Requirements and Procedures of Final Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital Assets (Taxable and Exempt)

Final Capital Gains Tax for Onerous Transfer of Real Property Classified as Capital Assets (Taxable and Exempt)

TAX FORM

BIR Form 1706 – Final Capital Gains Tax Return (For Onerous Transfer of Real Property Classified as Capital Assets -Taxable and Exempt)

DOCUMENTARY REQUIREMENTS

1) One original copy and one photocopy of the Notarized Deed of Sale or Exchange

2) Photocopy of the Original Certificate of Title; Transfer Certificate of Title; or Condominium Certificate of Title in case of a condo unit

3) Certified True Copy of the tax declaration on the lot and/or improvement during nearest time of sale

4) “Certificate of No Improvement” issued by the Assessor’s office where the property has no declared improvement, if applicable or Sworn Declaration/Affidavit of No Improvement by at least one (1) of the transferees

5) Copy of BIR Ruling for tax exemption confirmed by BIR, if applicable

6) Duly approved Tax Debit Memo, if applicable

7) “Sworn Declaration of Intent” as prescribed under Revenue Regulations 13-99, if the transaction is tax-exempt

8) Documents supporting the exemption

Additional requirements may be requested for presentation during audit of the tax case depending upon existing audit procedures.

PROCEDURES

File the Capital Gains Tax return in triplicate (two copies for the BIR and one copy for the taxpayer) with the Authorized Agent Bank (AAB) in the Revenue District where the property is located. In places where there are no AAB, the return will be filed directly with the Revenue Collection Officer or Authorized City or Municipal Treasurer.

One-Time Transaction (ONETT) taxpayers shall mandatorily use the eBIRForms in filing all of their tax returns. They may opt to submit their tax returns manually using the eBIRForms Offline Package in the RDO where the property is located or electronically through the use of the Online eBIRForms System. (Sec. 3(2) RR No. 6-2014)

TAX RATES

For real property - 6%.

 

BASIS IN THE VALUATION OF PROPERTY

 

The value of the real property will be based on the selling price, fair market value as determined by the Commissioner (zonal value) or the fair market value as shown in the schedule of values of the Provincial or City Assessor, whichever is higher.

If there is no zonal value, the taxable base is whichever is higher of the gross selling price per sales documents or the fair market value that appears in the latest tax declaration.

If there is an improvement, the FMV per latest tax declaration at the time of the sale or disposition, duly certified by the City/Municipal Assessor shall be used. No adjustments shall be added on the said value, provided that the tax declaration bears the upgraded fair market value of the said property pursuant to Section 219 of R.A. No. 7160, otherwise known as the Local Government Code of 1991 and the last paragraph of the Local Assessment Regulations No. 1-92 dated October 6, 1992.

In case the tax declaration being presented was issued three (3) or more years prior to the date of sale or disposition of the real property, the seller/transferor shall be required to submit a certification from the City/Municipal Assessor whether or not the same is still the latest tax declaration covering the said real property. Otherwise, the taxpayer shall secure its latest tax declaration and shall submit a copy thereof duly certified by the said Assessor. (RAMO 1-2001).

DEADLINE

Within 30 days after each sale, exchange, transfer or other disposition of real property.

 

SOURCE: http://www.bir.gov.ph/index.php/tax-information/capital-gains-tax.html#cgt2 

How to Validate Monthly Alphalist of Payees (MAP) and Summary Alphalist of Withholding Taxes (SAWT) Using the BIR Alphalist Validation Module

FOR BIR 1601E

 

1.User can either validate 1600,1601E and 1601F diskette and data files. To validate 1601E files, click Validation and the Alphalist Validation Module screen will appear. 
Note: Validation is auto-checking of data conformity with prescribed data structure. Encode the TIN and the Branch Code (9 digit TIN without RDO Code) of the withholding agent at the <TIN of Withholding Agent> field. The <Year> field is defaulted to the current year. 

2.Click button on the <1601E> field to choose the transaction type to be validated, the 1601E Validation Menu screen appears. Click on <Browse> to search for that certain filename.

