Value, or FMV)

Example Calculation:

• Selling Price: ₱5,000,000
• Zonal Value: ₱5,500,000
• Fair Market Value (FMV): ₱5,200,000
• CGT = 6% × ₱5,500,000 = ₱330,000

Step-by-Step Guide to Filing and Paying CGT

Step 1: Prepare Required Documents

• Notarized Deed of Absolute Sale (DOAS)
• Latest Tax Declaration of Property
• Certificate of Title (TCT/CCT)
• BIR Form 1706 (CGT Return)
• Valid government-issued ID of Seller
• Special Power of Attorney (if applicable)

Step 2: Fill Out BIR Form 1706

Download BIR Form 1706 from the BIR website and provide accurate details on the sale, including seller and buyer information.

Step 3: Pay the CGT at an Authorized Agent Bank (AAB)

• Proceed to a BIR-accredited bank within the property’s Revenue District Office (RDO).
• Submit BIR Form 1706 along with required documents.
• Pay the computed 6% Capital Gains Tax.
• Receive a validated tax payment slip.

Step 4: Secure the Certificate Authorizing Registration (CAR)

• Submit proof of CGT payment to the BIR RDO where the property is registered.
• The Certificate Authorizing Registration (CAR) will be issued once all taxes are settled.
• This is mandatory for the transfer of property title.

CGT Deadlines and Penalties

• Filing Deadline: Within 30 days from the date of sale
• Penalties for Late Payment:
  • 25% surcharge on the unpaid tax amount
  • 20% annual interest on the unpaid amount
  • Compromise penalty depending on the tax amount due

Common Mistakes & How to Avoid Them

• ❌ Incorrect computation of CGT—always check the highest value between Selling Price, Zonal Value, and FMV
• ❌ Late CGT filing—Pay within 30 days to avoid penalties
• ❌ Missing required documents—prepare all BIR forms and sale-related documents before filing

Exemptions from Capital Gains Tax

• Sale of principal residence (if proceeds are used to buy a new home within 18 months)
• Transfer via inheritance (subject to estate tax instead)
• Properties classified as ordinary assets (subject to other taxes instead)

FAQs on Capital Gains Tax in the Philippines

1. Can CGT be paid online?

Yes. BIR now allows CGT payments via GCash, Landbank, and BIR-accredited online payment portals.

2. What happens if I don’t pay CGT?

Failure to pay CGT results in penalties, legal actions, and delays in property title transfer.

3. Do buyers pay CGT?

No. The seller is responsible for paying CGT. However, the buyer may shoulder the payment as part of the agreement.

4. How long does it take to process the CAR?

Processing usually takes 2-3 months but may vary depending on the BIR’s workload.

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