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RMC No. 19-2018: Clarifies the basis for the computation of Capital Gains Tax and Documentary Stamp Taxes in sale transactions of real property previously mortgaged at a value higher than its zonal or fair market value

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Summary

RMC No. 19-2018 clarifies the basis for computing Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) on sales of real property that was earlier mortgaged at a value higher than its zonal or fair market value.

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Key points

  1. Only two bases. Under Section 24(D)(1) and Section 196 in relation to Section 6(E) of the NIRC, the basis is the gross selling price or consideration contracted to be paid, or the Fair Market Value determined under Section 6(E).
  2. What Fair Market Value means. It is the higher of the fair market value determined by the Commissioner (commonly the Zonal Value) and the value in the schedule of the Provincial or City Assessors.
  3. Mortgage value. Revenue District Officers cannot depart from the law and consider the mortgage value previously set on the property.

Who is affected

  • Sellers of real property previously mortgaged
  • Revenue District Officers

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.

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