3. After clicking the <Browse> button, a directory screen will appear. From the directory screen choose and click the filename corresponding to the type of transaction to be validated. Filenames contain the following letters depending on the transaction to be validated: E=1601E and F=1601F. In this case, choose E then click <Ok> button to continue the process. 

4. After clicking the <Ok> button, it will go back to the 1601E Validation Menu. Click on <Validate File> to continue the validation. 

5. A Log Directory screen will appear. The default directory is “reports”. The user may  choose the folder where to save the report generated after validation, then click <Select> button to complete the validation process. 

6. After validation, the report generated will automatically appear. This report will indicate any errors found during validation. Otherwise, the report will specify that no errors were encountered. Click X at the upper right corner to close the Notepad window.

7. After closing the notepad window a validation window will appear informing the user where the validated file is stored. 


FOR SAWT FORM 2550Q

1.User can validate the SAWT forms diskette and data files. To validate 2550Q files, click Validation and the Alphalist Validation Module screen will appear. 

 Note: Validation is auto-checking of data conformity with prescribed data structure.

Encode the TIN and the Branch Code (9 digit TIN without RDO Code) of the withholding agent at the <TIN of Withholding Agent> field. The <Year> field is defaulted to the current year.

2.Click button on the <SAWT> field to choose the transaction type to be validated, the SAWT Validation Menu screen appears. Click on <Browse> to search for that certain filename.

3. After clicking the <Browse> button, a directory screen will appear. From the directory screen choose and click the filename corresponding to the type of transaction to be validated. Filenames contain the following letters depending on the transaction to be validated. Click <Ok> button to continue the process.

 

SOURCE: http://www.bir.gov.ph/images/bir_files/old_files/zip/jobaid.zip

How to Login, Add/Update MAP, Print/Inquire on a Taxpayer Screen, Add/Update SAWT and Generate File using the BIR Alphalist Data Entry

 A. LOGIN
 1. Click the icon on 1604 Attachments Data Entry and the User Login pop up will appear. Encode the <User Name> and <Password>, then click <OK> button or press E.

 2. The BIR Data Entry Main Menu will appear together with the BIR System Message pop-up. Then click <Yes> or press Enter key.

 Note: The BIR System Message pop-up will appear only on the initial installation of this program to capture information of the Withholding Agent.

3. The Withholding Agent Information screen will appear. Fill in all mandatory fields, then click Save button. The <Revert> button is used to undo encoding or when the user does not want to save the encoded data of the withholding agent. Once the Withholding Agent  Information screen is filled up, the next time you view the same screen to update information, Edit & Close buttons are activated.

Note: If field validation rule is violated, an Error Message pop up will appear. 

4. After saving the encoded information of the withholding agent, the Main Menu screen will appear. The selection buttons for attachments will be activated. Click MAP Forms button or press M.

5. The MAP Menu (Monthly Alphalist of Payees consisting of 1600, 1601E and 1601F) screen will appear. Click 1601E button or press E.

6. The 1601E Menu (Monthly Remittance Return of Creditable Income Taxes Withheld  (Expanded)) screen will appear.

Note: Details of the 1601E form is already available on the 1601E Menu screen.  <For the Month of> field is defaulted to current month and year but the user has the option to enter the same.

7. In the 1601E Schedule II screen, click <Add/Update> button, a pop-up message will appear. Click <Ok> button.

B. ADD / UPDATE 1601E SCHEDULE II

8. In the 1601E Schedule II Data Entry screen, click <Add> button to add or encode a record.  Take note that after clicking the Add button, the <Save>, <Revert > and <Exit> buttons are activated.

9. All mandatory fields must be properly filled up. After encoding data on the last field, click  <Save> button.

Note: An Error pop up screen will appear when there is still a mandatory field not yet filled  up.

10. A Question pop up message will appear. Click <Yes> to add another record and <No> if not. The cursor will go back to the original screen. Click the <Exit> button.

