Philippines Clarifies Tax Rules for One-Time Transactions

The Philippine Tax Whiz has clarified tax issues related to One-Time Transactions (ONETT) based on Revenue Memorandum Circular No. 75-2026 issued by the Bureau of Internal Revenue (BIR). ONETT transactions include the sale of real property (classified as capital or ordinary asset), transfer of shares of stock not traded on the stock exchange, donations, and transfers of properties from a decedent's estate. Taxpayers involved in these transactions are required to submit documentary requirements, pay applicable taxes, and obtain necessary BIR-issued documents, such as the Electronic Certificate Authorizing Registration (eCAR), before the property or shares can be validly transferred or registered. The BIR may issue an eCAR even if the Value-Added Tax (VAT) due on the transaction has not yet been paid. However, the issuance of the eCAR does not extinguish the taxpayer's obligation to pay the applicable VAT. The BIR's concerned office will inform the Revenue District Office (RDO) for the appropriate assessment and collection of any unpaid VAT. Taxpayers are cautioned not to interpret the eCAR issuance as confirmation that all tax liabilities have been settled. Regarding the Capital Gains Tax (CGT), if the buyer agrees to assume its payment, the CGT amount should not be included in the selling price for tax base determination. The tax base for CGT is the highest of the selling price shown on the Deed of Absolute Sale, the BIR's Fair Market Value (FMV), or the Provincial/City Assessor's FMV. Documentary Stamp Tax (DST) is computed similarly, except for government transactions where it is based on the consideration paid. A dacion en pago, where a debtor conveys property to a creditor to settle an obligation, is considered a transfer of property for tax purposes. Applicable taxes depend on the property's classification: Capital Gains Tax and Documentary Stamp Tax for capital assets, and Creditable Withholding Tax and Value-Added Tax (if applicable) for ordinary assets. Furthermore, the tax classification of a property is determined by its classification in the Tax Declaration, not its actual use. This means a property declared as residential but used commercially, or vice versa, will be taxed based on its declared classification. These clarifications aim to assist taxpayers in complying with tax regulations for property sales and asset transfers in the Philippines, a crucial aspect of personal and corporate financial management.