The Bureau of Internal Revenue (BIR) has issued Revenue Memorandum Circular No. 031-2025 to provide clear guidelines on the applicable taxes for the sale of real property classified as “ordinary assets” by taxpayers habitually engaged in the real estate business. This circular aims to ensure uniform application of tax laws and regulations across all transactions.
1. Required Tax Returns for Real Estate Sales:
Taxpayers habitually engaged in the real estate business must file the following tax returns:
BIR Form No. 1606: For remittance of expanded withholding tax on the sale of real property.
BIR Form No. 2000-OT: For declaration and payment of documentary stamp tax (DST).
Note: Filing and remittance of creditable withholding tax (CWT) for multiple transactions using a single return is not allowed.
2. Proof of Income Tax Credit:
Taxpayers must attach BIR Form No. 1606 (with proof of payment) to their Income Tax Return (ITR) to claim income tax credit.
The issuance of BIR Form No. 2307 as proof of income tax credit is discontinued.
3. Presentation of Income Tax Credits in Annual ITR:
Taxpayers must lodge tax credits as follows:
BIR Form No. 2307: For businesses other than real estate.
BIR Form No. 1606: Under “Other Tax Credits/Payments” in the Annual ITR.
The applicable sections for different ITR forms are outlined in the circular.
4. VAT on Real Estate Sales Financed by Institutions:
If a buyer settles the balance through a loan from a financing institution, the seller must:
Pay a 12% output VAT on the money received from the financing institution.
Issue a Sales Invoice to the buyer and an Acknowledgment Receipt/Official Receipt to the financing institution.
5. Taxability of Other Fees:
Transfer fees, processing fees, registration fees, and similar charges collected by real estate businesses are subject to Income tax and 12% output VAT.
Conclusion:
This circular provides essential guidance for taxpayers engaged in the real estate business to ensure compliance with tax laws. All concerned parties are encouraged to familiarize themselves with these provisions and adhere to the outlined requirements.
For further updates, stay tuned to announcements regarding the availability of revised Annual ITR forms in the BIR’s electronic platforms.