11. A pop up message will appear asking if you want to exit, click <Yes> button to return to 1601E Menu screen. 

12. All buttons are displayed and activated when you have encoded and saved multiple data. User  may use all activated buttons (i.e. <Top>, <Next>, <Prev>, <Bottom>,<Inquiry>) to go to other records. The <Edit> button is used if there are corrections on the saved data and  the <Delete> button is used to erase saved data. Click <Exit> to go back to the 1601E  Main Menu. Click <Back to MAP Sub Menu> to go back to the Main Menu.


C. PRINT / INQUIRE ON A TAXPAYER SCREEN (1600/1601/F)

13. To print or inquire a record, click <Print/Inquire> button and the Inquiry Screen will appear.

14. Click the <Search> button and the <Search Entry> pop-up will appear. Encode the TIN or Registered Name/Trade Name or Taxpayer’s Name (Individual) you want to inquire. Click the <Ok> button and the record you are inquiring will be highlighted.            

Note: All other forms (i.e. 1600 & 1601F) have the same inquiry screen. 

15. Click <View> button to view the report on line. The user can print said report by clicking print icon located on the toolbar at the upper left corner of the screen. Click arrows to navigate to other pages of the report. Click X on the upper right corner of the screen to close report and to go back to <Inquiry> screen.

16. To view report in excel format, click <eXcel Report> button. The user can edit entries and make corrections using this format; however, changes and/or corrections made in this report will not necessarily update information stored in the system. Click X on the upper right corner of the screen to close report and to go back to <Inquiry> screen.


D. GENERATE FILE

17. To generate file, click <Generate File> button on the 1601E Menu. A <Save As> pop up screen will appear. Specify the folder where to save the encoded data, then click <Save> button. A pop up message asking “Do you want to view the file created?’ will appear. Click <Yes> and the flat file of the data will appear. Click <No> and pop up message informing that the file was successfully created will appear. Click <Ok> to go back to 1601E Menu screen.

 

D. ADD / UPDATE SAWT

18. Click SAWT Forms button or press S.

19. The SAWT Menu (Summary Alphalist of Withholding Taxes) screen will appear.

 Note: Details of the SAWT form is already available on the SAWT Menu. <For the Month of> field is defaulted to current month and year but the user has the option to enter the same.

20. Choose a form from the pull down list. In this example we will choose form 2550Q. 

21. Click the <Add/Update> button, a pop-up message will appear. Click <Ok> button. 

22. In the 2550Q Schedule I Data Entry screen, click <Add> button to add or encode a record. Take note that after clicking the Add button, the <Save>, <Revert > and  <Exit> buttons are activated. 

23. All mandatory fields must be properly filled up. After encoding data on the last field, click  <Save> button.

 

Note: An Error pop up screen will appear when there is still a mandatory field not yet filled up.

24. A Question pop up message will appear. Click <Yes> to add another record and <No> if not. The cursor will go back to the original screen. Click the <Exit> button.

25. A pop up message will appear asking if you want to exit, click <Yes> button to return to SAWT Menu screen. 

26. All buttons are displayed and activated when you have encoded and saved multiple data. User may use all activated buttons (i.e. <Top>, <Next>, <Prev>, <Bottom>,<Inquiry>) to go to other records. The <Edit> button is used if there are corrections on the saved data and the <Delete> button is used to erase saved data. Click <Exit> to go back to the SAWT Menu. Click <Back to Main> to go back to the Main Menu.

 

 

E. PRINT / INQUIRE ON A TAXPAYER SCREEN (SAWT)

27. To print or inquire a record, click <Print/Inquire> button and the Inquiry Screen will appear. 

28. Click the <Search> button and the <Search Entry> pop-up will appear. Encode the TIN or Registered Name/Trade Name or Taxpayer’s Name (Individual) you want to inquire. Click the <Ok> button and the record you are inquiring will be highlighted.

Note: All other forms have the same inquiry screen. 

29. Click <View> button to view the report on line. The user can print said report by clicking print icon located on the toolbar at the upper left corner of the screen. Click arrows to navigate to other pages of the report. Click X on the upper right corner of the screen to close report and to go back to <Inquiry> screen.

30. To view report in excel format, click <eXcel Report> button. The user can edit entries and make corrections using this format; however, changes and/or corrections made in this report will not  necessarily update information stored in the system. Click X on the upper right corner of the screen   to close report and to go back to <Inquiry> screen.

