Capital Gains Tax in the Philippines: Real Property and Shares

In the Philippines, capital gains tax (CGT) is a final tax imposed under the National Internal Revenue Code (NIRC) on the sale, exchange, or other disposition of two specific kinds of capital assets. It is not a single, general tax on every gain you make. Despite the name, only two transactions are taxed as CGT: (1) the sale of real property classified as a capital asset, and (2) the sale of shares of stock of a domestic corporation that are not traded through the local stock exchange.

Everything else that produces a gain is taxed differently. Gains from assets you use in your trade or business — inventory, equipment, property held for sale, receivables — are ordinary assets, and their disposal is subject to regular income tax (and often VAT), not CGT. Listed shares sold through the Philippine Stock Exchange are subject to a separate stock transaction tax, not CGT. Getting this classification right is the whole game: it determines the rate, the form, the deadline, and whether the tax is final or merely a credit against your annual return.

CGT is a final tax. That means once it is correctly paid, the gain is not added again to your taxable income for the year, and no further income tax is due on that specific transaction. This is the key practical difference from ordinary income, which flows into your annual income tax return (ITR).

CGT only ever applies to capital assets. Section 39(A)(1) of the NIRC defines an ordinary asset by exclusion: stock in trade, inventory, property held primarily for sale to customers in the ordinary course of business, property used in the trade or business that is subject to depreciation, and real property used in the trade or business. A capital asset is anything that is not an ordinary asset — for most people and most companies, this is real property and shares that are held as investments rather than as business stock.

For real property, the practical test is use. A vacant lot you bought as a long-term investment, the family home, or land held by a non-dealer is typically a capital asset taxed at 6% CGT. The same land, if it is inventory of a real-estate developer or is used as the site of your operating business, is an ordinary asset taxed under the regular income tax and VAT regime. Revenue Regulations No. 7-2003 lays out the guidelines for distinguishing the two and even covers reclassification when a business stops using a property.

For shares, the test is who holds them and whether they are listed. Shares of a domestic corporation held as an investment by a non-dealer in securities are capital assets. If the shares are part of the inventory of a dealer in securities, they are ordinary assets. And if capital-asset shares are sold through the local stock exchange, they leave the CGT regime entirely and fall under the stock transaction tax instead.

The table below summarizes the two CGTs plus the two regimes people most often confuse them with — the stock transaction tax on listed shares and the regular income tax on ordinary assets. Use it to locate your transaction before reading the detailed sections.

Under Section 24(D)(1) of the NIRC, the sale, exchange, or other disposition of real property located in the Philippines and classified as a capital asset is subject to a 6% capital gains tax. The rate is the same whether the seller is an individual, an estate or trust, or a domestic corporation (the corporate version sits in Section 27(D)(5)).

The crucial point is the tax base. The 6% is not applied to your profit. It is applied to the HIGHEST of three figures: (1) the gross selling price stated in the deed of sale, (2) the BIR zonal value (the fair market value the Commissioner has fixed for the area, often called zonal valuation), and (3) the fair market value shown in the schedule of values of the provincial or city assessor. Because the tax is on the highest of these — not on net gain — you can owe CGT even on a sale that produced little or no actual profit. The zonal or assessor value frequently exceeds a below-market selling price, and the BIR will assess on that higher figure.

CGT on real property is filed on BIR Form 1706 and must be paid within 30 days following each sale or disposition. On top of the CGT, the buyer typically shoulders documentary stamp tax (DST) of 1.5% (P15 per P1,000) of the same tax base under Section 196, filed on BIR Form 2000-OT, also generally within five days after the close of the month of notarization. Local transfer tax to the province or city and registration fees with the Registry of Deeds are separate again. You cannot transfer title without the BIR's electronic Certificate Authorizing Registration (eCAR), which the BIR issues only after the CGT and DST are settled.

Documents the BIR generally requires for an eCAR on a real-property sale

• Notarized Deed of Absolute Sale or exchange
• Certified true copy of the latest Transfer/Condominium Certificate of Title
• Latest tax declaration for the land and improvement, plus a certificate of no improvement where applicable
• BIR Form 1706 (CGT) and Form 2000-OT (DST) with proof of payment
• Tax Identification Numbers of both seller and buyer and valid IDs
• Sworn declaration of no improvement or a certified zonal/assessor valuation, as required by the RDO

Section 24(D)(2) of the NIRC exempts from the 6% CGT the sale of a natural person's principal residence, provided the entire proceeds are fully used to acquire or construct a new principal residence within 18 calendar months from the date of sale. The relief is conditional and procedural, not automatic.

To qualify, the seller must notify the Commissioner (through the RDO) of the intention to avail of the exemption within 30 days of the sale, and the exemption can be used only once every ten years. The historical cost or adjusted basis of the old residence carries over to the new one. If only part of the proceeds is reinvested, only the corresponding portion is exempt and the rest is taxed. To secure the exemption while protecting collection, the BIR requires the 6% CGT to be deposited in escrow; it is released back to the seller once full utilisation within 18 months is proven, or forfeited to the government (with interest) if the conditions are not met.

