THE Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 27-2017 which clarifies the tax base on the sale, exchange or other disposition of real property whether classified as capital asset or ordinary asset.
The Tax Code provides that the imposition of tax on the sale of real property located in the Philippines will be based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of the Tax Code, whichever is higher. Section 6(E) of the Tax Code provides for the authority of the Commissioner to prescribe real property values.
For purposes of computing any internal revenue tax, the value of the property must be whichever is the higher of: (1) the fair market value as determined by the Commissioner; or (2) the fair market value as shown in the schedule of values of the provincial and city assessors.
A comparative sale or any other tax base must not be applied. Moreover, revenue officials or employees cannot apply any other basis for the imposition of capital gains tax/income tax/withholding tax on sale, exchange or disposition of real property.
Please be guided accordingly.
Source: P&A Grant Thornton
Certified Public Accountants
As published in SunStar Cebu, dated in 18 April 2017