Chapter

Capital Gains Taxation

Reviewer
CLASSIFICATION OF
TAXPAYERS PROPERTIES
1. Ordinary assets - assets
used in business
2. Capital assets - any assets
other than oridnary assets
Asset classification is relative
-the classification of asset or
properties depends upon the
nature of taxpayers business.
*All the personal assets of
taxpayer not engaged in business
are capital ssets while the
business assets of taxpayers
engaged in business may either
be ordinary or capital asset
GAINS ON DEALINGS IN
PROPERTIES
1. Ordinary gain - arises from the
sale, exchange and other
disposition, including pacto de
retro sales and other conditional
sales, of ordinary assets
2. Capital gain - arises from the
sale, exchange and other
disposition, including pacto de
retro sales and other conditional
sales, of capital asstes
Taxation of Gains on Dealings
in Properties
Applicable taxation
Type of
scheme
gain
Ordinary
Regular income tax
gains
Capital
General Rule:
gains
Regular income tax
Exception rule:

Capital gains tax

CAPITAL GAINS SUBJECT TO

CAPITAL GAINS TAX
1. Capital gains on the sale of
domestic stocks sold directly to
buyer
2. Capital gains on the sale of
real properties not used in
business
SCOPE OF CAPITAL GAINS
TAXATION
Gains on dealings in capital
assets
Gain on domestic stocks
directly to the buyer (1)
Sale, exchange and other
disposition of real property
in the Philippines (2)
Gains from other capital
assets

Tax Rates
5% and
10%
capital
gains tax
6% capital
gains tax
Regular
income
tax

SALE, EXCHANGE AND OTHER

DISPOSITION OF DOMESTIC
STOCKS DIRECTLY TO BUYER
Meaning of Domestic
Stocks
-are evidence of ownership or
rights to ownership in a domestic
corporation, regardless of its
feature such as:
1. Preferred stocks
2. Common stocks
3. Stock rights
4. Stock options
5. Stock warrants
6. Unit of participation in any
association, recreation or
amusement club

Exchange of domestic stocks in

kind and other disposition such
as:
1. Foreclosure of property in
settlement of debt
2. Pacto de retro sales - sale with
buy back agreement
3. Conditional sales - sales which
will be perfected upon completion
of certain specified conditions
4. Voluntary buy back of shares
by the issuing corporation
MODES OF DISPOSING
DOMESTIC STOCKS
Shares of stocks may be sold,
exchanged or disposed:
1. Through Philippine Stock
Exchange (PSE) or
2. Directly to the buyer
TAX ON SALE OF DOMESTIC
STOCKS THROUGH THE PSE
The sale of domestic stocks
classified as capital assets
through the PSE is subject to a
stock transaction tax of 1/2 of 1%
of the selling price.
TAX ON SALE, EXCHANGE AND
OTHER DISPOSITIONS OF
DOMESTIC STOCK DIRECTLY
TO THE BUYER
Tax
Rate
Net gain up to P100,000
5%
Excess net gain above
10%
P100,000
CAPITAL GAINS TAX
COMPLIANCE
1. Transactional capital gains tax
2. Annual capital gains tax
Deadline of the transactional
capital gains tax return
-within 30 days after each sale,

exchange and other disposition of

stocks