REVENUE REGULATIONS NO. 4-99
CAPITAL GAINS TAX AND DST ON FORECLOSURE SALE
Q: What is the present law on the transfer of title under a foreclosure sale?
A: If the mortgage was foreclosed judicially, a certified copy of the final order of the court confirming the sale shall be registered with the Register of Deeds.
If no right of redemption exists, the certificate of title of the mortgagor will be cancelled, and a new certificate is issued in the name of the purchaser.
However, where the right of redemption exists, the certificate of title of the mortgagor shall not be cancelled. In the event the property is redeemed, the certificate or Deed of Redemption shall be filed with the Register of Deeds, and a brief memoranda concerning the redemption shall be made on the certificate of title of the mortgagor. If the property is not redeemed, the final deed of sale will be executed by the sheriff in favour of the purchaser, and the title of the mortgagor shall be cancelled with the issuance of a new certificate in the name of the purchaser.
Q: When should the capital gains tax due on foreclosed properties be paid?
A: At the time the property is foreclosed, no capital gains tax will be imposed since no sale or transfer of property has taken place.
If the mortgagor exercises his right of redemption within one year from the issuance of the certificate of sale, the certification to that effect or the deed of redemption should be filed with the Revenue District Office having jurisdiction over the place where the property is located. Such certification must also be filed with the Register of Deeds.
In case of non-redemption, the capital gains tax on the foreclosure sale shall become due based on the bid price of the highest bidder. The tax will be imposed only upon the expiration of the one-year period of redemption, and shall be paid within 30 days from the expiration of the said one-year redemption period with an authorized agent bank (AAB) located at the revenue District Office having jurisdiction over the place where the property is located.
Q: When should the documentary stamp tax be imposed?
A: In case the mortgagor exercises his right of redemption, the transaction shall only be subject to the documentary stamp tax (DST) of P15.00 inasmuch as no land or realty was sold or transferred for a consideration.
In case of non-redemption, the corresponding DST shall be levied, collected and paid by the person making, signing, issuing, accepting or transferring the real property wherever the document is made, signed, issued, accepted or transferred if the property is situated in the Philippines. However, in case one party to the taxable document enjoys exemption from the tax, the other part in the transaction who is not exempt shall be the one directly liable for the tax. The DST shall be computed based on the bid price at the same time the return is filed.
The DST must be paid and the tax return filed within ten (10) days after the close of the month following the lapse of the one-year redemption period. The return must be filed with the AAB located at the Revenue District Office having jurisdiction over the place where the property is located.
Q: When will the BIR issue the Tax Clearance Certificate?
A: In case of non-redemption, a tax clearance certificate (TCL) or Certificate Authorizing Registration (CAR) in favor of the purchaser/highest bidder shall be issued upon presentation of the capital gains and DST tax returns duly validated by the authorized agent bank (AAB) evidencing full payment of the capital gains tax and DST due on the sale of the property classified as capital asset.
(Implenting Sec. 24 (D) (1) and Sec 27 (D)(5) of the 1997 Tax Code as amended by RANo. 8424; Date of Issue: March 9, 1999; Effective fifteen days after publication in newspaper of general circulation)