For Philippine real property classified as a capital asset, the seller is generally subject to 6% capital gains tax based on the higher of the gross selling price or the property’s fair market value. But not every apartment sale is a capital-asset sale: property used in business or held primarily for sale can be treated differently. Classification comes before the tax calculation.
Tax framework last reviewed: August 18, 2026. Confirm the property’s tax classification and current BIR documentary requirements before closing.
Capital Gains Tax: Decision Snapshot
| Question | Answer |
|---|---|
| Headline CGT rate | 6% for qualifying real property treated as a capital asset. |
| Tax base | Higher of gross selling price or fair market value under applicable BIR rules. |
| Does every apartment sale use 6%? | No. Ordinary assets are taxed differently. |
| Who usually pays CGT? | The seller bears the tax liability under law; contracts may allocate transaction costs between parties. |
| Other transfer costs? | Documentary stamp tax, local transfer tax, registration fees, broker/legal costs and other closing expenses may apply separately. |
1. First Decide: Capital Asset or Ordinary Asset?
This distinction changes the tax regime. A privately held apartment or condo that is not used in the taxpayer’s trade or business and is not held primarily for sale may qualify as a capital asset. Property used in a rental business, held by a real-estate dealer or developer, or otherwise falling within the statutory ordinary-asset rules may not.
Do not apply “6% CGT” automatically to every landlord or investor. When the property’s use has changed over time, ask a Philippine tax professional or the BIR to confirm classification before signing a final tax allocation.
2. How the 6% Calculation Works
Capital gains tax = 6% × higher of gross selling price or fair market value.
Example: if a condo sells for ₱4,000,000 but the applicable fair market value is ₱4,300,000, the illustrative CGT is ₱258,000 (₱4,300,000 × 6%). If the selling price is the higher number, use that instead.
3. CGT Is Not the Entire Closing Cost
- Documentary stamp tax: a separate national tax may apply to the transfer instrument.
- Local transfer tax: imposed by the LGU under local tax rules.
- Registration fees: paid in connection with registering the transfer.
- Brokerage: based on the brokerage agreement, if a licensed broker is used.
- Notarial/legal/document costs: depend on the transaction.
- Unpaid dues or taxes: may need settlement before transfer.
The contract should clearly state which party bears each economic cost. Do not describe a seller’s “net proceeds” until these items are included.
4. Principal-Residence Exemption Is Conditional
Philippine tax law provides a conditional exemption for certain sales of a natural person’s principal residence when the proceeds are fully used to acquire or construct a new principal residence within the statutory period and BIR requirements are satisfied. This is not an automatic exemption for an investment apartment.
5. Verify the Tax Base Before You Sign
The 6% rate is only useful after both asset classification and the tax base are confirmed. Sellers should obtain the applicable zonal value and local fair-market-value information used for BIR purposes and compare them with the gross selling price. The tax base is not simply whatever amount appears in a private negotiation.
| Question | Why it matters |
|---|---|
| Capital or ordinary asset? | Determines whether the 6% capital-gains-tax framework is the correct regime. |
| What is the gross selling price? | One input in determining the taxable base. |
| What fair market value applies? | The higher applicable value can control the 6% calculation. |
| Are there separate transfer costs? | DST, local transfer tax, registration and professional fees are not the same as CGT. |
6. Seller Verification Checklist
- Confirm title, ownership and authority to sell.
- Determine whether the property is a capital or ordinary asset.
- Obtain the applicable BIR fair-market-value basis.
- Calculate CGT only after classification is confirmed.
- Separate CGT from documentary stamp tax and local transfer/registration costs.
- Prepare the BIR transfer documents and secure the required eCAR process before title transfer.
- Keep official payment and filing records.
Related Guides
For the complete transaction sequence, see how to sell an apartment in the Philippines. Landlords should also review rental income tax because tax while renting and tax on sale are separate questions.