 

F. GENERATE FILE

31. To generate file, click <Generate File> button on the 1601E Menu. A <Save As> pop up screen will appear. Specify the folder where to save the encoded data, then click <Save> button. A pop up message asking “Do you want to view the file created?’ will appear. Click <Yes> and the flat file of the data will appear. Click <No> and pop up message informing that the file was successfully created will appear. Click <Ok> to go back to 1601E Menu screen

 

SOURCE: http://www.bir.gov.ph/images/bir_files/old_files/zip/jobaid.zip

Penalties for Late Filing of Tax Returns

A. For late filing of Tax Returns with Tax Due to be paid, the following penalties will be imposed upon filing, in addition to the tax due:

1. Surcharge

NIRC SEC. 248. - Civil Penalties.

(A) There shall be imposed, in addition to the tax required to be paid, a penalty equivalent to twenty-five percent (25%) of the amount due, in the following cases:

(1) Failure to file any return and pay the tax due thereon as required under the provisions of this Code or rules and regulations on the date prescribed; or

(2) Unless otherwise authorized by the Commissioner, filing a return with an internal revenue officer other than those with whom the return is required to be filed; or

(3) Failure to pay the deficiency tax within the time prescribed for its payment in the notice of assessment; or

(4) Failure to pay the full or part of the amount of tax shown on any return required to be filed under the provisions of this Code or rules and regulations, or the full amount of tax due for which no return is required to be filed, on or before the date prescribed for its payment.

2. Interest

NIRC SEC. 249. Interest. -

(A) In General. - There shall be assessed and collected on any unpaid amount of tax, interest at the rate of twenty percent (20%) per annum, or such higher rate as may be prescribed by rules and regulations, from the date prescribed for payment until the amount is fully paid.

3. Compromise

NIRC SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation. - Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax make a return, keep any record, or supply correct the accurate information, who willfully fails to pay such tax, make such return, keep such record, or supply correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by a fine of not less than Ten Thousand Pesos (P 10,000) and suffer imprisonment of not less than one (1) year but not more than ten (10) years.

Any person who attempts to make it appear for any reason that he or another has in fact filed a return or statement, or actually files a return or statement and subsequently withdraws the same return or statement after securing the official receiving seal or stamp of receipt of internal revenue office wherein the same was actually filed shall, upon conviction therefor, be punished by a fine of not less than Ten Thousand Pesos (P10,000) but not more than Twenty Thousand Pesos (P 20,000) and suffer imprisonment of not less than one (1) year but not more than three (3) years.

In addition, Annex A of Revenue Memorandum Order (RMO) No. 7-2015 provides for the Revised Consolidated Schedule of Compromise Penalties for Violations of the National Internal Revenue Code (NIRC), which can be accessed via this link: Annex

From page 5 of Annex A of RMO No. 7-2015

TAX CODE SEC	NATURE OF VIOLATION	CRIMINAL PENALTY IMPOSED	AMOUNT OF COMPROMISE
255	Failure to file and/or pay any internal revenue tax at the time or times required by law or regulation	Fine of not less than P10,000 and imprisonment of not less than one (1) year but not more than 10 years	If the amount of tax unpaid
			Exceeds	But does not exceed	Compromise is
			P     x x x	P   5,000	P   1,000
			5,000	10,000	3,000
			10,000	20,000	5,000
			20,000	50,000	10,000
			50,000	100,000	15,000
			100,000	500,000	20,000
			500,000	1,000,000	30,000
			1,000,000	5,000,000	40,000
			5,000,000	x x x	50,000

B. For late filing of Tax Returns with NO Tax Due to be paid, the compromise penalty will be imposed upon filing of the Tax Return based on the following:

1. For violations of the NIRC provisions which are subject to compromise, the reference is found in page 4 of Annex A of RMO No. 7-2015.

