BIR Form 1706 Capital Gains Tax Real Property
Updated June 13, 2026
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Definition
BIR Form 1706 is the tax return used to report and pay capital gains tax on the sale of real property in the Philippines held as a capital asset. It is filed, and the 6% tax paid, within 30 days after the sale.
BIR Form 1706 is the return for the capital gains tax (CGT) on sales and other dispositions of real property located in the Philippines and classified as a capital asset. Under Section 24(D) of the Tax Code, individuals, estates and trusts pay a final tax of 6% based on the gross selling price or the current fair market value, whichever is higher. Fair market value is the higher of the BIR zonal value and the value in the assessor's schedule (NIRC §6(E)). Domestic corporations selling land or buildings held as capital assets pay the same 6% (NIRC §27(D)(5)). Because the tax is presumed on the price or value, it is due whether the seller made a gain or a loss, and the seller's cost does not enter the computation. The return and payment are due within 30 days after the sale (RR 2-98, as amended by RR 11-2018).
Detailed explanation
Overview of BIR Form 1706
BIR Form 1706 is the return prescribed by the Bureau of Internal Revenue (BIR) for the capital gains tax (CGT) on sales and other dispositions of real property located in the Philippines and classified as a capital asset. Under NIRC §24(D), individuals, estates and trusts pay a final tax of 6% based on the gross selling price or the current fair market value, whichever is higher. The return is filed and the tax paid within 30 days after the sale (RR 2-98, as amended by RR 11-2018).
Who Must File Form 1706
Form 1706 is filed for sales, exchanges and other dispositions of Philippine real property held as a capital asset, meaning property not used in the seller's trade or business. This covers:
- Filipino citizens and resident aliens selling a lot, house or condominium they do not use in business
- Non-resident aliens selling Philippine real property (NIRC §25(B))
- Estates and trusts
- Domestic corporations selling land or buildings held as capital assets, which pay the same 6% (NIRC §27(D)(5))
Real property held as an ordinary asset, such as inventory of a real estate dealer or property used in business, is taxed under the regular income tax rules instead. The sale of a principal residence by an individual can be exempt if the proceeds are fully used to buy or build a new principal residence within 18 months (NIRC §24(D)(2)).
Tax Rate and Computation
The tax is 6% of the gross selling price or the current fair market value, whichever is higher. Fair market value is the higher of the BIR zonal value and the value in the provincial or city assessor's schedule (NIRC §6(E)). The seller's cost and any gain or loss do not enter the computation.
Capital Gains Tax = 6% × the highest of the gross selling price, BIR zonal value and assessor's value
For example, if Juan dela Cruz sells a lot in Quezon City for ₱2,500,000 and the zonal value is ₱2,800,000, the tax is ₱2,800,000 × 6% = ₱168,000.
Filing Deadline and Penalties
Form 1706 is filed and the tax paid within 30 days after the sale. Late filing or payment adds a 25% surcharge (NIRC §248) and interest of 12% a year on the unpaid tax (NIRC §249). Willful failure to file a return or pay tax is also a criminal offense (NIRC §255).
Required Documents
Sellers usually prepare:
- The notarized deed of sale or other document of transfer
- The certificate of title
- The latest tax declaration of the land and improvements
- TINs and valid IDs of the seller and buyer
- For a seller acting through a representative, a special power of attorney
The BIR may ask for additional documents before it issues the electronic Certificate Authorizing Registration (eCAR).
Where and How to File
Form 1706 is filed with the Revenue District Office having jurisdiction over the location of the property, and the tax is paid through the BIR's authorized payment channels. The documentary stamp tax on the sale (₱15 for every ₱1,000 of the higher of price or value) is paid separately on BIR Form 2000. Once both are paid, the BIR issues the eCAR, which the Registry of Deeds requires to transfer the title.
Special Situations
Inherited property: Heirs who sell inherited real property pay the same 6% on the price or fair market value. The value at the decedent's death does not reduce the tax.
Exchange of property: An exchange is a disposition covered by NIRC §24(D), so the 6% applies to the higher of the consideration and the fair market value of the property given up.
