For regular sales of real estate, commonly between property developers and buyers, to be completed before the Registry of Deeds, an Electronic Certificate Authorizing Registration (eCAR) shall be sought from the Bureau of Internal Revenue (BIR), which involves the proper settlement of capital gains taxes, withholding taxes, and documentary stamps, as applicable. The BIR recently issued Revenue Memorandum Order (RMO) No. 33-2023 last September 29, 2023, to reiterate the guidelines for the appropriate tax to be withheld on the sale of real property sold in installments where payments in the year of sale do not exceed 25% of the selling price, in accordance with Section 3.J of RR No. 17-2003.

For individual buyers who are not engaged in trade or business, no withholding is required on the periodic installment payments. The tax shall be withheld on the last installment and/or prior installments if the last installment is inadequate to cover the tax owed. The applicable tax rate is based on the gross selling price or fair market value of the property at the time the contract to sell is executed, whichever is higher.

On the other hand, for individual or non-individual buyers engaged in trade or business, the tax shall be deducted and withheld by the buyer from each installment based on the ratio of the amount of consideration (exclusive of interest on installment payments) collected as stipulated in the contract to sell, applied to the gross selling price or fair market value at the time of the execution of the contract to sell, whichever is higher.

In either case, the withholding taxes thereon shall be filed and paid through BIR Form No. 1606, which is due on or before the tenth (10th) day of the following end of the month where the transaction occurred.

Under no circumstances may an eCAR on installment sale transactions as above described be issued to the buyer of real property until the withholding tax owed on such sales, transfers, or exchanges, along with any applicable penalties, has been fully paid.

Please be guided accordingly.



P&A Grant Thornton

Certified Public Accountants

P&A Grant Thornton is the Philippine member firm of Grant Thornton International Ltd.


As published in SunStar Cebu, dated 22 October 2023