Capital Gains Tax (2026 Guide)

What is capital gains tax?

Who pays capital gains tax?

Required for

Any individual or entity that sells, exchanges, or otherwise disposes of capital assets located in the Philippines (including Filipino citizens, resident and non-resident aliens, and domestic and foreign corporations) that dispose of real property (6% on the higher of gross selling price or fair market value/zonal value) or of unlisted shares (15% of net capital gain), per NIRC § 24(C)-(D) and § 27(D).

Optional for

Individuals selling to the government or a government-owned corporation may choose graduated income tax instead of the 6% CGT; sellers of a principal residence may claim the NIRC Sec. 24(D)(2) exemption by notifying the BIR within 30 days and reinvesting all proceeds in a new principal residence within 18 months.

Exempt

Sales by the government; qualifying sales of a principal residence under NIRC § 24(D)(2); transfers exempt under donor's/estate tax rules; and dispositions of shares listed and traded on the PSE (subject instead to the stock transaction tax).

Worked examples

1. Example 1

   Maria sells a residential condominium in Makati for ₱8,000,000 (cost basis ₱6,000,000).

   Gross Selling Price = ₱8,000,000
   CGT Rate for Real Property = 6%
   CGT = ₱8,000,000 × 6% = ₱480,000
   

   Result: Maria owes ₱480,000 in CGT. She files BIR Form 1706 within 30 days of sale and pays the tax at her RDO or through eFPS.

2. Example 2

   Juan buys 5,000 unlisted shares of a family-owned domestic corporation at ₱80 per share (cost ₱400,000) and sells them 14 months later at ₱120 per share (selling price ₱600,000). The shares are not traded through any stock exchange.

   Selling Price = ₱600,000
   Cost Basis = ₱400,000
   Net Capital Gain = ₱600,000 − ₱400,000 = ₱200,000
   CGT Rate (unlisted shares, NIRC § 24(C)) = 15% (flat, no holding-period tiers)
   CGT = ₱200,000 × 15% = ₱30,000
   

   Result: Juan owes ₱30,000 in CGT. He files BIR Form 1707 within 30 days of the sale and reconciles the transaction on the annual Form 1707-A by April 15 of the following year.

3. Example 3

   Rosa sells her principal residence in Quezon City for ₱12,000,000 (zonal value ₱11,000,000). Within 18 months she uses all ₱12,000,000 to buy a new principal residence, and she has not used this exemption in the past 10 years.

   Tax base without the exemption = ₱12,000,000 (higher of price and zonal value)
   CGT without the exemption = ₱12,000,000 × 6% = ₱720,000
   Proceeds fully used for a new principal residence within 18 months (NIRC Sec. 24(D)(2))
   CGT due = ₱0
   

   Result: Rosa owes no CGT, but she must notify the BIR of her intent to use the exemption within 30 days of the sale. Her old home's cost carries over to the new one. Had she spent only part of the proceeds, the unused part would stay taxable.

4. Example 4

   ABC Corporation sells a commercial building in Cebu for ₱50,000,000 (cost basis ₱30,000,000).

   Gross Selling Price = ₱50,000,000
   CGT Rate for Real Property (Corporate) = 6%
   CGT = ₱50,000,000 × 6% = ₱3,000,000
   

   Result: ABC Corporation owes ₱3,000,000 in CGT. The 6% CGT is a final tax filed on BIR Form 1706 within 30 days of the sale; it is not reported again on the corporate income tax return.

5. Example 5

   Pedro sells PSE-listed shares of Ayala Corporation through his broker for a gross selling price of ₱750,000 (his cost was ₱500,000).

   Gross Selling Price = ₱750,000
   Because the shares are traded THROUGH the local stock exchange, no capital gains tax applies.
   Instead, a stock transaction tax under NIRC § 127 applies to the gross selling price (regardless of gain or loss).
   Stock Transaction Tax Rate = 0.1% (NIRC § 127, as reduced by CMEPA/RA 12214 effective July 1, 2025)
   Stock Transaction Tax = ₱750,000 × 0.1% = ₱750
   

   Result: Pedro pays no CGT on these listed shares. The broker withholds and remits the ₱750 stock transaction tax, so Pedro has no separate CGT return to file for this sale.

