Documents Required by the BIR on Sale of Land or Real Property Subject to Capital Gains Tax - A Bureaucratic Web of Entanglements and Obstacles

The most common complaint of people when they deal with Philippine government agencies is the bureacratic red tape. It seems that there are so many unnecessary requirements and processes that the government may justify as merely safeguards against fraud but are actually adding layers of inefficiency in the system and adding further burden to the transacting public. Let us take for example land transactions, more particularly the payment of tax obligations with the Bureau of Internal Revenue (BIR) for Capital Gains Tax and Documentary Stamp Tax.

Under the law, the Capital Gains Tax must be paid within 30 days from the date of the execution of the deed of sale, and the Documentary Tax within 5 days after the close of the month when the document of sale was executed. To meet this 30-day deadline, the seller (or actually the buyer based on actual practice because he is the most interested in transferring the property to his name) must prepare the following, based on a most recent policy guideline of the BIR:

a. Mandatory Requirements

1. Tax Identification Number (TIN) of Seller and Buyer
2. Notarized Deed of Absolute Sale / Document of Transfer
3. Certified True Copy of the latest Tax Declaration issued by the Local Assessor's Office for land and improvement applicable to the taxable transaction
4. Certification from the Assessor's Office that the Tax Declaration presented is still existing and no new assessment or revision has been made up to the present
5. Original Certified True Copy of Transfer Certificate of Title (TCT), Condomonium Certificate of Title (CTC), Original Certificate of Title (OCT), whichever is applicable
6. Certificate of No Improvement issued by the Assessor's Office, if applicable (when there is no structure or building in the land)
7. Special Power of Attorney of the processor/authorized representative must be attached to the docket
8. Valid IDs (original for presentation and two photocopies to be attached to the docket) of the processor/authorized representative and the authorizing seller/buyer.
9. Acknowledgment Receipt
10. History of Ownership of the property sold or Tracer
11. Official Receipt issued by the Notary Public / Lawyer notarizing the document/s presented
12. Official Receipt/Deposit Slip for this purpose and duly validated return as proof of payment
13. P100.00 certification fee and P15.00 Documentary Stapms issued by the BIR cashier

b. Other Requirements, if applicable

1. Special Power of Attorney, if the person signing the document is not the owner as appearing in the Title
2. Certification of the Philippine Consulate, if the document is executed abroad
3. Location plan/vicinity map, if the zonal value cannot be readily determined from the documents submitted
4. Such other requirements as may be required by law/rulings/regulations/other issuances

With the foregoing requirements, the processor of the transfer (e.g. lawyer, bookkeeper, accountant) is best advised to secure most of the aforelisted documents before the execution of the deed of sale. Otherwise, good luck getting all those certifications, certified copies of documents, TINs, SPAs, valid IDs, etc. especially if the sellers have already been paid the full price and are not easily available or cooperative. My take is that the BIR just really wants us taxpayers to pay the penalty for late payment of taxes, thus these obstacles, err, requirements, plus of course the opportunity to offer a shorcut of these requirements for a fat bribe. As one foreigner client of mine who bought a residential building commented in frustration: "Why is your government making it very hard for the public to pay their tax?! I just want to pay the tax, why is it very cumbersome to do so?" He's right. Unfortunately, our bureacracy suffers from a grave lack of common sense, and worse, is inherently and hopelessly staffed and run by inefficient and/or corrupt people. I hope the "tuwid na daan" (straight path) PNoy Aquino administration will prove me wrong. I have the same complaint for payment of estate tax, but that would be in another article.

About This Blog

I started this blog in 2008 as an aid for me to prepare for the Philippine Bar exams and also to serve as a platform to share my notes on bar exam preparations and from my study of the law. Since then many things have happened in my career in the law and this blog has evolved through the years.

I took the Bar exam in September 2009 and was inducted as a lawyer in April 2010 after passing the arguably most difficult professional examination in the country. From my student days and up to now I still believe in the saying that giving is receiving a thousand-fold. This continues to be the main principle of this blog.

As this evolves following my career path in the legal profession - from being a struggling law student to a greenhorn lawyer with a promising career (I always stay positive!) - I will continue to write here and develop this blog site for others to learn from my notes and experiences. The bar tips, insights, digests or links to relevant cases and what-have-you are still there.

What's new? I will continue to add to the rich deposit of legal doctrines and annotations found here but that are not usually found in reviewers, together with citations or links of most recent relevant decisions of the Supreme Court. I'm also building a new section devoted to developing a successful legal career. Borrowing from the words of the E-Myth Lawyer author Michael E. Gerber, a successful lawyer is one "who works balanced hours, has little stress, enjoys rich and rewarding relationships with friends and family, and has an economic life that is diverse, fulfilling, and shows a continuous return of investment.". Such beautiful words. Lately, I have been struggling with, or perhaps to put it mildly, reflecting on  the meaning of "success" as I continually evaluate my budding law career.

As I said in 2008, may this blog site be useful to you!