Non-redemption of properties sold during involuntary sales

Properties sold during involuntary sales which are not redeemed shall be considered sold. All applicable taxes, such as capital gains tax (CGT) if the property is a capital asset, the creditable withholding tax (CWT) if the property is an ordinary asset, value-added tax (VAT), and documentary stamp tax (DST) shall become due.

The following are the obligations of owner/mortgagor and buyer/mortgagee on unredeemed properties sold during involuntary sales:

1. The buyer of the property shall file the CGT return and remit the tax to the BIR within 30 days from the expiration of the applicable statutory redemption period. As regards the CWT, the buyer shall file the CWT return and remit the tax within 10 days following the end of the month after expiration of the applicable statutory redemption period. For taxes withheld in December, the CWT returns shall be filed and the taxes remitted on or before January 15 of the following year.

2. In case of property sold through involuntary sale that is subject to VAT, the VAT must be paid to the BIR by the owner/mortgagor on or before the 20th or 25th day, whichever is applicable, of the month following the month when the right of redemption prescribes.

3. The DST return shall be filed and the tax shall be remitted to the BIR within five days from the close of the month after the lapse of the applicable statutory redemption period.

The CGT, CWT, VAT and DST shall be based on whichever is the higher consideration (bid price of the highest bidder) or fair market value or zonal value as determined in accordance with Section 6(E) of the Tax Code.

Revenue Regulations No. 9, June 1, 2012

Tax Brief – July 2012

Punongbayan and Araullo