BIR clarifies basis for tax on sale of real properties

(Revenue Memorandum Circular No. 27-2017, March 29, 2017)

This Tax Alert is issued to inform all concerned of clarifications on the tax base on sale, exchange or other disposition of real properties. 

Under the Tax Code, the gross selling price or current fair market value (as determined under Sec 6E the Tax Code) of the property subject to sale, exchange or other disposition shall be used as basis for the 6% capital gains tax.

Section 6 (E) of the National Internal Revenue Code provides that for purposes of computing any internal revenue tax, the fair market value of the property shall be either the fair market value as determined by the Commissioner or the fair market value by Provincial and City Assessors, whichever is higher.

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. The comparative sale or any other tax base shall not be acceptable.