July 26, 1999

REVENUE REGULATIONS NO. 13-99

SUBJECT : Exemption of Certain Individuals from the Capital GainsTax on the Sale,
Exchange or Disposition of a Principal Residence under Certain Conditions

TO: All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to Section 244, in relation to Section 24(D)(2) of the

National Internal Revenue Code of 1997 , these Regulations are hereby promulgated to
govern the exemption of a citizen or a resident alien individual from capital gains tax on
the sale, exchange or disposition of his principal residence.

SECTION 2. Definition of Terms. — For purposes of these Regulations, the following

items shall have the following meaning:

(1) “Natural person” — shall refer to a citizen or resident alien individual taxable under
Sec. 24 of the Code. It does not include an estate or a trust, the provision of Sec. 60 of
the Code to the contrary notwithstanding.

(2) “Principal Residence” — shall refer to the dwelling house, including the land on
which it is situated, where the husband and wife or an unmarried individual, whether or
not qualified as head of family, and members of his family reside. Actual occupancy of
such principal residence shall not be considered interrupted or abandoned by reason of
the individual’s temporary absence therefrom due to travel or studies or work abroad or
such other similar circumstances. Such principal residence must be characterized by
permanency in that it must be the dwelling house to which, whenever absent, the said
individual intends to return.

(3) “Fully Utilized” — shall mean that the taxpayer has actually commenced with the
construction of his new principal residence or has actually entered into a contract for the
purchase of his new principal residence within eighteen (18) calendar months from the
date of sale, exchange or disposition thereof, with the intention of using the entire
proceeds of sale for the acquisition or construction of his new principal residence.
Provided, that any expense paid for by the seller in effecting the sale, i.e., documentary
stamp tax, transfer fees, broker’s commission, if any, shall be considered as part of the
amount utilized.

SECTION 3. Conditions of Exemption. — The general provisions of the Code to the

contrary notwithstanding, capital gains presumed to have been realized from the sale,
exchange or disposition by a natural person of his principal residence shall not be
imposed with income tax, including the six percent (6%) capital gains tax, subject to the
following conditions:

(1) Sworn Declaration Requirement. — He shall submit a Sworn Declaration (ANNEX A

hereof) of his intent to avail of the tax exemption herein provided which shall be filed
with the aforementioned Revenue District Office (RDO) having jurisdiction over the
location of the principal residence within thirty (30) days from the date of its sale,
exchange or disposition, inclusive of the following:

(a) Duly Accomplished Capital Gains Tax Return (BIR Form No. 1706);

(b) Proof of payment of documentary stamp tax on conveyance of real property;

(c) A sworn statement from the Barangay Chairman that his principal residence is
located within the jurisdiction of that Barangay and has been his residence as of the
date of sale, exchange or disposition thereof;

(d) A duplicate original copy of the Deed of Conveyance of his Principal Residence;

(e) Photocopy of the Transfer Certificate of Title (TCT) or Condominium Certificate of

Title (CCT), in case of a condominium unit (covering the principal residence sold,
exchanged or disposed); and

(f) Latest Tax Declaration of the said principal residence (land and improvement).

(2) Post Reporting Requirement. — The proceeds from the sale, exchange or

disposition of his principal residence must be fully utilized in acquiring or constructing
his new principal residence within eighteen (18) calendar months from date of its sale,
exchange or disposition. In order to show proof that positive action was undertaken to
utilize the proceeds for the acquisition or construction of his new principal residence
within the 18-month reglementary period, he shall submit to the RDO concerned, within
thirty (30) days from the lapse of the said period, the following documents:

(a) A sworn statement that the total proceeds from the sale of his old principal residence
has been actually utilized in the acquisition or construction of his new principal
residence or, if the construction of his new principal residence is still in progress, a
sworn statement that such amount shall be fully utilized to procure the necessary
materials and pay for the cost of labor and other expenses for the construction thereof;

(b) A certified statement from his architect or engineer, or both, showing the cost of
materials and labor for the construction of his new principal residence;
(c) A certified copy of the Building Permit issued by the Office of the Building Official of
the City or Municipality where his new principal residence shall be constructed, as well
as photocopies of documents (e.g. building specification plan, construction plans,
construction cost estimates) submitted with his application for said permit;

(d) In case his new principal residence is acquired by purchase, a duplicate original
copy of the Deed of Absolute Sale covering the purchase of his new principal residence.

