Capital gains tax

[Kingpin]

9 hours ago, fillipino_wannabe said:

The buyer pays it, the seller gets it

Not how escrows work.

4 hours ago, Gator said:

The bottom line is that it’s all negotiable

Correct, prior to any escrow agreement between the seller and the BIR.

[fillipino_wannabe]

5 hours ago, Kingpin said:

Not how escrows work.

Correct, prior to any escrow agreement between the seller and the BIR.

That's not what I said though is it lol. 'The buyer pays it, the seller gets it when he proves he's spent the money building/buying a new house.'

That is how escrow works

[Guy F.]

On 8/9/2023 at 6:04 PM, Kingpin said:

It doesn't say that, the BIR is taxing (and refunding) the seller not the buyer:

See below, there is no 'contradiction'

If requirements are met, the seller ("Transferor") gets refunded. If not, he pays his tax.

 

 

 

 

So if construction on a new home is begun (NOT necessarily completed) within 18 months and an amount equal to or greater than the tax money is spent on the new construction, conditions for a "refund" are met?

Edited August 12, 2023 by Guy F.

[Kingpin]

4 hours ago, fillipino_wannabe said:

'The buyer pays it

Seems to be a lot of confusion about the term "pays".

The buyer may or may not pay the 6% to the seller, that's up to them when negotiating the sale and is entirely irrelevant to the point here, which is that the seller and only the seller pays his gains tax to the BIR. The escrow is between the seller and the BIR. If terms are met, funds are refunded back to the seller. If not, they go the BIR. That's how escrow accounts work.

2 hours ago, Guy F. said:

So if construction on a new home is begun (NOT necessarily completed) within 18 months and an amount equal to or greater than the tax money is spent on the new construction, conditions for a "refund" are met?

Correct:

Quote

The proceeds of the sale of the principal residence have been fully utilized in acquiring or constructing new principal residence within eighteen (18) calendar months from the date of sale or disposition;

 

[fillipino_wannabe]

16 hours ago, Kingpin said:

Seems to be a lot of confusion about the term "pays".

The buyer may or may not pay the 6% to the seller, that's up to them when negotiating the sale and is entirely irrelevant to the point here, which is that the seller and only the seller pays his gains tax to the BIR. The escrow is between the seller and the BIR. If terms are met, funds are refunded back to the seller. If not, they go the BIR. That's how escrow accounts work.

Correct:

 

No, the buyer deducts the 6% tax from the total price and gives it to the BIR, the seller can then get the 6% if the terms are met. You quoted it yourself a couple of pages back:
'In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from the seller and shall deduct from the agreed selling price/consideration the 6% capital gains tax'

It's basically the same as witholding tax, when my Wifes business pays her suppliers she's supposed to deduct 1% from the total and give it to the BIR, that 1% is then deducted from the amount of tax the business has to pay.

Edited August 13, 2023 by fillipino_wannabe

[Guy F.]

21 hours ago, Kingpin said:

Seems to be a lot of confusion about the term "pays".

The buyer may or may not pay the 6% to the seller, that's up to them when negotiating the sale and is entirely irrelevant to the point here, which is that the seller and only the seller pays his gains tax to the BIR. The escrow is between the seller and the BIR. If terms are met, funds are refunded back to the seller. If not, they go the BIR. That's how escrow accounts work.

Correct:

 

Actually I was NOT correct. Not just the 6%, but the entire proceeds from the sale must be utilized within 18 months.

[Kingpin]

9 hours ago, fillipino_wannabe said:

the buyer deducts the 6% tax from the total price and gives it to the BIR

Nothing is given to the BIR because there's an escrow account. If the escrow is between the buyer and the BIR then the funds would revert to the buyer. 

Of course in practice there is no "deduct 6%" from anything. The seller advertises a sale price which never includes any tax. They add 6% to the total price, and then demand the buyer pay all of it, to them, I explained it in my first post here. Because, again, the seller pays the BIR, not the buyer:

 

Quote

 

• Who shall file

The Capital Gains Tax Return (BIR Form No. 1706) shall be filed in triplicate copies by the Seller/Transferor who are natural or juridical whether resident or non-resident, including Estates and Trusts, who sell, exchange, or dispose of a real property located in the Philippines classified as capital asset as defined under Sec. 39 (A) (1) of RA No. 8424. The term “sale” includes pacto de retro sale and other forms of conditional sales. The transaction may be taxable or exempt. - https://www.bir.gov.ph/index.php/10-tax-information/241-capital-gains-tax.html

 

 

 

 

4 hours ago, Guy F. said:

Actually I was NOT correct.

The correct part was "construction is begun (NOT necessarily completed".

[fillipino_wannabe]

21 hours ago, Kingpin said:

Nothing is given to the BIR because there's an escrow account. If the escrow is between the buyer and the BIR then the funds would revert to the buyer. 

Of course in practice there is no "deduct 6%" from anything. The seller advertises a sale price which never includes any tax. They add 6% to the total price, and then demand the buyer pay all of it, to them, I explained it in my first post here. Because, again, the seller pays the BIR, not the buyer:

 

 

 

 

The correct part was "construction is begun (NOT necessarily completed".

You're quoting a completely different section now, as I said on the previous page the buyer paying the BIR (or paying into an escrow account if you prefer) only applies when the seller has told the BIR he's selling his principal residence.

Try to read the below carefully as I'm bored of discussing it now. If the conditions aren't met then the BIR get the money in escrow (aka buyer pays BIR).

In case of sale/transfer of principal residence, the Buyer/Transferee shall withhold from the seller and shall deduct from the agreed selling price/consideration the 6% capital gains tax which shall be deposited in cash or manager’s check in interest-bearing account with an Authorized Agent Bank (AAB) under an Escrow Agreement between the concerned Revenue District Officer, the Seller and the Transferee, and the AAB to the effect that the amount so deposited, including its interest yield, shall only be released to such Transferor upon certification by the said RDO that the proceeds of the sale/disposition thereof has, in fact, been utilized in the acquisition or construction of the Seller/Transferor’s new principal residence within eighteen (18) calendar months from date of the said sale or disposition

https://spotlightonbir.tripod.com/html/html/tax_capgaintax.html#:~:text=In case of sale%2Ftransfer,Bank (AAB) under an Escrow

[Kingpin]

8 hours ago, fillipino_wannabe said:

buyer paying the BIR (or paying into an escrow account if you prefer) only applies when the seller has told the BIR he's selling his principal residence.

If describing how that plays out doesn't show you why this arbitrary shifting of liability from seller to buyer is clearly wrong, I don't know what will:

Situation 1) Seller claims he's selling principal residence, forcing buyer to pay his sellers tax into escrow. Seller is exempt. Seller receives 6% bonus from the buyer. Funny.

Situation 2) Seller claims he's selling principal residence, forcing buyer to pay his tax into escrow. Seller is not exempt. Buyer pays the sellers tax to the BIR. Another funny scam.