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Capital Gains Tax--- computed from ORIGINAL value or CURRENT value?

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Mc2012


Arresto Menor
Here is the situation:

My parents bought a property 40 years ago, but was not able to completely pay for it. As you know, of course, real estate prices during the 70's were much lower compared to now. A few years ago, the original seller/developer contacted us, and I, as the child of my late parents, agreed to pay off the remaining balance PLUS the accrued interests and penalties for over 30 years of non-payment. I just fully paid this year, and a Deed of Absolute Sale was written in my favor. Now I have the Original Owner's TCT under the name of the developer, and of course, I need to transfer it to my name. The developer, as part of the deal, asked us to pay the Capital Gains on this property as part of the settlement of the long-overdue arrears even if normally CGT is paid by the seller. Question is, will BIR base the Capital Gains Tax, and other taxes to be paid to have the Title transfered to my name, on the ZONAL VALUE of the property TODAY or on its value 40 years ago when the original sale was made to my parents (which I just completed)? This is a big deal because the original selling price is super low compared to the value today of course.

Can anyone shed some light?

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betchay001


Reclusion Perpetua
The BIR will base their assessment on either the Selling Price (evidenced by the notarized Deed of Absolute Sale), the Zonal Value TODAY (BIR's records) or the Market Value (on the tax dec), whichever is higher. They will no longer look at the previous year's zonal value.

If it is a habitual seller, then the percentage to be paid may be less than 6% (1.5%, 3% or 5% depending on the amount on the DOAS).

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Mc2012


Arresto Menor
betchay001 wrote:The BIR will base their assessment on either the Selling Price (evidenced by the notarized Deed of Absolute Sale), the Zonal Value TODAY (BIR's records) or the Market Value (on the tax dec), whichever is higher. They will no longer look at the previous year's zonal value.

If it is a habitual seller, then the percentage to be paid may be less than 6% (1.5%, 3% or 5% depending on the amount on the DOAS).

What do you mean by habitual seller? Isn't the capital gains tax fixed at 6%?

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betchay001


Reclusion Perpetua
If the seller is a developer (whose business is in selling), then it's withholding tax that is paid. The form used is 1606. If the seller is a private individual, the BIR form used is 1706 - capital gains tax.

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