(3) The tax exemption herein granted may be availed of only once every ten (10) years;

(4) The historical cost or adjusted basis of his old principal residence sold, exchanged
or disposed shall be carried over to the cost basis of his new principal residence; and

(5) If there is no full utilization of the proceeds of sale, exchange or disposition of his old
principal residence for the acquisition or construction of his new principal residence, he
shall be liable for deficiency capital gains tax which shall be computed in accordance
with Sec. (4) hereof . Accordingly, only a fractional part (which the utilized amount bears
to the gross selling price) of the historical cost of the old principal residence sold shall
be carried over to the cost basis of the new principal residence.

SECTION 4. Determination of Capital Gains Tax Due if the Proceeds of Sale, Exchange

or Disposition of his Principal Residence has not Been Fully Utilized. — In a case where
the entire proceeds of sale is not utilized for the purchase or construction of a new
principal residence, the capital gains tax shall attach. In computing the capital gains tax
due on the sale of the principal residence, we follow the following steps:

(1) Determine the percentage (%) of non-utilization applying the formula:

Unutilized Portion of GSP

________________________________ = Percentage (%) of Non-Utilization

GSP

(2) Multiply the % of non-utilization by the GSP or FMV, whichever is higher.

(3) Multiply the product in item (2) above by the rate of six percent (6%).

If the seller fails to utilize the proceeds of sale or disposition in full or in part within the
18-month reglementary period, his right of exemption from the capital gains tax did not
arise to the extent of the unutilized amount, in which event, the tax due thereon shall
immediately become due and demandable on the 31st day after the date of the sale,
exchange or disposition of principal residence. As such, he shall file his capital gains tax
return covering the sale, exchange or disposition of his principal residence and pay the
deficiency capital gains tax inclusive of the twenty five percent (25%) surcharge for late
payment of the tax plus twenty percent (20%) delinquency interest per annum incident
to such late payment computed on the basis of the basic tax assessed. The interest
shall be imposed from the thirty-first (31st) day after the date of the sale of principal
residence until the date of payment, provided, that the date of sale shall mean the date
of notarization of the document of sale, exchange, or disposition of principal residence.

Illustrations:

(1) In case the proceeds from the sale, exchange or disposition of his principal
residence has been fully utilized to acquire his new principal residence.

— Assume that Mr. Arnold Buendia acquired his principal residence in 1986 at a cost of
P1,000,000.00. He sold the said property on January 1, 1998, with a fair market value of
P5,000,000.00, for a consideration of P4,000,000.00. Within the 18-month reglementary
period, he purchased his new principal residence at a cost of P7,000,000.00.

Computations:

Historical cost of old principal residence P1,000,000.00

Gross selling price (GSP) P4,000,000.00
Fair market value (FMV) of old principal residence at the time of P5,000,000.00
sale
Cost to acquire new principal residence P7,000,000.00
(a) To compute for the capital gains tax due. — In this case, Mr. Buendia shall be
exempt from the capital gains tax otherwise due from him since the entire proceeds of
the sale has been fully utilized to acquire his new principal residence.

(b) To compute for the basis of the new principal residence. — The historical cost or adjusted cost basis
of his old principal residence shall be carried over to the cost basis of his new principal residence,
computed as follows:

Historical cost of old principal residence P1,000,000.00

Add: Additional cost to acquire new principal

residence
Cost to acquire his new principal residence P7,000,000.00

Less: GSP of his old principal residence (P4,000,000.00) P3,000,000.00

Adjusted Cost Basis of New Principal P4,000,000.00

Residence

(2) In case the fair market value of the old principal residence is equal to the cost to
acquire the new principal residence. — Using the above illustration, if for example,
instead of P7,000,000.00, Mr. Buendia was able to acquire his new principal residence
at a cost of P4,000,000.00, which is equal to the gross selling price of his old principal
residence.

(a) To compute for the capital gains tax due. — In this case, Mr. Buendia is still exempt
from the payment of the capital gains tax otherwise due from him because there has
been full utilization of the proceeds from the sale of his old principal residence within the
18-month reglementary period.

(b) To compute for the basis of his new principal residence. — Since the fair market value of his old
principal residence is equal to the cost to acquire his new principal residence, the historical cost of his
old principal residence shall be the basis of his new principal residence, computed as follows:

Historical cost of old principal residence P1,000,000.00

Add: Additional cost to acquire new principal

residence
Cost to acquire his new principal residence P4,000,000.00

Less: GSP of old principal residence (P4,000,000.00) –

Adjusted Cost Basis of New Principal P1,000,000.00

Residence
(3) In case the proceeds from the sale of his old principal residence has not been fully
utilized to acquire his new principal residence. — If Mr. Buendia acquired his new
principal residence within the 18-month reglementary period but did not, however, utilize
the entire proceeds of the sale in acquiring his new principal residence because he only
used P3,000,000 thereof in acquiring his new principal residence, that portion of the
gross selling price not utilized in the acquisition or construction of his new principal
residence shall be subject to capital gains tax.