TAX CODE SEC	NATURE OF VIOLATION	CRIMINAL PENALTY IMPOSED	AMOUNT OF COMPROMISE
255	Failure to make/file/submit any return or supply correct information at the time or times required by law or regulation	Fine of not less than P10,000 and imprisonment of not less than one (1) year but not more than ten (10) years	If gross sales, earnings or receipts; or gross estate or gift (based on the subject returns/information for filing/submission)
			Exceeds	But does not exceed	Compromise is
			P     x x x	P   50,000	P   1,000
			50,000	100,000	3,000
			100,000	500,000	5,000
			500,000	5,000,000	10,000
			5,000,000	10,000,000	15,000
			10,000,000	25,000,000	20,000
			25,000,000	x x x	25,000

2. For violations of the NIRC provisions which may be the subject of criminal actions, Section 250 of the NIRC will apply as follows: 

NIRC SEC. 250. Failure to File Certain Information Returns. - In the case of each failure to file an information return, statement or list, or keep any record, or supply any information required by this Code or by the Commissioner on the date prescribed therefor, unless it is shown that such failure is due to reasonable cause and not to willful neglect, there shall, upon notice and demand by the Commissioner, be paid by the person failing to file, keep or supply the same, One Thousand Pesos (P 1,000) for each failure: Provided, however, That the aggregate amount to be imposed for all such failures during a calendar year shall not exceed Twenty-Five Thousand Pesos (P 25,000).

C. For late filing of Statements/Reports required to be filed with NO Tax Due to be paid, the compromise penalty will be imposed upon filing of the Tax Return based on the following:

NIRC SEC. 275. Violation of Other Provisions of this Code or Rules and Regulations in General.- Any person who violates any provision of this Code or any rule or regulation promulgated by the Department of Finance, for which no specific penalty is provided by law, shall, upon conviction for each act or omission, be punished by a fine of not more than One Thousand Pesos (P 1,000) or suffer imprisonment of not more than six (6) months, or both. both.

SOURCE: http://www.bir.gov.ph/index.php/penalties.html

Observance of the "NO GIFT POLICY"

Revenue Memorandum Order (RMO) No. 40-2016 dated July 4, 2016 has issued by the bureau relative to the Observance of the "NO GIFT POLICY".

 

It is stated in the RMO that as public servants and professionals, the BIR officials and employees adhere to the principle that public office is a public trust and promote a high standard of ethics in public service.

 

With this, they are expected to perform their duties and responsibilities without expectation of any favor or material reward. In this connection, the BIR officials and employees are not allowed to accept nor solicit gifts, whether from the public or the private sectors.

 

This Gift Policy is issued pursuant to the following:

 

- Section 25, Article II of the 1987 Constitution

- Section 1, Article XI of the 1987 Constitution

- Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act)

- Presidential Decree No. 46 s. 1972 (Making it Punishable for Public Officials and Employees to Receive, and for Private Persons to Give Gifts on Any Occasion, including Christmas)

- Republic Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees).

 

In order to enforce this policy, the BIR officials and employees are directed to immediately and politely return any gift that may be given.

 

SOURCE: http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202016/RMO%20No.%2040-2016.pdf of the full text of RMO No. 40-2016.

Assumption to duty of Caesar R. Dulay as Commissioner of Internal Revenue

Revenue Memorandum Order (RMO) No. 39-2016 refers to the Assumption to duty of Ceasar R. Dulay as Commissioner of Internal Revenue (CIR).

In view of his assumption of the duties of CIR effective July 1, 2016, all papers and correspondence prepared for the signature of the CIR pursuant to the provisions of RMO No. 65075 dated November 28, 1975 and other subsequent Orders, shall be prepared in the following maner:

CEASAR R. DULAY
Commissioner of Internal Revenue

SOURCE: http://www.bir.gov.ph/images/bir_files/internal_communications_3/Full%20Text%20of%20RMO%202016/RMO%20No.%2039-2016.pdf

"SMART" PVC TIN Card for Seniors and Registered Professionals

The BIR just recently launched the “SMART” PVC TIN Card for Seniors and Registered Professionals last June 20, 2016.

