Capital gains tax

1. CAPITAL GAINS TAX

2. SEC. 32. Gross Income
(A) General Definition. - Except when otherwise provided in this Title, gross income means
all income derived from whatever source, including (but not limited to) the following items:
• (1) Compensation for services in whatever form paid, including, but not limited to fees,
salaries, wages, commissions, and similar items;
• (2) Gross income derived from the conduct of trade or business or the exercise of a
profession;
• (3) Gains derived from dealings in property;
• (4) Interests;
• (5) Rents;
• (6) Royalties;
• (7) Dividends;
• (8) Annuities;
• (9) Prizes and winnings;
• (10) Pensions; and
• (11) Partner's distributive share from the net income of the general professional
partnership.

3. GROSS INCOME
REGULAR
INCOME TAX
FINAL TAX
CAPITAL
GAINS TAX

4. CAPITAL GAINS TAX
- is a tax imposed on the gains presumed to have been realized by the seller
from the sale, exchange, or other disposition of capital assets located in the
Philippines, including pacto de retro sales and other forms of conditional
sale. (BIR.gov.ph)
Capital Assets. – The term ‘capital assets’ means property held by the
taxpayer (whether or not connected with his trade or business), but does
not include stock in trade of the taxpayer or other property of a kind
which would properly be included in the inventory of the taxpayer if on
hand at the close of the taxable year or property held by the taxpayer
primarily 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 the allowance for depreciation provided in Subsection (F) of
Section 34; or real property used in trade or business of the taxpayer.
(Sec 39)

5. CAPITAL GAINS TAX
A. Sale of real property
capital assets
B. Sale of equity securities
directly to the buyer (domestic
stocks classified as capital
assets)
Other capital gains not mentioned above is subject to Regular
Income Tax

6. A. Sale of real property capital assets
6% of the Selling Price or FMV whichever is higher. FMV is
whichever is of Zonal Value or Assessed Value
Selling Price
Zonal Value
Assessed Value
X 6%
EXCEPTIONS:
• Sale of Principal Residence and the proceeds are used to
acquire a new Principal Residence.
• Sale of real property by an Individual taxpayer to the
Government or GOCCs – the individual taxpayer has the
option to be taxed at 6% CGT or regular income tax.

7. Illustrative Examples:
1. X, a real estate dealer sold a land with a Zonal Value of
P500,000 and an Assessed Value of P450,000 to Y for
600,000. Compute the Capital Gains Tax.
Ans: Zero
2. X sold his principal residence to Y for P2.5M. The said
property has fair market value of P3M. The proceeds of
the sale was used to acquire a new principal residence
worth P2.2M.
Ans: P21,600
Solution: 3M x 6% = 180,000 x 300k/2.5M = P21,600

8. B. Sale of equity securities directly to the buyer (domestic
stocks classified as capital assets)
CGT of 15% based on Net Capital Gain computed as follows:
Selling Price P xx
Less: Basis of stocks disposed (xx)
Selling expenses (xx)
DST if paid by the seller (xx)
Net Capital Gain (Loss) PXX
If there is net capital loss, it shall not be
subjected to CGT

9. Sale or
disposition of
Shares of
Stock
Directly to the buyer
(Domestic Shares)
By a dealer of
securities
Shares of stock of a
foreign corporation
Through LSE
Through IPO
CGT
RIT
RIT
Stock transaction
tax (sec 127b)
Repealed under
Section 6 of
Republic Act No.
11494

10. Illustrative Examples:
1. A sold shares of stock of XYZ Corp, a domestic corporation to B for 500,000.
the shares was acquired at a cost of 300,000. Compute the applicable capital
gains tax. Ans: 500,000- 300,000 = 200,000 x 15% = P30,000
Supposed that the cost of the shares is 550,000. compute the CGT. Ans: 0
2. A sold to B shares of stock of SanMig corporation, a listed entity through the
local stock exchange. The gross selling price is 500,000. The FMV is 600,000
with a cost of 350,000. What tax is applicable in this transaction? Determine the
amount of the tax. Ans: Stock transaction tax, 3,000.
3. A, a dealer of securities sold shares of stock to B for 380,000. The shares
was acquired by A for 200,000 last year. What is the applicable tax on the
transaction? Ans: Regular Income Tax or Basic Tax

11. A. Sale of real property
capital assets
B. Sale of equity securities
directly to the buyer (domestic
stocks classified as capital
assets)
Filing and Payment of CGT
• BIR form 1706
• 30 days after each
transaction. If installment, 30
days after each payment • BIR Form 1707
• 30 days after each transaction

12. END