Computations:

Historical cost of old principal residence P1,000,000.00

Gross selling price (GSP) P4,000,000.00
Fair market value (FMV) of old principal residence P5,000,000.00
Cost to acquire new principal residence P3,000,000.00
(a) To compute for the capital gains tax due. — To compute for the capital gains tax
due, the following formula shall be used in determining capital gains tax due on the
taxable portion pertaining to the unutilized amount of the proceeds of sale:

Unutilized Portion of
GSP of Old Principal
Residence  

x GSP or FMV of Old x Capital gains tax rate

___________________
Principal Residence,
whichever is higher
GSP of Old Principal
Residence

(P4,000,000 – P3,000,000)

________________________
=  x P5,000,000 x 6%
_

P4,000,000

= 25%  x P5,000,000  x  6%

= P75,000.00

The capital gains tax due from Mr. Buendia for the said unutilized portion shall be P75,000 out of the
total of P300,000 capital gains tax otherwise due from the sale of his old principal residence (i.e.,
P5,000,000 x 6% = P300,000). However, he shall be exempt from capital gains tax to the extent allocable
to that portion which he actually utilized to acquire his new principal residence (i.e., capital gains tax
portion of P225,000), as shown below:

Fair market value of the principal residence sold P5,000,000.00

Capital gains tax otherwise due thereon (6%) P 300,000 P300,000.00

Capital gains tax allocable to the unutilized portion 75,000 P75,000.00

Amount of exempt capital gains tax allocable to the utilized P225,000.00

portion of proceeds from sale (P3,000,000/P4,000,000 = 75%
times P300,000)
(b) To compute for the basis of the new principal residence. — In this case, since the entire proceeds
was not utilized to acquire the new principal residence, the cost basis to be carried over to his new
principal residence shall be equivalent to the proportion of the utilized amount over the GSP applied on
the historical cost, computed as follows:

Historical cost of old principal residence P1,000,000.00

Less: Portion of historical cost pertaining to the tax paid (250,000.00)

unutilized amount (25%)
Adjusted Cost Basis of New Principal Residence P750,000.00

or another way for computing the adjusted cost basis of the new principal residence is
by using this formula:

Utilized Amount of GSP

 Amount to be Carried
___________________ Historical Cost of Old
x = Over to the Cost Basis of
Principal Residence
New Principal Residence
GSP of Old Principal
Residence

applied as follows:

(P4,000,000 –
P1,000,000)

 x P1,000,000 =  P750,000
_________________

P4,000,000

SECTION 5. Disposition of the Principal Residence in Exchange for Property Other than
Cash. — (1) If the individual taxpayer’s principal residence is disposed in exchange for
a condominium unit, the disposition of the taxpayer’s principal residence shall not be
subjected to the capital gains tax herein prescribed, provided that the said condominium
unit received in the exchange shall be used by the taxpayer-transferor as his new
principal residence. In this particular case, the exempt provision of Sec. 24(D)(2) of the
1997 Tax Code shall only apply to the transferor of the principal residence and not to
the transferee who shall be subject to the capital gains tax in case his/its condominium
unit is treated as capital asset or to the income tax which shall be withheld in
accordance with Sec. 2.57.2(J) of Revenue Regulations No. 2-98, as amended, in case
the condominium unit is treated as an ordinary asset. However, if the condominium unit
is similarly treated by an individual owner as his principal residence, then the same shall
also be covered by the exempt provision under Sec. 24(D)(2) of the same Code.
Example: Mr. Buendia assigned and conveyed his principal residence to ABC Realty
Corporation in exchange for a condominium unit which Mr. Buendia will use as his new
principal residence. Thus, Mr. Buendia is exempt the from imposition of capital gains tax
on the exchange of his new principal residence while ABC Realty Corporation, on the
other hand, shall be subject to income tax, on its exchange of the condominium unit.

(2) If the said taxpayer’s principal residence is disposed of in exchange for a parcel of
land and such land received in the exchange shall be used for the construction of his
new principal residence, no income tax or capital gains tax shall be imposed upon the
owner of the principal residence. However, the owner of the land shall be subject to
capital gains tax or to income tax, as the case may be.

(3) If in the acquisition of his new principal residence, the taxpayer exchanged his old
principal residence plus cash or other property, the unutilized portion subject to capital
gains tax shall be determined by the difference between the total consideration made on
the conveyance of old principal residence transferred (FMV of old principal residence +
cash or FMV of other property) and the total consideration received (FMV of new
principal residence) for such exchange.