Principal residence: An individual selling a principal residence may claim exemption if the full proceeds are used to acquire or build a new principal residence within 18 months (NIRC §24(D)(2)).
Common Errors
- Computing the 6% on the net gain instead of the higher of price or fair market value
- Using the contract price when the zonal value is higher
- Filing after the 30-day deadline, which triggers surcharge and interest
- Filing with the wrong RDO instead of the one where the property is located
- Treating an ordinary asset, such as a dealer's inventory, as a capital asset
Why it matters
Capital gains tax on real property sales is a significant tax obligation in the Philippines. Filing Form 1706 correctly and on time ensures compliance with BIR requirements, avoids penalties and interest, and provides a clear record of the transaction. For many Filipinos, the sale of real property (whether a family home, inherited land, or investment property) represents a major financial event; understanding and meeting the Form 1706 requirement protects against unexpected tax liabilities and legal complications.
How it works
Determine the Sale Date and Property Details
Identify the date the deed of sale was executed, gather the title, tax declaration and the property's BIR zonal value, and note the Revenue District Office where the property is located. The 30-day deadline runs from the sale.
Compute the Tax Base and the 6% Tax
Compare the gross selling price with the BIR zonal value and the assessor's market value. Take the highest of the three and multiply it by 6%. Cost of acquisition and improvements are not deducted (NIRC §24(D), §6(E)).
Prepare and File Form 1706 with Supporting Documents
Complete Form 1706 with the taxpayer and property details and the tax computation. Prepare the deed of sale, title, tax declaration and IDs, and file within 30 days after the sale.
Pay the Tax and Obtain Proof of Payment
Pay the tax through an authorized agent bank, Revenue Collection Officer or other BIR payment channel and keep the proof of payment. The BIR issues the electronic Certificate Authorizing Registration (eCAR) for the transfer once the CGT and documentary stamp tax are paid.
Examples
Salaried employee selling residential lot for ₱2,500,000
Maria Santos sells a residential lot in Makati for ₱2,500,000. She bought it years ago for ₱1,800,000, but cost does not matter here. The BIR zonal value is ₱2,800,000, which is higher than the price, so the tax is ₱2,800,000 × 6% = ₱168,000. She files Form 1706 and pays within 30 days after signing the deed of sale.
Retiree selling inherited commercial building for ₱5,000,000
Roberto Reyes, a retiree, inherited a commercial building in Cebu and sells it for ₱5,000,000. Its zonal value and assessor's value are both lower than the price, so the tax is ₱5,000,000 × 6% = ₱300,000. The value at his father's death does not reduce the tax, because CGT on real property is not computed on gain.
Businessman selling an investment lot for ₱10,000,000
Antonio Cruz sells an industrial lot held as an investment for ₱10,000,000, payable over two years. His cost was ₱6,000,000 and the zonal value is ₱9,000,000. The tax is computed on the ₱10,000,000 price, the highest of the values: ₱10,000,000 × 6% = ₱600,000.
Non-resident alien selling condominium unit for ₱3,000,000
David Chen, a non-resident alien, sells a condominium unit in Manila for ₱3,000,000. Its zonal value is ₱2,700,000. Non-resident aliens pay the same 6% tax on Philippine real property (NIRC §25(B), §24(D)), so the tax is ₱3,000,000 × 6% = ₱180,000. He files Form 1706 with the RDO where the condominium is located.
Common misconceptions
- Myth: Capital gains tax on real property is graduated based on the amount of gain, similar to income tax brackets.
- Fact: Capital gains tax on real property is a flat 6% final tax on the higher of the gross selling price or fair market value, not on the gain. There are no graduated brackets (NIRC §24(D)).
- Myth: If I sell a property at a loss, I do not need to file Form 1706.
- Fact: The tax is computed on the selling price or fair market value, so it is due even when the sale is below cost. Form 1706 must still be filed within 30 days, and no loss is carried forward (NIRC §24(D)).
- Myth: The 30-day filing deadline for Form 1706 starts from the date I receive payment, not the date of the deed of sale.
