You are selling your principal residence, do you need to pay the 6% Capital Gains Tax?
It depends. If you don’t use your primary residence in trade or business and you will use the entire proceeds of the sale in buying a new home then you could be exempted in paying the Capital Gains tax.
You must fully use the proceeds in acquiring and constructing new principal residence within 18 calendar months from the date of sale or disposition. The BIR Commissioner should be duly notified, within thirty (30) days from the date of sale or disposition of the person’s intention to avail of the tax exemption. If there is no full utilization of the proceeds of sale. The portion of the gain presumed to have been realized from the sale will be subject to Capital Gains Tax.
The Buyer will withhold from the seller and deduct from the agreed selling price/consideration the 6% capital gains tax which shall be deposited in cash or manager’s check in interest-bearing account with an Authorized Agent Bank (AAB) under an Escrow Agreement between the concerned Revenue District Officer, the Seller and the AAB to the effect that the amount so deposited, including its interest yield, shall only be released to such Transferor upon certification by the said RDO that the proceeds of the sale thereof has, in fact, been utilized in the acquisition or construction of the Seller/Transferor’s new principal residence within eighteen (18) calendar months from date of the said sale. The date of sale of a property refers to the date of notarization of the document evidencing the transfer of said property.
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Tags: Capital Gains, Exemption, Seller's Taxes
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