BIR Form 1606: Withholding Tax on Sale of Real Property Classified as an Ordinary Asset

BIR Form 1606 is the Withholding Tax Remittance Return that a buyer files to remit withholding tax on the sale of real property classified as an ordinary asset — property such as house-and-lot inventory or subdivision lots held by a real estate dealer or developer, rather than a personal capital asset. The rate runs from 1.5% to 6% depending on the seller’s classification and the gross selling price, and a 2025 circular changed what document actually proves the seller’s tax credit.

Who files BIR Form 1606, and why #

BIR Form 1606 is filed by the buyer — the withholding agent — on every sale, transfer, or exchange of real property that qualifies as an ordinary asset, one return per transaction. Under Section 2.57.2(J) of Revenue Regulations (RR) No. 2-98, as amended, a buyer of real property from a seller whose property is inventory or otherwise held for sale or lease in the ordinary course of business must withhold and remit tax before the sale can be registered with the Registry of Deeds. This is separate from the 6% capital gains tax under Section 24(D) of the National Internal Revenue Code (NIRC), which applies only when the property is a capital asset — see Capital Gains Tax vs Real Property Tax for that distinction.

The withholding tax rate table #

The rate a buyer withholds depends on whether the seller is habitually engaged in the real estate business, and on the gross selling price (GSP) or fair market value (FMV), whichever is higher. RR No. 2-98 §2.57.2(J), as amended by RR No. 11-2018 under the TRAIN Law, sets the following schedule:

Even an exempt socialized-housing sale is still reported on BIR Form 1606 — it’s filed at a 0% rate, not skipped entirely.

Worked example #

A real estate developer sells a townhouse unit for ₱1,800,000 to a buyer who is not itself engaged in real estate. Because the seller is a developer habitually engaged in the real estate business and the price falls in the ₱500,000–₱2,000,000 bracket, the buyer withholds at 3%:

The buyer remits the ₱54,000 using BIR Form 1606 and keeps proof of payment — this is what the seller now needs to claim the credit, not a separate certificate.

RMC No. 31-2025 changed what proves the credit #

Revenue Memorandum Circular (RMC) No. 31-2025, issued April 7, 2025, discontinued using BIR Form 2307 as proof of the income tax credit for ordinary-asset real property sales by sellers habitually engaged in the real estate business. Before this circular, a buyer would often also issue BIR Form 2307 to the seller as the standard creditable-withholding proof, the same certificate used across most other creditable withholding transactions. RMC No. 31-2025 clarifies that for real property specifically, BIR Form 1606 together with proof of payment of the withholding tax is now the only valid proof of the credit, and it is this combination — not a Form 2307 — that the seller attaches to the annual income tax return where the sale is declared. In the seller’s Summary Alphalist of Withholding Taxes, credits from other lines of business (non-real-estate income) still appear under Form 2307, while the real property CWT appears separately under “Other Tax Credits/Payments.” Sellers and buyers who were still routing this transaction through a Form 2307 workflow should confirm the current process against the BIR website or their tax adviser before the next closing.

When is it filed? #

BIR Form 1606 and the corresponding tax payment are due on or before the tenth day following the end of the month in which the sale, transfer, or exchange occurred. A sale that closes on July 22, for example, requires the buyer to file and remit by August 10. Because the deed of sale typically cannot be registered with the Registry of Deeds without proof of this filing, the deadline functions as a practical gate on completing the transfer, not just a compliance formality.

Frequently asked questions #

What is BIR Form 1606 used for? #

BIR Form 1606 is the Withholding Tax Remittance Return that a buyer files to remit creditable or final withholding tax on the sale, transfer, or exchange of real property classified as an ordinary asset — property other than a capital asset, such as inventory held by a real estate dealer or developer.

Does BIR Form 1606 apply to a house I’m selling as my personal residence? #

No. A personal residence sold by someone not engaged in the real estate business is typically a capital asset, subject to the 6% capital gains tax under BIR Form 1706, not BIR Form 1606. BIR Form 1606 applies to ordinary-asset sales, most commonly by real estate dealers and developers.

Is BIR Form 2307 still issued for a BIR Form 1606 transaction? #

Not as proof of the tax credit. RMC No. 31-2025 discontinued using BIR Form 2307 for this purpose — the seller now attaches BIR Form 1606 itself, together with proof of payment, to the income tax return to claim the credit.

What withholding tax rate applies if the seller isn’t habitually engaged in real estate? #

A flat 6% withholding tax applies to the gross selling price or fair market value, whichever is higher, when the seller is not habitually engaged in the real estate business but the property is still classified as an ordinary asset.

When must BIR Form 1606 be filed? #

BIR Form 1606 and the withheld tax are due on or before the tenth day following the end of the month in which the sale, transfer, or exchange took place.

Summary #

BIR Form 1606 is how a buyer remits withholding tax — 1.5% to 6% depending on the seller’s classification and price — on real property sold as an ordinary asset, distinct from the 6% capital gains tax that applies to capital-asset sales. Since RMC No. 31-2025, the return itself plus proof of payment is what proves the seller’s tax credit, not a BIR Form 2307. For the capital-asset side of real property taxation, see BIR Form 1706: How to File Capital Gains Tax on Sale of Real Property and VAT on Sale of Real Property in the Philippines for when the same ordinary-asset sale also carries VAT.