Example: Mr. Buendia assigned and conveyed his principal residence with fair market
value of P4,000,000 and in addition paid P2,000,000 to acquire as new principal
residence the principal residence of Mr. Yabut. Mr. Yabut, on the other hand, conveyed
his principal residence to Mr. Buendia with fair market value of P5,000,000, with the
intention of making the property received from Mr. Buendia as his new principal
residence. The historical cost of the old principal residence of Mr. Buendia is
P1,000,000 while the historical cost of the old principal residence of Mr. Yabut is
P500,000.

(a) Computation of capital gains tax due on the exchange of property by Mr. Buendia —
No capital gains tax is due from Mr. Buendia for the reason that there has been full
utilization of the value of his old principal residence exchanged where in addition to fair
market value of his old principal residence of P4,000,000, he still paid cash of
P2,000,000 to acquire as his new principal residence the old principal residence of Mr.
Yabut valued at P5,000,000.

(b) Computation of cost basis of the new principal residence of Mr. Buendia —

Historical cost of old principal residence P1,000,000.00

Add: Additional cost to acquire new principal

residence
Cost to acquire his new principal residence P6,000,000.00

Less: FMV of old principal residence at the (P4,000,000.00) 2,000,000.00

time of exchange

Adjusted Cost Basis of New Principal P3,000,000.00

Residence
(c) Computation of capital gains tax due from Mr. Yabut — Mr. Yabut shall be liable to
capital gains tax to the extent of the unutilized portion of the total value of consideration
received in the exchange which is computed as follows:

(P6,000,000 – P5,000,000)

 = ____________________________ x  P6,000,000  x  6%

P6,000,000

P1,000,000

= ____________________________ x  P6,000,000 x  6%

P6,000,000

 = P60,000.00

(d) Computation of the adjusted cost basis of the new principal residence of Mr. Yabut
— In computing for the adjusted cost basis of the new principal residence of Mr. Yabut,
only that portion of historical cost corresponding to the unutilized portion of the value
received shall be considered. In this case, the adjusted cost basis of the new principal
residence is computed as follows:

P5,000,000

 = ________________________  x  P500,000

P6,000,000

 = P416,667

In order to avail of the tax exemption from capital gains tax with respect to such
exchanges, the aforesaid taxpayer is nevertheless required to acquire his new principal
residence within the eighteen (18) month reglementary period, otherwise, he shall be
liable to pay the capital gains tax on the disposition of his principal residence.
In all cases of exchange of principal residence for another real property, the liability of
documentary stamp tax provided under Sec. 196 of the 1997 Code shall accrue to both
parties involved in the exchange.

SECTION 6. Issuance of Certificate Authorizing Registration (CAR) or Tax Clearance

Certificate (TCL). — The taxpayer’s filing of the Sworn Declaration of Intent to avail of
the capital gains tax exemption in the manner prescribed under Sec. (3) hereof shall be
a sufficient basis of the RDO to approve and issue the CAR or TCL of the principal
residence sold, exchanged or disposed by the aforesaid taxpayer. Said CAR or TCL
shall state that on the sale, exchange or disposition of the taxpayer’s principal residence
is exempt from capital gains tax pursuant to Sec. 24(D)(2) of the Code.

SECTION 7. Repealing Clause. — All existing rules and regulations or parts thereof
which are inconsistent with the provisions of these Regulations are hereby amended,
modified or repealed accordingly.

SECTION 8. Effectivity. — The provisions of these Regulations shall take effect fifteen
(15) days after publication in the Official Gazette or in any newspaper of general
circulation without prejudice, however, to those persons who have availed of the capital
gains tax exemption on account of such sale or disposition during the period from
January 1, 1998 to the date of effectivity of these Regulations: Provided, however, that
such persons shall be required to comply with the documentary requirements herein
prescribed within thirty (30) days from date of effectivity hereof.

(SGD.) EDGARDO B. ESPIRITU

Secretary of Finance

Recommending Approval:

(SGD.) BEETHOVEN L. RUALO

Commissioner of Internal Revenue

Annex “A”

Republic of the Philippines

Department of Finance

BUREAU OF INTERNAL REVENUE

 Revenue District Office No. ___

SWORN DECLARATION OF INTENT

I, ___________________________________________ (Name of Affiant),

____________________ (Nationality of Affiant), of legal age, married/single, and with
residence or forwarding address at ____________________, hereby voluntarily depose
and say:

THAT, I am the registered owner of a certain parcel of land and improvements thereon,
described under Transfer Certificate of Title (TCT) No. _________________ of the
Register Deeds of _____________, Tax Declaration No. (Land) ____________, and
Tax Declaration No. (Improvement) _____________ of the City/Municipality of
__________________;

THAT, the aforesaid property is my principal residence;

