Tax on Sale of Real Property

The determination of the tax imposed on SALE of Real Property depends on whether the property is capital asset or ordinary asset.

Capital Gains Tax is imposed if the property is classified as capital asset of the SELLER while Creditable Withholding Tax is imposed if the same is classified as ordinary asset.

Pursuant to the provisions of Section 244, in relation to Sections 57(A) and (B) of the National Internal Revenue Code of 1997, the Revenue Regulations No. 30-2003 amended pertinent provisions of Revenue Regulations No. 2-98 which includes imposition of WITHHOLDING as a mode of remitting Tax on the Sale of Real Property to the BIR.

According to Section 5 of Revenue Regulations No. 30-2003, albeit the burden of paying Tax is really upon SELLER-income earner, the obligation to withhold is imposed upon the BUYER-payor subject to the corresponding withholding tax rate. Provided, that the Official Receipts of payment and the corresponding Certificate of Taxes Withheld shall be issued in the name of the SELLER. (Certificate of Final Income Taxes Withheld for real property classified as capital asset or Certificate of Creditable Taxes Withheld for ordinary asset)

Unjustifiable refusal of the SELLER to be subjected to withholding shall be a ground for the mandatory audit of his income tax liabilities (including withholding tax) upon verified complaint of the BUYER.