Bureau of Internal Revenue(BIR)

January 24, 2023 Dear Ms. Cabading, Greetings! Thank you for your request dated Jan 23, 2023 12:17:46 PM under Executive Order No. 2 (s. 2016) on Freedom of Information in the Executive Branch. Your Request You asked for Inquiry Process of Selling of Land. Response to Request In reply, we refer you to the following regarding the taxation of sale of real property by a corporation: Sale of real property is subject to VAT (12%) if such asset is categorized as an ordinary asset (Section 39(A)(1) of the Tax Code) as follows: - Stock in trade - Real property included in the taxpayer’s inventory and on hand at the close of the taxable year - Real property for sale in the ordinary course of trade or business - Real property used for trade or business subject to depreciation allowance under Section 34(F) of the Tax Code - Other real property used in trade or business Pursuant to Section 20 of Revenue Regulations (RR) 4-2018, deeds of sale and conveyances and donation of real property is subject to a documentary stamp tax of 1.5%. Section 2(F) of RR 11-2018 states that a creditable withholding tax of 1.5% to 6% based on the gross selling price/total amount of consideration or the fair market value determined in accordance with Section 6 € of the Tax Code whichever is higher, paid to the seller/owner for the sale, transfer or exchange of real property, other than capital asset, shall be imposed upon the withholding agent/buyer. For the requirements, we refer you to the Guidelines and Instructions in BIR Forms 2550Q Quarterly VAT Return, 1606 Withholding Tax Remittance Return for Transfer of Real Property Other than Capital Asset and 2000-OT Documentary Stamp Tax Declaration Return (One-Time Transactions). Further, you should apply for business closure with the Revenue District Office (RDO) where such corporation is registered and be issued a Tax Clearance Certificate. Likewise, you may ask for assistance from the ONETT Section of the concerned RDO for the details on your concern. Thank you. Respectfully, FOI Receiving Officer Public Information and Education Division