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 individuals 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, brokers 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 sale
P5,000,000.00
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 Residence P4,000,000.00
(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 Residence P1,000,000.00
(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
GSP or FMV of Old Principal
x
x Capital gains tax rate
___________________
Residence,
whichever
is
GSP
of
Old
higher
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 portion of P225,000.00
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 unutilized(250,000.00)

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
GSP
of
Old
Principal Residence
New Principal Residence
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 taxpayers principal residence is disposed in
exchange for a condominium unit, the disposition of the taxpayers 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 taxpayers 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 time (P4,000,000.00) 2,000,000.00
of exchange
Adjusted Cost Basis of New Principal Residence P3,000,000.00
(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 taxpayers 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 taxpayers
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 _____________________ (Buyers 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 ________________________

November 20, 2000

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
individuals 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 coowners 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 vendors 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 managers 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/Transferors 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
taxpayers 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 taxpayers 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 taxpayers 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 taxpayers 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
taxpayers 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/transferors 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
taxpayers 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/transferors 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/Transferors 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 AABs 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/Transferors 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 taxpayers capital gains tax, due to non-utilization
of the entire proceeds thereof in the acquisition or construction of the taxpayers 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 taxpayers 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