Summary

RMC No. 62-2006 clarifies the tax treatment of foreclosure sales initiated by the Department of Agrarian Reform (DAR).

RR No. 4-99 does not apply. RR No. 4-99 covers only extra-judicial foreclosure sales initiated by banks, finance and insurance companies, so it does not apply to DAR. Capital Gains Tax is due within 30 days from the sale, and Withholding and Documentary Stamp Taxes are due on the 5th day after the close of the month of the sale.
DAR as statutory seller. DAR, representing the owner-mortgagor, is the statutory seller liable for the Capital Gains/Income/Withholding Tax. The tax is based on the higher of the auction bid price or the zonal value.
DAR as highest bidder. If DAR is the highest bidder and consolidates title in the Government when the property is not redeemed, it is exempt from all taxes, including penalties, surcharge and interest, because the funds come from the government treasury. DAR must first obtain a Certificate Authorizing Registration (CAR) from the RDO where the property is located before transfer to the Republic of the Philippines.
Other highest bidder. If the highest bidder is not DAR, that bidder assumes payment of the taxes. The bidder is also liable for penalties, surcharge and interest for any payment delay.
Issuing the CAR. Revenue District Officers issue the CAR when DAR files the returns showing the sale in its favor is tax exempt, the Sheriff’s Certificates of Sale, and proof that the transactions were made under the DAR-SPO/DBP Window III Financing Program.

Capital Gains Tax due within 30 days from the foreclosure sale
Withholding and Documentary Stamp Taxes due on the 5th day after the close of the month of sale

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

RMC No. 62-2006: Clarifies the tax treatment of foreclosure sales initiated by the Department of Agrarian Reform