Capital Gains Tax on Real Estate in the Philippines (2026)

Selling land, a house, or a condo in the Philippines triggers a tax that surprises many sellers: the 6% capital gains tax (CGT) on real property under Section 24(D) of the National Internal Revenue Code. It is not computed on your actual profit — it is a final tax on the presumed gain, based on the transaction price or the government’s valuation, whichever is higher. This guide explains the rule end to end: the tax base, who pays, the filing deadline (BIR Form 1706), how installment sales work, and the principal-residence exemption that can make a sale tax-free.

The Core Rule: 6% Final Tax on Presumed Gains

When an individual sells, exchanges, or otherwise disposes of real property held as a capital asset (roughly: property not held for sale in the ordinary course of a real-estate business), the law presumes a gain and imposes a final tax of 6% under Section 24(D) of the Tax Code. Three features make this tax different from regular income tax:

• It is a final tax. The 6% is full and complete payment of income tax on the sale. You do not declare the gain again in your annual income tax return, and no deductions are allowed.
• It is based on presumed gain. The tax applies even if you sold at a loss. Because the BIR does not examine your actual cost, the law simply presumes a gain and taxes the transaction base.
• The seller pays it. The liability sits with the seller, not the buyer — although in practice the cash flow is often arranged so funds are withheld from the seller’s proceeds.

Computing the Tax: Price vs Zonal Value, Whichever Is Higher

The 6% is applied to the higher of:

• the gross selling price stated in the deed of sale, or
• the property’s current fair market value — for tax purposes, the BIR’s zonal value or the local assessor’s schedule of market values, whichever of the two is higher (Section 6(D) of the Tax Code).

This “whichever is higher” rule prevents under-declaration: you cannot shrink the tax by writing a low price into the deed if the government’s zonal valuation for that property is higher.

Filing and Paying: BIR Form 1706, Within 30 Days

The CGT return is BIR Form 1706 (Capital Gains Tax Return). The rules on timing:

• Lump-sum sale: file and pay within 30 days from the date of sale (typically, the notarization of the deed of sale).
• Installment sale: file the return within 30 days from receipt of the first down payment, and pay the 6% on each down payment or installment as you actually receive it. The tax follows the cash, not the contract date.

Miss the 30-day window and the standard BIR delinquency additions apply — surcharge, annual interest, and compromise penalty stack quickly. Our late-filing penalties guide breaks down exactly how those additions compute on a late return.

Practically, the CGT is part of a sequence: the BIR will not issue the Clearance / Certificate Authorizing Registration (CAR/TCC) needed to transfer the title until the CGT and the other transaction taxes are paid. Title transfer is what most buyers care about, so these taxes are usually settled at (or before) the notarization-and-payment stage.

The Principal-Residence Exemption (Section 24(D)(2))

There is one meaningful exemption, and it exists specifically for people selling their own home. Under Section 24(D)(2) of the Tax Code (implemented by Revenue Regulations 13-99), the 6% CGT is exempted if all of these are true:

1. The property sold is your principal residence (the home you actually live in).
2. The proceeds are fully utilized in acquiring or constructing a new principal residence.
3. The acquisition or construction happens within 18 months from the sale.
4. You have not availed of this exemption within the last 10 years (it is a once-per-decade benefit).

Because the exemption is conditional on what you do after the sale, the standard arrangement is an escrow: the buyer deposits the full payment (or the CGT-equivalent portion) with a bank, and the funds are released to the seller only upon proof of compliance — or forfeited to pay the 6% CGT if the seller fails to reinvest. If you use only part of the proceeds for the new home, a proportional exemption applies to the used portion and the remainder of the proceeds is taxed.

CGT Is Not the Only Tax on the Transaction

Sellers (and buyers) often conflate the taxes on a property sale. The 6% CGT is an income-type tax, but a land transfer typically involves several distinct levies:

• Capital gains tax (6%) — on the seller, final, based on price/zonal value (this guide).
• Documentary stamp tax (1.5%) — a tax on the deed of sale itself, computed on the same higher-of price/zonal base, commonly shouldered by the buyer in practice.
• Local transfer tax — roughly 0.5% of the sale price (city/municipal), plus registration fees at the Registry of Deeds.
• Real property tax (annual) — the yearly local tax on ownership; unpaid RPT must be settled before transfer. This is separate from the sale taxes.

None of these substitute for another. Budget the full stack, not just the headline 6%, when pricing a property sale.

Special Situations

• Inherited property. Property passing by death is first subject to estate tax (6% of the net estate). When the heir later sells that property, the 6% CGT applies to that sale — the two taxes do not cancel out.
• Donation instead of sale. A transfer for little or no consideration is treated as a donation and taxed under the donor’s tax rules instead (6% of total gifts above the annual ₱250,000 exemption, effective 2018).
• Sale of shares of stock (not real property) uses a different rule: a 15% final tax on net capital gains for shares not traded through the stock exchange, or 0.6% stock transaction tax for listed shares.
• Family home on the deed. If the property is the principal residence of the seller, plan the exemption documentation (new home contract, dates, amounts) before the sale closes — retrofitting an escrow later is much harder.

Common Mistakes to Avoid

• Computing 6% on your actual profit. The base is price-vs-zonal (whichever higher), not selling price minus cost. You can owe CGT on a sale that lost money.
• Writing a low price into the deed. The zonal-value floor makes this pointless — and under-declaration creates its own exposure.
• Missing the 30-day deadline. Surcharge, 12%-per-annum-style interest, and compromise penalties attach to late 1706 filings.
• Assuming the exemption is automatic. The principal-residence exemption requires full reinvestment within 18 months, once per 10 years — arrange the escrow up front.
• Forgetting the other taxes. DST, transfer tax, and registration fees are separate; the buyer cannot get the CAR without all of them.
• Confusing CGT with VAT. A one-off sale of a capital asset is not a VAT sale; a dealer’s inventory sale can be. Classification drives everything.

Related Guides and Resources

• BIR Late-Filing Penalties — how surcharge, interest, and compromise penalty stack if the 1706 slips past 30 days.
• Sole Proprietorship Tax — the 8% vs graduated choice, relevant when property is an ordinary asset of your business.
• Income Tax Brackets Explained — the graduated schedule ordinary-asset gains fall under.
• The main Philippine Tax Calculator — compute income tax and contributions for your regular income.

Frequently Asked Questions

Key Takeaways

• Selling real property (a capital asset) as an individual triggers a 6% final CGT under Section 24(D) — paid by the seller.
• The base is the higher of gross selling price or fair market/zonal value — computing 6% on your “actual profit” is the most common error.
• File BIR Form 1706 within 30 days; installment sales are taxed on each amount as received.
• The principal-residence exemption (full reinvestment within 18 months, once per 10 years) is the only way to zero it out — set up the escrow before closing.
• CGT is one of several transaction taxes: budget DST (1.5%), local transfer tax, and registration fees too.
• Dealers’ inventory and corporate sellers are outside the 6% regime — classification decides the tax.