THAT, I sold the said property to _____________________ (Buyer’s name) with

address at _______________ under a Deed of Absolute Sale executed on
_____________ for a consideration of ________________ Pesos;

THAT, pursuant to the provisions of Section 24(D)(2) of the National Internal Revenue
Code of 1997, and its implementing Regulations, I shall utilize the proceeds of sale
thereof in the acquisition or construction of my new principal residence within the
eighteen (18) month reglementary period; and

THAT, in the event that the proceeds of sale of the said principal residence be not fully
utilized for the acquisition or construction of my new principal residence, in the manner
as prescribed by law and its implementing regulation, I hereby undertake to pay the
corresponding capital gains tax on such unutilized amount of the proceeds of sale within
thirty (30) days after the lapse of the said 18-month reglementary period.

I HEREBY DECLARE UNDER THE PENALTIES OF PERJURY THAT THE

FOREGOING ATTESTATIONS ARE TRUE AND CORRECT TO THE BEST OF MY
KNOWLEDGE.

Name and Signature of Affiant/Taxpayer

TIN ___________________________
Address ________________________
 REVENUE REGULATIONS NO. 14-00

SUBJECT : Amending Sections 2(2), 3 and 6 of Revenue Regulations No. 13-99 vis-a-
vis Sale, Exchange or Disposition, by a Natural Person, of His “Principal Residence”

TO :  All Internal Revenue Officers and Others Concerned

SECTION 1. Scope. — Pursuant to the provisions of Section 244, in relation to Section

24 (D) (2) of the National Internal Revenue Code of 1997, these regulations are hereby
promulgated in order to streamline and make more efficient the collection of the capital
gains tax, if any, presumed to have been realized from the sale, exchange or
disposition, by a natural person, of his “Principal Residence.”

SECTION 2. Amendments. —

2.1. Section 2 (2) of Revenue Regulations No. 13-99 is hereby amended, to read as
follows:

(2) Principal Residence. — (a) The term “Principal Residence” shall refer to the dwelling
house, including the land on which it is situated, where the husband and wife or an
unmarried individual, whether or not qualified as head of family, and members of his
family reside. Actual occupancy of such principal residence shall not be considered
interrupted or abandoned by reason of the individual’s temporary absence therefrom
due to travel or studies or work abroad or such other similar circumstances. Such
principal residence must be characterized by permanency in that it must be the dwelling
house in which, whenever absent, the said individual intends to return.

(b) Where ownership of the land and the dwelling house thereon belongs to different
persons, e.g., where the land is leased to the dwelling house owner, only the dwelling
house shall be treated as Principal Residence of the dwelling house owner. Thus, if the
said land and the dwelling house thereon be jointly sold or disposed by the said owners,
only the-sale or disposition of the dwelling house shall be entitled to the benefit of
exemption from the capital gains tax herein prescribed: Provided, however, that where
both the owner of the land and owner of the dwelling house actually reside in the said
dwelling house, then both the said land and dwelling house shall be treated as their
Principal Residence (e.g., owner of the land is the parent while owner of the house is
his child, or vice versa).

(c) Where the land and the dwelling house thereon be owned by several co-owners,
e.g., inherited by two or more heirs through hereditary succession, and where the said
property is actually used as Principal Residence by one or more of the said co-owners,
including the members of his/their family, the said property shall be treated as the
Principal Residence of the co-owner/s actually occupying and using the same as
his/their Principal Residence but to the extent of his/their proportionate share in the
value of the principal residence. Conversely, the capital gains tax exemption benefit
herein prescribed shall not apply in respect of the other co-owners who do not actually
use and occupy the same as their Principal Residence.

(d) The residential address shown in the latest income tax return filed by the
vendor/transferor immediately preceding the date of sale of the said real property shall
be treated, for purposes of these Regulations, as a conclusive presumption about his
true residential address, the certification of the Barangay Chairman, or Building
Administrator (in case of a condominium unit), to the contrary notwithstanding, in
accordance with the doctrine of admission against interest or the principle of estoppel
(e.g., if the property was sold on May 1, 2000, the vendor’s annual income tax return for
the year 1999, which he filed on or before April 15, 2000, showing his residential
address, shall be treated as a conclusive presumption that his true residential address
is that which is shown in his aforesaid income tax return). If the vendor is exempt from
filing any tax return, in which case, he has no tax record immediately prior to the sale of
his property, then the aforementioned certification from the Barangay Chairman or
Building Administrator, as the case may be, shall suffice.”

