Installment Sale of Shares: Can You Pay the 15% Capital Gains Tax Over Time?

When unlisted shares of stock are sold on an installment basis, the seller does not automatically owe the full 15% capital gains tax within 30 days of signing the sale agreement. BIR Form 1707 itself — the Capital Gains Tax Return for shares not traded through the local stock exchange — includes a built-in “Installment Sale” transaction type and a per-period computation schedule, letting a qualifying seller remit tax only on the portion of the gain tied to each installment as it’s collected. The statutory hook for this is thinner for shares than for real property, which this guide addresses directly.

This is a narrower question than the general mechanics already covered in BIR Form 1707: Capital Gains Tax Return for Sale of Shares of Stock Not Traded on the Stock Exchange, which assumes a single lump-sum payment. It also addresses a different asset class than Capital Gains Tax on Installment Sales (BIR Form 1706), which covers the well-established installment rule for real property. Sellers who already filed one return for the year and are wondering about the annual consolidation should also see BIR Form 1707-A: The Annual Capital Gains Tax Return for Shares of Stock.

What “installment sale” means on BIR Form 1707 #

BIR Form 1707 formally recognizes an installment sale of unlisted shares as a distinct transaction type, separate from a cash sale, and gives it its own computation schedule rather than treating every sale as a single lump-sum event. Item 9 of the return — “Description of Transaction” — offers four checkboxes: Cash Sales, Installment Sale, Foreclosure Sale, and Others. Checking “Installment Sale” directs the filer to Part IV, Schedule 1 of the form, which captures the selling price, cost and expenses, the mortgage assumed (if any), the number of installments, the amount of the installment for that specific payment period, an applicable rate, and the date that installment was collected.

The form’s own instructions make the computation split explicit. Part II separates two lines that are mutually exclusive:

“13 Tax Due on the Entire Transaction (Cash Sale/Foreclosure Sale) (Item 12 Multiply by Applicable Tax Rate)”

“14 Tax Due for this Payment Period (From Part IV Schedule 1 Item 7) (If tax is payable under the installment method of computation)”

That is verbatim from BIR Form No. 1707 (January 2018 ENCS), Part II. A cash or foreclosure sale completes Item 13 — the full 15% on the entire net capital gain, due once. An installment sale instead completes Item 14, which pulls from Schedule 1’s “Amount of Installment for this Payment Period” multiplied by an “Applicable Rate” — meaning only the gain attributable to that period’s collection is taxed on that filing, not the gain on the full contract price.

Why NIRC Section 49 doesn’t settle this cleanly for shares #

The statutory provision that explicitly lets a taxpayer pay capital gains tax in installments, NIRC Section 49(C), names real property by its own text — it does not mention shares of stock, which creates a genuine gap between the law as written and the administrative practice built into BIR Form 1707. Section 49 sits in the NIRC’s general accounting-methods chapter and has four parts: (A) covers dealers who regularly sell personal property on installment; (B) covers casual sales of personal property and sales of real property where initial payments stay under a threshold; (C) extends the privilege to pay the resulting capital gains tax itself in installments, but only to “An individual who sells or disposes of real property considered as capital asset” who otherwise qualifies under (B); and (D) covers a taxpayer changing from accrual to installment reporting.

Section 49(B) — the subsection defining which sales qualify for installment treatment at all — does cover personal property broadly, including a verbatim threshold test:

“…for a price exceeding One thousand pesos (P1,000), or (2) of a sale or other disposition of real property … if in either case the initial payments do not exceed twenty-five percent (25%) of the selling price…” — NIRC Section 49(B), as reproduced on LawPhil.net.

Shares of stock are personal property, so a casual, non-dealer sale of shares for more than ₱1,000 appears to fit this general description. But Section 49(B) is about the accounting method for recognizing income under the ordinary graduated income tax — it does not, by its own text, say that the resulting tax can be paid in installments. That privilege is spelled out separately, in Section 49(C), and Section 49(C) names only real property. Unlike real property’s 6% capital gains tax — which Section 49(C) and its implementing Revenue Regulations (RR No. 13-99, amending RR No. 8-98) explicitly tie to installment payment — there is no parallel NIRC subsection that names the 15% final tax on unlisted shares under Section 24(C) the same way.

Despite that statutory gap, the BIR’s own Form 1707 operationalizes installment reporting for share sales anyway, through the Schedule 1 mechanism described above. This site could not locate a Revenue Regulation or Revenue Memorandum Circular that specifically codifies installment-basis capital gains tax reporting for shares of stock, the way RR No. 13-99 does for real property. Tax and accounting review materials consistently describe the BIR applying the same 25%-of-selling-price initial-payment threshold and the same gross-profit-ratio computation to share installment sales by analogy to the real property rule, and the form’s structure is consistent with that description — but sellers relying on this for a material transaction should treat it as a well-established administrative practice embedded in the form itself, not as a settled point codified in a numbered regulation this site could verify, and should confirm the current treatment with their RDO or a tax professional before structuring a sale around it.

How the per-installment tax is actually computed #

Where a sale qualifies for installment treatment, BIR Form 1707’s Schedule 1 taxes each payment period on a proportionate share of the total gain, not on the full contract price, by applying a reduced “applicable rate” to each installment collected. The mechanics mirror the gross-profit-ratio method long used for real property installment sales:

1. Compute the net capital gain on the entire transaction (selling price, or fair market value if higher, less cost and allowable expenses) — the same base used for a cash sale.
2. Compute the gross profit ratio: net capital gain divided by the total selling price.
3. Multiply the gross profit ratio by 15% to get the “applicable rate” for Schedule 1, Item 6.
4. For each installment actually collected, multiply the amount collected by that applicable rate to get the tax due for that period (Schedule 1, Item 7).
5. File a separate BIR Form 1707 within 30 days of each installment’s collection date, reporting only that period’s tax.

