Q&A on Primary Residence Capital Gains Exemption


In this industry we’re in where the rules and regulations affecting the Philippine Real Estate Market is undergoing frequent changes, it’s always best to verify every transaction with the concerned government entity in order to assure a smooth transaction.  Recently, i came upon an interesting case where the “Primary Residence Capital Gains Excemption” is the issue.

The regulation says that the title should be owned by individuals and not a corporation.  It also says that the title must have been in the property owner’s name for a minimum of two years.  The proceeds of the sale must be used to purchase the next primary residence and the capital gains tax amount will be held in an escrow bank.  The difference on the sale of the property sold and bought would then determine the amount that will be refunded to the Seller, if it qualifies.

Here’s an interesting issue i have to verify with the Bureau of Internal Revenue:

Case :  Owner has lived in property for over 35 years.  Property is about 5000 square meters.  Since the lot could be subdivided as per the deed of restrictions of the subdivision, the owner opted to have the lots subdivided into three lots last year in order to sell the property easier and faster.

Question :  Since the property is really their primary residence up to date and the association, barangay and utility bills could testify to that, will the ruling that the title must have been in the owner’s name for two years disqualify them from this exemption ?

In my opinion, since they really qualify for Primary Residence Capital Gains Exemption and just because they subdivided the lot, i believe that they shouldn’t be the victim of a technicality.  At the land value of  Php 20,000 per square meter, the amount that would qualify for exemption is ( 5000m2 x Php 20,000 = Php 100,000,000 x 6% = Php 6,000,000 ).  Imagine if the owner did qualify for some or all of that amount, specially selling a property during their retirement years.

However, that is a question that has to be cleared and answered by the Bureau of Internal Revenue.

Next case i will be blogging pertains to a lost title wherein a Reconstitution of Title is involved.  Sometimes, you’ll never know just what problems could happen until you are actually fixing the problem.  Experience will teach us, it’s always good to be prepared to expect the unexpected.

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Thank you.

Robert G. Sarmiento Properties
Professional Affiliation :
Philippine Association of Real Estate Boards
Member, City of  Taguig Real Estate Board 2016 – 2017
Real Estate Broker’s Association of the Philippines 2000-2015
President, Greenhills Chapter 2008, 2009
Philippine Association of Real Estate Brokers
San Juan Mandaluyong Chapter 1998, 1999
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