- Fact: The 30 days run from the sale, not from the date payment is received. Late filing adds a 25% surcharge and 12% interest a year (NIRC §248, §249).
- Myth: I can deduct the capital gains tax paid on Form 1706 from my annual income tax return as a tax credit.
- Fact: Capital gains tax on real property is a final tax. It is not deductible from, or creditable against, income tax, and the sale is not taxed again at graduated rates (NIRC §24(D)).
- Myth: If I sell a property to a family member, I do not need to file Form 1706 because it is a family transaction.
- Fact: Form 1706 is filed for any sale of real property held as a capital asset, including sales to relatives. A transfer with no consideration is a donation, which is subject to donor's tax instead (NIRC §24(D), §99).
Questions people ask
What is the deadline for filing BIR Form 1706 after selling real property?
Form 1706 is filed and the tax paid within 30 days after the sale (RR 2-98, as amended by RR 11-2018). Late filing or payment adds a 25% surcharge (NIRC §248) and interest of 12% a year on the unpaid tax (NIRC §249).
What documents must I attach to Form 1706 when filing?
Prepare the notarized deed of sale, the certificate of title, the latest tax declaration, and the TINs and IDs of the seller and buyer. The BIR may ask for more documents before it issues the eCAR.
Can I file Form 1706 online, or must I file in person at the BIR office?
Filing channels depend on what your RDO and the BIR's electronic systems accept for this return. Whatever the channel, keep the proof of payment, because the BIR needs it before issuing the eCAR for the transfer.
If I sell real property at a loss, do I still need to file Form 1706?
Yes. The 6% is a final tax on gains presumed from the sale, computed on the selling price or fair market value. It is due even if you sold below your cost, and no loss is recognized (NIRC §24(D)).
Is the capital gains tax on real property deductible from my annual income tax return?
No. Capital gains tax on real property is a final tax. The sale is not reported again for graduated income tax on your annual return, and the CGT is not a credit against income tax (NIRC §24(D)).
Does my cost basis matter if I sell real property I inherited?
No. For real property held as a capital asset, the 6% is computed on the selling price or fair market value, not on gain, so neither the decedent's cost nor the value at death reduces the tax (NIRC §24(D)). The estate tax on the inheritance is a separate obligation filed on BIR Form 1801.
Do I need to file Form 1706 if I sell property to a family member or spouse?
Yes. A sale to a relative is taxed like any other sale and needs Form 1706 within 30 days. A transfer for no consideration is a donation, which is covered by donor's tax on Form 1800 instead (NIRC §24(D), §99).
In practice
- Real estate brokers often help sellers prepare Form 1706 and the supporting documents so the return is filed within 30 days.
- Buyers and banks financing a purchase often ask for proof that the capital gains tax and documentary stamp tax were paid before releasing the balance of the price.
- The BIR issues the electronic Certificate Authorizing Registration (eCAR) only after the CGT and documentary stamp tax are paid; the Registry of Deeds needs it to transfer the title.
- Sellers compare the agreed price with the BIR zonal value before signing, because a zonal value above the price raises the tax.
- Non-resident aliens selling Philippine real property held as a capital asset pay the same 6% tax and file Form 1706 like residents (NIRC §25(B)).
Next steps
Learn more
Capital Gains Tax Calculator
Real Property Transfer Cost Calculator
BIR Zonal Value Calculator
BIR Form 1706 Download
BIR Form 1800 (Donor'S Tax)
Certificate Authorizing Registration (CAR)
Complete Guide To Selling Real Property In Philippines
BIR Zonal Values Vs Market Values
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Sources & References (3)
Primary sources and the laws, regulations, and official issuances this page relies on. Each citation links directly to the issuing authority’s document.
- Bureau of Internal Revenue. “BIR Form 1706 (CGT on real property): 6%, 30-day filing.” bir.gov.ph. Bureau of Internal Revenue, BIR Form 1706. Accessed .
- LawPhil Project (Arellano Law Foundation). “NIRC §24(D) as amended by RA 10963 (TRAIN): 6% CGT real property.” lawphil.net. Republic Act No. 10963 (TRAIN), amending NIRC Sec. 24(D). Accessed .