Because the applicable rate already bakes in the proportion of the price that represents gain, the sum of every per-installment tax payment across the life of the contract equals the same amount the seller would have owed upfront on a cash sale — the installment method changes when the tax is paid, not the total amount ultimately due.

Worked example: ₱5,000,000 in unlisted shares, paid in four quarterly installments #

An individual sells ₱5,000,000 worth of shares in a family-owned unlisted domestic corporation, with the buyer paying in four equal quarterly installments of ₱1,250,000 each and no interest — the first installment lands exactly at the 25% threshold that qualifies the sale for installment reporting.

Because the first payment of ₱1,250,000 does not exceed 25% of the ₱5,000,000 selling price, the sale qualifies for installment treatment under the threshold test described above. The seller checks “Installment Sale” on Item 9 of BIR Form 1707, completes Schedule 1 using the ₱1,250,000 figure and the 9% applicable rate, and files and pays the resulting ₱112,500 within 30 days of receiving that first quarterly payment — not ₱450,000 within 30 days of signing the sale agreement. The seller then repeats the same per-period filing — a new BIR Form 1707, a new Schedule 1, the same 9% rate applied to the next ₱1,250,000 — within 30 days of each subsequent quarterly collection, for a total of four separate returns and four ₱112,500 payments across the year, summing to the same ₱450,000 the seller would have owed in one payment on a cash sale.

If the buyer had instead paid ₱2,000,000 upfront (40% of the selling price) and the balance later, the sale would exceed the 25% initial-payment threshold and would not qualify for installment reporting — the full ₱450,000 would be due within 30 days of the sale itself, regardless of how the remaining balance was later collected.

Frequently asked questions #

Can I pay the 15% capital gains tax on unlisted shares in installments instead of all at once? #

In practice, yes, if the sale qualifies as an installment sale. BIR Form 1707 includes a built-in “Installment Sale” transaction type and a computation schedule (Schedule 1) that lets the seller report and pay tax on only the portion of the gain corresponding to each installment actually collected, rather than the full 15% on the entire selling price upfront. This administrative accommodation is built into the official form itself, even though the specific NIRC provision authorizing installment payment of capital gains tax (Section 49(C)) names real property, not shares, by its own text.

What counts as an “installment sale” on BIR Form 1707? #

BIR Form 1707 defines the transaction types in Item 9 as Cash Sales, Installment Sale, Foreclosure Sale, or Others. An installment sale is one where the buyer pays the selling price in two or more payments over time rather than in a single lump sum at closing, which the seller indicates by checking the “Installment Sale” box and completing Schedule 1 (Selling Price, Cost and Expenses, No. of Installments, Amount of Installment for this Payment Period, and the Date of Collection) for each payment period instead of completing the single lump-sum computation used for a cash sale.

Is there a minimum down payment requirement to use installment reporting for share sales? #

The NIRC’s own installment-basis provision, Section 49(B), ties qualification for installment reporting of a casual sale of personal property to initial payments that “do not exceed twenty-five percent (25%) of the selling price.” Tax and accounting references describe BIR applying the same 25%-of-selling-price threshold to installment sales of unlisted shares by analogy to the real-property rule, though this site could not confirm a Revenue Regulation that states this threshold for shares by name — confirm the exact threshold with your RDO or a tax professional before structuring a transaction around it.

Do I still file BIR Form 1707 within 30 days if I’m paying the tax on an installment basis? #

Yes, but the 30-day clock resets with each installment rather than running once from the sale. For an installment sale, a separate BIR Form 1707 is filed within 30 days of receiving each payment, computing tax only on that period’s collection using Schedule 1 — compared to a single BIR Form 1707 filed within 30 days of the sale itself for a cash transaction.

Do I still need to file BIR Form 1707-A if I report the capital gains tax in installments? #

Yes. BIR Form 1707-A is the annual consolidation return required on top of every per-transaction BIR Form 1707, whether a sale was paid in cash or in installments. A seller who filed four separate per-installment BIR Form 1707 returns during the year still consolidates all four into one BIR Form 1707-A by the 15th day of the fourth month after the taxable year closes.

Summary #

A seller collecting payment for unlisted shares over time is not automatically stuck paying the full 15% capital gains tax within 30 days of signing — BIR Form 1707’s own “Installment Sale” transaction type and Schedule 1 computation let qualifying sales spread the tax across each payment period, using a gross-profit-ratio applicable rate applied to the amount actually collected. The catch is that the statutory basis for this is noticeably thinner for shares than it is for real property: NIRC Section 49(C), the provision that explicitly authorizes paying capital gains tax in installments, names real property by its own text, not shares of stock, and this site could not locate a Revenue Regulation that codifies the 25%-initial-payment threshold for shares the way RR No. 13-99 does for real property. The form itself nonetheless builds in the mechanism, and secondary tax references describe BIR applying it by analogy — so a seller structuring an installment sale of unlisted shares should use the per-period Schedule 1 computation shown here, confirm the current threshold and documentation requirements with their RDO before relying on it for a large transaction, and remember that every per-installment BIR Form 1707 still feeds into the annual BIR Form 1707-A consolidation regardless of how the tax was paid during the year. For the general mechanics of a lump-sum share sale, see BIR Form 1707: Capital Gains Tax Return for Sale of Shares of Stock Not Traded on the Stock Exchange.