Wednesday, October 29, 2014

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.

Disclaimer

The articles in this blog are the writer's own opinion, views or report of facts, AND SHOULD NOT SUBSTITUTE for official documents or issuances, or the advice of an independent and competent legal counsel. We do not warrant the accuracy and suitability of these articles for whatever purpose you may have in copying them. Thank you.
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