In the context of real estate transactions in the Philippines, a common question arises: Can the buyer be made responsible for paying the capital gains tax (CGT) on the property being sold?

Who is Legally Responsible for Capital Gains Tax?

Under Philippine law, specifically the National Internal Revenue Code (NIRC), the capital gains tax is a tax on the seller's income derived from the sale of capital assets, such as real estate. This tax is typically set at 6% of the gross selling price or the current fair market value of the property, whichever is higher. According to the law, the seller is the one who is legally obligated to pay the capital gains tax. This tax is the seller’s responsibility because it is considered a tax on the profit they gain from the sale of the property.

Can the Buyer Pay the Capital Gains Tax?

While the seller is legally responsible for paying the capital gains tax, it is not uncommon in practice for buyers and sellers to negotiate who will bear the cost of this tax. However, any agreement where the buyer assumes the responsibility to pay the CGT should be clearly stipulated in the deed of sale or any agreement between the buyer and seller.

Implications of Buyer-Paid Capital Gains Tax

If the buyer agrees to pay the capital gains tax, it does not change the fact that the seller is the party legally liable for the tax. The Bureau of Internal Revenue (BIR) will still hold the seller responsible if the tax is not paid. Therefore, sellers should ensure that the tax is properly settled to avoid any future legal complications.

Final Thoughts

While the buyer can be made to pay the capital gains tax through mutual agreement, it is essential to understand that the legal obligation to pay this tax remains with the seller. This should be clearly outlined in the sale agreement to avoid disputes and ensure compliance with Philippine tax laws.