2.2. Section 3 of Revenue Regulations No. 13-99 is hereby amended, to read as

follows:

.”SEC. 3. Conditions for Exemption. — The general provisions of the Code to the
contrary notwithstanding, capital gains presumed to have been realized from the sale,
exchange or disposition by a natural person of his Principal Residence shall not be
imposed with six percent (6%) capital gains tax, subject to compliance with the
following:

(1) Escrow Agreement. — The six percent (6%) capital gains tax otherwise due on the
presumed capital gains derived from the sale, exchange or disposition of his Principal
Residence shall be deposited in cash or manager’s check in interest-bearing account
with an Authorized Agent Bank (AAB) under an Escrow Agreement (ANNEX A hereof)
between the concerned Revenue District Officer, the Seller/Transferor and the AAB to
the effect that the amount so deposited, including its interest yield, shall only be
released to such Seller/Transferor upon certification by the said RDO that the proceeds
of sale or 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. The date of sale or disposition of a property
refers to the date of notarization of the document evidencing the transfer of said
property. In general, the term “Escrow” means “A scroll, writing or deed, delivered by
the grantor, promisor or obligor into the hands of a third person, to be held by the latter
until the happening of a contingency or performance of a condition, and then by him
delivered to the grantee, promisee or obligee.”
(2) Capital Gains Tax Return. — The Seller/Transferor shall file, in duplicate, his Capital
Gains Tax Return (BIR FORM No. 1706) covering the sale or disposition of his Principal
Residence with the concerned Revenue District Office within thirty (30) days from date
of its sale or disposition:

Provided, however, that the Seller/Transferor shall not be required to pay any capital
gains tax during the 18-month period on the sale of his principal residence duly
established as such. Provided, further, that for purposes of the capital gains tax
otherwise due on the sale, exchange or disposition of the said Principal Residence, the
execution of the Escrow Agreement referred to in the immediately preceding Section 3
(1) hereof shall be considered sufficient.

The following shall be submitted with the Capital Gains Tax Return herein required to be
filed:

(a) Proof of payment of the documentary stamp tax imposed under Sec. 196 of the Tax
Code of 1997 on the deed of sale or conveyance of the said “Principal Residence”

(b) A sworn statement from the Barangay Chairman that the taxpayer’s Principal
Residence is located within the jurisdiction of that Barangay and that the same has
been his residence immediately prior to the date of its sale or disposition: Provided,
however, that if the taxpayer’s Principal Residence sold or disposed is a condominium
unit, in lieu of the said Barangay Chairman, the certification shall be issued by the
Building Administrator of the Condominium building.

(c) A duplicate original copy of the Deed of Conveyance of his Principal Residence;

(d) A certified xerox copy of the Transfer Certificate of Title (TCT) or Condominium
Certificate of Title (CCT), in case of a condominium unit, covering the Principal
Residence sold or disposed;

(e) A certified xerox copy of the latest Tax Declaration covering the said Principal
Residence (land and improvement); and

(f) If the building or improvement thereon has been constructed on or after the year
1990, the Building Permit or Occupancy Permit issued by the concerned city or
municipality, showing the amount of the construction cost thereof.

(3) Post Reporting Requirement. — The proceeds from the sale, exchange or
disposition of his old Principal Residence must be fully utilized in acquiring or
constructing his new Principal Residence within eighteen (18) calendar months from
date of its sale, exchange or disposition. In order to show proof that positive action was
undertaken to utilize the proceeds for the acquisition or construction of his new Principal
Residence within the 18-month reglementary period, he shall submit to the RDO
concerned, within thirty (30) days from the lapse of the said period, the following
documents:

(a) A sworn statement that the total proceeds from the sale or disposition of his old
Principal Residence has been actually utilized in the acquisition or construction of his
new Principal Residence or, if the construction of his new Principal Residence is still in
progress, a sworn statement that such amount shall be fully utilized to procure the
necessary materials and pay for the cost of labor and other expenses for the
construction thereof;

(b) A certified statement from his architect or engineer, or both, showing the cost of
materials and labor for the construction of his new Principal Residence;

(c) A certified copy of the Building Permit issued by the Office of the Building Official of
the City or Municipality where his new Principal Residence shall be constructed as well
as xerox copies of documents (e.g., building specification plan, construction plans, or
construction cost estimates) submitted with his application for the said Building Permit
on which computation of the amount of the building license fee has been based;

(d) In case his new Principal Residence is acquired by purchase, a duplicate original
copy of the Deed of Absolute Sale covering the purchase of his new Principal
Residence.

(4) Release from the Escrow Agreement. — Upon a showing, based on the foregoing
documents, that the proceeds of sale, exchange or disposition of his old Principal
Residence have already been fully utilized in the acquisition or construction of his new
Principal Residence, the concerned Revenue District Officer shall, within fifteen (15)
days from date of submission by the Seller/Transferor of the foregoing documents,
release the Escrow on the aforesaid bank deposit in favor of the Seller/Transferor
(ANNEX B hereof).

