BIR Form 1706: How to File Capital Gains Tax on Sale of Real Property

BIR Form 1706 is the Capital Gains Tax Return filed when a taxpayer sells, exchanges, or otherwise disposes of real property classified as a capital asset in the Philippines. Under NIRC Section 24(D), the tax is a flat 6% of whichever is highest among the gross selling price, the BIR zonal value, or the assessed value in the deed — and it must be paid within 30 days of the sale.

What transactions require BIR Form 1706? #

BIR Form 1706 applies to the sale or other disposition of real property held as a capital asset — property not used in the seller’s trade or business, such as a family home, vacant lot, or inherited land being sold by an heir. Property held as an ordinary asset (inventory, or used in an active real estate or rental business) is instead subject to regular income tax and creditable withholding tax, not this final capital gains tax.

The tax base is not simply the sale price. It is the highest of three values:

• The gross selling price stated in the deed of sale
• The BIR zonal value for the property’s location and classification
• The assessed value shown on the latest tax declaration

How is the 6% capital gains tax computed? #

The capital gains tax due is a flat 6% multiplied by the highest of the three values above — there is no deduction for the seller’s original acquisition cost or improvements, unlike an ordinary gain-based tax. This flat design under NIRC Section 24(D) means the tax applies even if the seller sold at a loss relative to what they originally paid.

Worked example: A residential lot is sold for a stated price of ₱2,500,000. The BIR zonal value for that location is ₱2,800,000, and the assessed value on the tax declaration is ₱1,900,000. Because the zonal value is the highest of the three figures, the capital gains tax is computed on ₱2,800,000, not the ₱2,500,000 selling price: ₱2,800,000 × 6% = ₱168,000 due.

When is BIR Form 1706 due, and what happens if it’s filed late? #

BIR Form 1706 and the corresponding tax payment are due within 30 days following the date of sale or disposition — and that 30-day window runs from the date on the notarized Deed of Absolute Sale, not the date funds changed hands or the date the buyer takes possession. Missing this window carries the same penalty structure as other BIR returns.

Before the EOPT Act took effect, sellers had to file at the Revenue District Office with jurisdiction over the property itself, which was often inconvenient for sellers or heirs living elsewhere. That restriction is gone: payment can now go through any Authorized Agent Bank or accepted electronic channel.

Why does paying BIR Form 1706 on time matter beyond the penalty? #

Settling the capital gains tax is not just about avoiding surcharge and interest — it is a precondition for the BIR to issue the Electronic Certificate Authorizing Registration (eCAR) that the Registry of Deeds requires before it will record the new owner’s title. A sale can be fully paid between buyer and seller and still leave the buyer unable to register the property if the capital gains tax return was never filed. RMC No. 75-2026 recently tightened related eCAR processing rules — see RMC No. 75-2026: BIR Clarifies eCAR Issuance and ONETT Processing Rules for what changed, including the requirement that every party to the sale have a TIN on file before the BIR will process the eCAR.

Capital gains tax on a sale and estate tax on an inheritance are both filed under the same one-time-transaction framework — see How to File BIR Form 1801: Estate Tax Return Requirements and Deadlines if the property changed hands through inheritance rather than a sale.

Summary #

BIR Form 1706 is a flat 6% capital gains tax on the highest of selling price, zonal value, or assessed value, due within 30 days of the notarized deed of sale. Late filing brings a 25% surcharge plus 12% annual interest, and — beyond the penalty — an unfiled return blocks the eCAR the buyer needs to register the property at all.