Under Section 24(C) of the NIRC (and the corresponding provisions for corporations), the sale, exchange, or other disposition of shares of stock in a DOMESTIC corporation that are not traded through the local stock exchange is subject to capital gains tax at a flat 15% on the net capital gain. This 15% flat rate is the result of the TRAIN law (RA 10963), which replaced the old two-tier 5%/10% schedule (5% on the first P100,000 of net gain and 10% on the excess) with a single 15% rate for individuals effective 1 January 2018. CREATE (RA 11534) later aligned the rate for non-resident foreign and domestic corporations as well, and CMEPA (RA 12214, effective 1 July 2025) extended the flat 15% CGT to unlisted shares of foreign corporations too, so the unlisted-share CGT is a uniform 15% across seller types and across domestic and foreign shares today.

Unlike the real-property CGT, this tax is on NET gain — selling price less the cost or adjusted basis of the shares and the directly attributable selling expenses. Where shares are sold for less than their fair market value, the difference between the FMV and the selling price may be treated as a deemed gift subject to donor's tax (Section 100), and the BIR uses the adjusted net asset method (per Revenue Regulations No. 6-2008, as amended by RR 20-2020) to determine the FMV of unlisted shares — for shares with real-property holdings, those underlying assets are taken at the higher of zonal or assessor value.

The per-transaction CGT return is BIR Form 1707, filed and paid within 30 days after each sale. Sellers who have multiple transactions in a year also file an annual capital gains tax return, Form 1707-A, on or before the income tax filing deadline (15 April of the following year for calendar-year taxpayers). Documentary stamp tax under Section 175 — currently P1.50 on each P200 of par value (or 50% of the DST paid on the original issue for shares without par value) — applies to the transfer as well, and the corporation cannot record the transfer in its stock and transfer book without proof of CGT and DST payment plus the eCAR.

This is the single most common confusion, so it deserves its own section. If you sell shares of a corporation THROUGH a stock exchange, you do not pay capital gains tax at all. Instead you pay the stock transaction tax under Section 127(A) of the NIRC: one-tenth of one percent (0.1%, written as 1/10 of 1%) of the gross selling price or gross value in money of the shares. TRAIN raised this rate from 0.5% to 0.1% in 2018, but the Capital Markets Efficiency Promotion Act (CMEPA, RA 12214) cut it to 0.1% effective 1 July 2025.

The stock transaction tax is technically a percentage tax, not a capital gains tax. It is imposed on the gross selling price regardless of whether you actually made a profit — sell at a loss and you still owe it. It is withheld and remitted for you by your stockbroker, who files BIR Form 2552 within five banking days from the date of collection at the current 0.1% rate, so individual investors trading listed shares normally have nothing to file themselves. Because the stock transaction tax is treated as a final tax on that sale, the gain is not reported again in your annual income tax return.

If you want a fuller treatment of how the stock transaction tax and other percentage taxes work, see our percentage tax guide linked below.

If the asset you sold was used in or held for your business, it is an ordinary asset and CGT does not apply. The gain is ordinary income, folded into your net taxable income and taxed under the regular income tax: the graduated 0%–35% schedule for individuals (Section 24(A), as set by TRAIN), or 25% (20% for qualifying small domestic corporations) under the CREATE-amended Section 27. The sale may also attract 12% VAT, or percentage tax for non-VAT taxpayers, and creditable withholding tax in many cases.

A real-estate developer selling a house and lot it built is taxed this way, not at 6% CGT, because the property is inventory. A manufacturer selling a used delivery truck is taxed on the gain as ordinary income because the truck was a depreciable business asset. The label CGT is reserved for genuine capital assets held as investments — investments held outside the business — and applying the 6% or 15% CGT to an ordinary asset is a frequent and costly misclassification that the BIR corrects on audit, often with deficiency income tax, VAT, surcharge, and interest.

Both CGTs run on a 30-day clock measured from each individual sale or disposition — Form 1706 for real property and Form 1707 for unlisted shares — so there is no waiting for the annual return to settle these. The Ease of Paying Taxes Act (RA 11976) and its implementing regulations removed the old 'file where you are registered or where the property is located' venue friction by moving toward a file-and-pay-anywhere system: returns can be filed and the tax paid through any Authorized Agent Bank, Revenue District Office, or authorized agent, or electronically, regardless of the taxpayer's home RDO. EOPT also reclassified taxpayers into micro, small, medium and large, and rationalised the penalty structure.

Penalties for late payment remain significant: a 25% surcharge (50% in cases of wilful neglect or fraud), deficiency and delinquency interest at the rate fixed under the NIRC as amended (double the legal interest rate set by the Bangko Sentral — currently 12% per annum), and a compromise penalty. Because the eCAR — and therefore the transfer of title or the recording of the share transfer — is gated on full payment, late CGT does not just cost penalties; it stalls the entire transaction. The practical advice is to compute the tax on the correct (highest) base, pay within 30 days, and keep the eCAR and proof of payment permanently.