CHAPTER 6

Applicable Taxation
Type of Gain
Scheme
Ordinary Gains NT

GR: NT
Capital Gains
EXPN: CGT
 Domestic Securities include:
 Common and Preferred stocks
 Stock rights
 Stock options
 Stock warrants
 Thru PSE Directly to buyer

Stock transaction tax CGT

½ of 1 % of SP 5% / 10% of Gain
 Tax Basis = Cost of Goods Sold

 Costing Methods
▪ Specific identification
▪ Moving average
▪ FIFO
 Acquisition by gratuitous title
▪ FMV at the time of gift or the last acquisition
price, whichever is LOWER.
▪ See p. 174, Illustration 3

 Acquisition for inadequate consideration

▪ FV > SP
▪ FV – SP = Gratuity subject to transfer tax
▪ SP – Cost = Gain subject to CGT
The 5%/10% CGT is regarded as the most
universal rule in income taxation.
The 5%/10% CGT is regarded as the most
universal rule in income taxation.

Payment is Transactional & Annual

 Filing and Payment
▪ For the TRANSACTIONAL, pay within 30 days
after each sale using BIR form 1707.
▪ For the ANNUAL, pay within the 15th day of the
4th month following the close of the taxable year
using BIR form 1707-A
 INSTALLMENT PAYMENT OF CGT
▪ Selling price exceeds PhP 1,000
▪ Initial payment does not exceed 25% of the SP

CGT = Collection x CGT / Contact Price

 INSTALLMENT PAYMENT OF CGT
▪ If there is a mortgage, SP less Mortgage = CP
▪ If mortgage > cost, the excess will be part of the
CP and the initial payment
 Sale of Tax Dividend-on to a Corporate buyer

Total Selling Price

less Cost & Expenses
less Dividends receivable

Capital Gains subject to CGT

 Sale of Tax Dividend-on to a Corporate buyer

Total Selling Price

less Cost & Expenses
less Dividends receivable

Capital Gains subject to CGT

 6% of the SP or FMV, whichever is higher

 FMV is the higher between:

 Zonal Value (from the CIR)
 Assessed Value (Assessor’s Office, LGU)

Note: Other authors may have different interpretations

 Certificate Authorizing Registration

No registration of documents transferring real

property unless all related taxes have been
paid.
 Individuals Domestic Corporations

Property Within
Property Within
[and Without?]
 Alternative Taxation

 Requisites:
 Individual Seller
 Buyer is the government
 Alternative Taxation

 Requisites:
 Individual Seller
 Buyer is the government

 Options:
 6% CGT or
 Gain subject to NT
 Exemption

 Sale of a principal residence for the

acquisition of a new principal residence by
individual taxpayers
 The exemption can be availed fully or
partially
 Exemption

 Important requisites:
 Citizen or resident alien
 BIR should be notified within 30 days
 The reacquisition must be within 18 months
 Can be availed of once every 10 years
 INSTALLMENT PAYMENT OF CGT
▪ Initial payment does not exceed 25% of the SP

CGT = Collection x CGT / Contact Price

 Filing and Payment
▪ Within 30 days after the sale using BIR form
1706.
 For domestic securities, P 0.75 for every P 200
of the par value of the stocks sold

 For real property, P 15 for every P 1,000 of the

SP or FMV