Capital Gains

Tax

Reporters:
Coros, Mara Dawn J.

Lozano, Hans
Definition: It is a tax imposed on the
gains presumed to have been realized
by the seller from the sale, exchange,
or the disposition of capital assets
located in the Philippines, including
pacto de retro sales and other forms
of conditional sale
Kinds of Income
1. Income from shares traded & listed
in the stock exchange
2. Income from shares not listed and
traded in the stock exchange
3. Income from the sale of real property
situated in the Philippines
4. Income from the sale, exchange, or
disposition of capital assets
Income from Shares Traded & Listed in the Stock
Exchange

- The transaction is exempt from income tax

regardless of the seller of the nature of business of
the seller or transferor.
- However, it is subject to of 1% stock
transaction tax imposed under Section 127 (A) of
NIRC based on the GSP or gross value in money of
the shares of stock sold or transferred
 Income from Shares not Listed and Traded in the
Stock Exchange (Section 24 (C))

-Under Section 24 (c) of NIRC, the net capital gains

from the sale, barter, exchange or other
disposition of shares of stock exchange is subject
to a final tax rate of 5% for the first 100,000 of
the net Capital gain, and 10% of net capital gain of
any amount in excess of 100,000
Elements for FIT to be applicable:
1. The shares are shares in DC
2. Classified as capital assets
3. Shares are not listed or traded in the
stock exchange
 Capital Gains from Sale of Real Property
(Section 23 (D) of NIRC)

General Rule: FIT of 6% to be applied:

1. The property sold is real property
2. Located in the Phil; and
3. Classified as a capital asset
Exceptions:
1. In case of sales made to the govt, any of its political
subdivision or to GOCCS
a.) Under sec. 24 (C)(1)- 6% CGT, or
b.) Under sec. 24 (A), at the option of the
taxpayer, either: (1) to pay by way of FIT; or
(2) by way of NIT
2. In case of mortgaged properties sold at public auction
(RR No. 4-99)
a.) if the buyer is NOT a bank or financial institution
FIT of 6%
b.) if the buyer is a bank or financial institution-
not immediately subject to FIT of 6% since there is no
change in ownership yet
3. In case of sale of or disposition of their principal residence by
natural persons
a.) Requirements:
(1) Sale or disposition by a natural
person of his principal residence,
(2) The proceeds of which is fully
utilized in acquiring/constructing a
new principal residence,
(3) Such acquisition/construction taking
place within 18 calendar months from
the date of sale or disposition,
(4) The taxpayer notifies the
Commissioner within 30 days from the
sale/disposition through a prescribed
return of his intention to avail of the exemption
(5) The tax exemption can only be availed of
once every 10 years.
(b) Tax treatment: Exempt from capital gains tax (CGT). If
there is no full utilization of the proceeds of sale or
disposition, the portion of the gain presumed to have
been realized from the sale or disposition shall be subject
to CGT.

(c) How taxable portion and tax determined:

- The historical cost or adjusted basis of the real property

sold or disposed shall be carried over to the new principal
residence built or acquired.
 Income from the Sale, Exchange, or other
Disposition of Capital Assets

Two percentages in Recognizing the Gain

from such sale or exchange:
1. Short-term Holding Period
- 100% if the capital asset has been
held for less than 12 months
2. Long-term Holding Period
- 50% if the capital asset has been
held for more than 12 months
Capital Assets- shall refer to all real properties held by a
taxpayer, whether or not connected with his trade or
business, and which are not included among the real
properties considered as ordinary assets under Section
39(A)(1) of the NIRC.

Ordinary assets shall refer to all real properties

specifically excluded from the definition of capital assets
under Section 39(A)(1) of the NIRC, namely:
(1) Stock in trade of a taxpayer or other real 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
(2) Real property held by the taxpayer primarily for sale
to customers in the ordinary course of his trade or
business; or
(3) Real property used in trade or business (i.e.,
buildings and/or improvements) of a character which is
subject to the allowance for depreciation provided for
under Sec. 34(F) of the Code; or
(4) Real property used in trade or business of the
taxpayer.
 Summary Tables of Rates
For 24 (C). CGT from Sale of Shares of Stock of a DC not traded in
the Stock Exchange

RES/CIT NRAETB NRANETB

Tax base: Net

Capital Gain
Tax rate:
Not over P100,000 5% 5% 5%

Amount in excess
of P100,000 10% 10% 10%
 Summary Tables of Rates
For 24 (D). CGT from Sale of Real Property Classified as Capital
Asset

RES/CIT NRAETB NRANETB

Tax base: Gross

selling price or
current fair market
value, whichever is
higher
Tax rate 6% 6% 6%