(5) Limitation on Tax Exemption Privilege. — The tax exemption herein granted may be
availed of only once every ten (10) years;

(6) Cost Basis of the New “Principal Residence”. — The historical cost or adjusted cost
basis of his old Principal Residence sold, exchanged or disposed shall be carried over
to the cost basis of his new Principal Residence; and

(7) Assessment for Deficiency Capital Gains Tax; Application of the Escrowed Bank
Deposit Against the Deficiency Tax. — If the Seller/Transferor fails to submit
documentary evidence within thirty (30) days after the lapse of the aforesaid 18-month
period, showing that he has utilized the proceeds of sale, exchange or disposition of his
old Principal Residence to acquire or construct his new Principal Residence, it shall be
presumed that he did not, in fact, utilize the aforesaid proceeds of sale for the
construction or acquisition of his new Principal Residence, in which case, he shall be
treated deficient in the payment of his capital gains tax from the sale or disposition of his
aforesaid Principal Residence, and shall be accordingly be assessed for deficiency
capital gains tax, inclusive of the 20% interest per annum, pursuant to the provisions of
Section 228 of the Code, as implemented by Revenue Regulations No. 12-99 , in
relation to Section 249 of the said Code.

Pursuant to the provisions of Revenue Regulations No. 12-99, the taxpayer shall be
issued with the required Post Reporting Notice informing him, in writing, of the
aforementioned facts, in order that he may present his side of the case through informal
conference, and the required Preliminary Assessment Notice, before issuance of the
Formal Assessment Notice. If, at this point in time, the escrowed tax money is still in the
custody of the Depository Bank, the full amount thereof, including its interest earnings,
shall be applied in computing for the taxpayer’s deficiency capital gains tax. Upon the
time that the said deficiency tax assessment has become final and executory, the
deposit in escrow, inclusive of its interest earnings, shall be forfeited and applied
against the taxpayer’s deficiency capital gains tax liability. The depository Bank shall
forthwith be informed of this action, and shall, upon demand in writing, by the
Commissioner or his duly authorized representative (ANNEX C hereof), turn over the
money for application in payment of the taxpayer’s deficiency tax liability. If the same is
insufficient to cover the entire amount assessed, the seller/transferor shall remain liable
for the remaining balance of the assessment. On the other hand, the excess of the
deposit in escrow, if any, shall forthwith be returned to the Seller/Transferor, by the
Bank, upon written authorization from the Commissioner or his duly authorized
representative.

(8) Partial Utilization of the Proceeds of Sales Exchange or Disposition. — If there is no

full utilization of the proceeds of sale, exchange or disposition of his old Principal
Residence for the acquisition or construction of his new Principal Residence, he shall be
liable for deficiency capital gains tax, inclusive of 20% interest per annum, computed
from the 31st day after the date of sale or disposition of the said old Principal
Residence.”

2.3. Section 6 of Revenue Regulations No. 13-99 is hereby amended, to read as

follows:

“SEC 6. Issuance of Certificate Authorizing Registration (CAR) or Tax Clearance

Certificate (TCL). — The seller/transferor’s compliance with the preliminary conditions
for exemption under Sec. 3(1) and (2) of these Regulations shall be sufficient basis for
the RDO to approve and issue the CAR or TCL of the principal residence sold,
exchanged or disposed by the aforesaid taxpayer. Said CAR or TCL shall state that the
said sale; exchange or disposition of the taxpayer’s principal residence is exempt from
capital gains tax pursuant to Sec. 24 (D)(2) of the Code but subject to compliance with
the post-reporting requirements imposed under Sec. 3(3) of these Regulations.
SECTION 3. Penalty Clause. — (1) Any Barangay Chairman, or Building Administrator,
as the case may be, who shall falsely certify that the property sold or disposed is the
vendor/transferor’s Principal Residence when, in truth and in fact, it is not, shall be
punished under the penalty of perjury, at the discretion of the Court.

(2) Any other violation of the provisions of these Regulations shall, upon conviction for
each act or omission, be punishable under Section 275 of the Code by a fine of not
more than One Thousand Pesos (P1,000.00) or imprisonment of not more than six (6)
months, or both, at the discretion of the Court.

SECTION 4. Repealing Clause. — Any revenue issuance, if inconsistent herewith, shall

be considered revoked, amended, or modified accordingly.

SECTION 5. Effectivity Clause. — These Regulations shall take effect fifteen (15) days
after its publication in any newspaper of general circulation.

