Pursuant to Section 63 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, it is clear that in cases where the right of redemption of the mortgagor exists, the certificate of title of the mortgagor will not be cancelled yet even if the property has already been subjected to foreclosure sale. Instead, only a brief memorandum will be annotated at the back of the certificate. The cancellation of the title and issuance of a new title depends on whether the mortgagor will exercise his right to redeem the property mortgaged within one year from the issuance of the certificate of sale.

Following this rule, 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. No capital gains tax will be imposed. However, 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 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.

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 party 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.

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.