The event was favored by Department of Finance (DOF) Secretary Cesar V. Purisima and BIR Officials led by Commissioner Kim S. Jacinto-Henares, DCIRs Nelson M. Aspe, Lilia C. Guillermo and Celia C. King, and other officials and employees of the BIR. Initially, the production and distribution of state of the art “smart” PVC TIN Card for Senior Citizens, including BIR employees at the National Office registered with Revenue District Office (RDO) 39- South Quezon City and registered professionals of all RDOs under Revenue Region No. 8 – Makati City was prioritized.

The smart TIN card is made of PVC material, equipped with a radio frequency identification (RFID) magnetic electronic microchip with duplicate “ghost” photo print, pre-printed security micro-printing and a QR code where the taxpayer’s information could be stored, similar to those found in credit or debit cards. 

The TIN Card Production Facility is located at the 4th Floor BIR Command Center.

The project was duly supported by the Millennium Challenge Account-Philippines (MCA-P) which donated the TIN Card printing machines and laptops, Pilipinas Micromatrix Technologies Inc. (PMTI) which developed the RFID SMART TIN cards and the Registration System, while Allcard Plastics Philippines Inc., provided the needed contactless card readers/writers. (mldn) 

SOURCE: http://www.bir.gov.ph/images/bir_files/public_information_and_education/PR96JUNE3016.pdf

Withholding Tax Calculator

The Bureau of Internal Revenue's (BIR) Withholding Tax Calculator has restrictions/limitations on the use of the application and it is not downloadable.

Besides, the application is simply an automated computation of the withholding tax due based only on the information entered into by the user in the applicable boxes. Accordingly, the withholding tax due computed by the calculator cannot be used as basis of complaints of employees against their employers.

No validation process is being performed on the following information:
Basic Salary/Statutory Minimum Wage Earner (whether or not the basic salary is more than or less than the statutory minimum wage in the National Capital Region or in other regions);

De Minimis Benefits (whether or not the total de minimis benefits received by the employee is more than or less than the total threshold);

The Cumulative Average Method in computing withholding taxes (where the total supplementary compensation is equal or greater than the total regular compensation) cannot be accommodated in the calculator.

To access Withholding Tax Calculator click here.

SOURCE: http://www.bir.gov.ph/index.php/withholding-tax-calculator.html 

Suspension of Effectivity of All Issuances

The CIR has issued Revenue Memorandum Circular (RMC) No. 69-2016 dated July 1, 2016 relative to the suspension of effectivity of all Issuances Promulgated with the Period Covering June 1-30, 2016.

The effectivity of all revenue issuances issued stated above is hereby suspended until further notice and the circular shall take effect immediately.

Please refer: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2069-2016.pdf

Suspension of Audit of the BIR and Submission of Inventory of Pending Letters of Authority/Letter Notices

The Commissioner of Internal Revenue, Caesar R. Dulay has issued Revenue Memorandum Circular (RMC) No. 70-2016 for the suspension of all field audit and other field operations of the Bureau of Internal Revenue (BIR) relative to the examinations and verifications of taxpayers' books of accounts, records and other transactions effective July 1, 2016.

The inventory of outstanding  Letters of Authority/Audit Notices, and Letter Notices as of June 30, 2016, shall be submitted to the Office of the Commissioner in Excel format, both in softcopy in CD/DVD and hardcopy, on or before July 16, 2016. 

Moreover, no written orders to audit and/or investigate taxpayers' internal revenue tax liabilities shall be issued and/or served except in the following cases:

- Investigation of cases prescribing on or before October 31, 2016; 

- Processing and verification of estate tax returns, donor's tax returns, capital gains tax returns and withholding tax returns on the sale of real properties or shares of stocks together with the documentary stamp tax returns related thereto;

- Examination and/or verification of internal revenue tax liabilities of taxpayers retiring from business;

- Audit of National Government Agencies (NGAs), Local Government Units (LGUs) and Government Owned and Controlled Corporations (GOCCs) including subsidiaries and affiliates; and

- Other matters/concerns where deadlines have been imposed or under orders of the Commissioner of Internal Revenue.

But, services of Assessment Notices, Warrants and Seizure Notices should still be effected. Taxpayers may voluntarily pay their known deficiency taxes without the need to secure authority from concerned Revenue Officials.

SOURCE: http://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/RMC%20No%2070-2016.pdf