(SGD.) JOSE T. PARDO

Secretary of Finance

Recommending Approval:

(SGD.) DAKILA B. FONACIER

Commissioner of Internal Revenue

ANNEX “A”

Republic of the Philippines

Department of Finance

BUREAU OF INTERNAL REVENUE

Revenue Region No. _____

RDO No. _______

ESCROW AGREEMENT

 
The Bureau of Internal Revenue, herein represented by _____________, Revenue
District Officer, RDO No. _____, ______; the Seller/Transferor _______________ with
postal address at _________________; and the Authorized Agent Bank (AAB),
_________________ with office address at _____________________ herein
represented by _____________________, in his capacity as _______________,
hereby agree:

That, the sum of _____________ (P______), representing six percent (6%) of the
selling price or fair market value, whichever is higher, of the Seller/Transferor’s
“Principal Residence,” which he sold/disposed on _____________, shall be deposited
with the above-mentioned AAB on or before , 200_;

That, the said amount shall be placed in an interest bearing bank deposit account under
the account name of the taxpayer in trust for the Bureau of Internal Revenue:

Provided, however, that this account may be readily withdrawn at any time, upon
presentation of “Release from Escrow Agreement” signed by the CIR or his authorized
representative or the concerned Revenue District Office (RDO) when the proceeds of
sale/disposition has been utilized in the acquisition or construction of a new principal
residence within 18 months from the date of sale or disposition of the old principal
residence: Provided, further, that the AAB shall, at any time, upon written request of
theRDO, furnish the latter with information on the amount of interests earned by the said
bank deposit in escrow;

That, no part of the said bank deposit may be withdrawn, delivered and paid to any
person except upon express and written order from the said Revenue District Office.

DONE THIS ________ DAY OF _________, IN THE YEAR OF OUR LORD, 200___.

The Parties have signed this Agreement subject to the penalties of Perjury.

Commissioner of Internal Revenue

By:

_____________________________

Name and Signature of the Revenue

District Officer, RDO NO. ________

_______________________________
 Name and Signature of Seller/Transferor

_____________________________

Name of the AAB, Name and Signature of the AAB’s Duly Authorized Representative

ANNEX “B”

Revenue District No. ____

Revenue Region No. 7

Quezon City

RELEASE FROM ESCROW AGREEMENT

To : (State name and address of the AAB)

Subject : ( State name of the taxpayer)

Date : __________________

This refers to the sum of ___________________ (P__________) which was deposited

with your Bank under our Escrow Agreement, representing six percent (6%) of the
selling price or the fair market value, whichever is higher, of the “Principal Residence”
which was sold by Mr./Ms. ____________________ on _______________, 200_, a
copy of which Agreement is attached herewith for your ready reference.

In accordance with our agreement, you are now hereby directed to turn over, deliver
and pay to the aforementioned Mr./Ms. ______________, the entire amount of the
aforesaid deposit in escrow, including its interest yield, considering that all the
conditions for the release of the deposit in escrow have already been fully complied with
by the said Seller/Transferor.

Very truly yours,

 Commissioner of Internal Revenue

By:

________________________

Name and signature of RDO

ANNEX “C”

Revenue District No. _____

Revenue Region No. 7

Quezon City

FORFEITURE OF THE BANK DEPOSIT IN ESCROW

To : (State name and address of the AAB)

Subject : ( State name of taxpayer)

Date : __________________

This refers to the sum of ___________________ (P____________) which was

deposited with your Bank under our Escrow Agreement, dated _________, 200_,
representing six percent (6%) of the selling price or the fair market value, whichever is
higher, of the “Principal Residence,” which was sold by Mr./Ms. _______________, on
_______________, a copy of which Agreement is attached herewith for your ready
reference.

[INSTRUCTION. — The RDO shall state under this paragraph (1) whether only a partial
portion thereof may be so delivered are paid to the Seller/Transferor, with the balance to
be applied in payment of the Seller/Transferor’s capital gains tax, due to non-utilization,
in full, of the proceeds of sale of his "Principal Residence”; or (2) whether the entire
escrowed deposit, including interest yield thereof, shall be forfeited in favor of the
Government and applied against the taxpayer’s capital gains tax, due to non-utilization
of the entire proceeds thereof in the acquisition or construction of the taxpayer’s new
"Principal Residence.” If any portion thereof is forfeited in favor of the Government, the
RDO shall prepare Authority to Accept Payment or Payment Order, addressed to the
said AAB, directing that such amount be receipted in the name of the taxpayer in
payment of his capital gains tax. The taxpayer’s copy of the official receipt shall be sent
to the taxpayer, by mail or personal delivery]
Very truly yours,

Commissioner of Internal Revenue:

By:

___________________________

Name and signature of the RDO