Common mistakes to avoid

• Computing real-property CGT on net gain (selling price minus cost), or on the gross selling price alone when the BIR zonal value is higher.

  Penalty:

  Underpayment of CGT; if discovered, the taxpayer faces a 25% surcharge plus 12% annual interest on the unpaid amount, plus potential fraud penalties.

  How to avoid it:

  Apply the flat 6% to the HIGHER of the gross selling price or the fair market value/BIR zonal value under NIRC § 24(D)(1) and RR 7-2003. Cost and improvements do not reduce the base for the 6% final CGT. Check the zonal value on the BIR website before computing.

• Failing to file BIR Form 1706 within 30 days of selling real property, assuming the annual ITR filing is sufficient.

  Penalty:

  Late filing penalties, interest accrual, and potential criminal prosecution for tax evasion if the delay is prolonged.

  How to avoid it:

  File BIR Form 1706 within 30 days of the sale date, regardless of when the annual ITR is due. Keep a copy of the Deed of Sale and proof of filing.

• Applying holding-period tiers (e.g. 37.5%, 20%, or 5%) to capital gains on shares, or treating PSE-listed shares as subject to CGT.

  Penalty:

  Overpayment of tax (if the assumed rate is too high) or underpayment (if too low), leading to interest and penalties, and incorrect returns that can trigger an audit.

  How to avoid it:

  There are no holding-period tiers. Unlisted shares of a domestic corporation are taxed at a flat 15% of net capital gain under NIRC § 24(C), regardless of how long they were held. Shares sold through the stock exchange are not subject to CGT at all, only the 0.1% stock transaction tax under NIRC § 127.

• Claiming the principal residence exemption without reinvesting all the proceeds within 18 months, or using it twice in 10 years.

  Penalty:

  The exemption is lost on the unused proceeds, and the 6% CGT falls due on that portion with surcharge and interest.

  How to avoid it:

  Notify the BIR within 30 days of the sale, keep the deed of the new residence, and track the date of your last exemption. It is available once every 10 years (NIRC Sec. 24(D)(2)).

• Overstating or failing to substantiate the cost basis of unlisted shares, leading to an incorrect net-gain calculation.

  Penalty:

  Underpayment of CGT if the cost basis is overstated; interest and surcharge penalties apply.

  How to avoid it:

  Maintain detailed records of the original purchase price and acquisition costs (such as broker's commissions and documentary stamp tax on the original issue). For unlisted shares the cost basis is the purchase price plus acquisition costs. Consult a CPA for complex adjustments.

Ways to lower the tax legally

• Where you have a choice of market, selling shares THROUGH the Philippine Stock Exchange replaces the 15% CGT on net gain with a 0.1% stock transaction tax on gross selling price, often far cheaper when the gain is substantial.

  Potential savings: On a ₱1,000,000 net gain from a ₱1,200,000 sale, unlisted-share CGT would be ₱150,000 (15%), whereas the same shares sold listed on the PSE incur only ₱1,200 stock transaction tax (0.1% × ₱1,200,000).

• If you are selling your principal residence to buy another, plan the purchase within 18 months and use all of the proceeds; the sale is then exempt from CGT (NIRC Sec. 24(D)(2)).

  Potential savings: On a ₱12,000,000 home sale, full reinvestment saves the ₱720,000 CGT (6% × ₱12,000,000).

• Keep complete cost-basis records for unlisted shares. Original purchase price plus documented acquisition costs reduce the net capital gain, which is the base for the flat 15% CGT. (There is no rate advantage from holding longer; the 15% rate is fixed regardless of holding period.)

  Potential savings: On shares sold for ₱1,000,000, substantiating an additional ₱200,000 of cost basis lowers the net gain by ₱200,000 and the CGT by ₱30,000 (15% × ₱200,000).