Non redemption of properties

THE Bureau of Internal Revenue (BIR) issued Revenue Regulations No. 9-2012 implementing the Tax Code on non-redemption of properties sold during involuntary sales such as foreclosures.

In case of non-redemption of properties sold during involuntary sales, regardless of the type of proceedings and personality of mortgagees/selling persons or entities, the Capital Gains Tax (CGT) if the property is a capital asset, or the Creditable Withholding Tax (CWT) if the property is an ordinary asset, the Value Added Tax (VAT) is applicable, and the Documentary Stamp Tax (DST) shall become due.

The buyer of the subject property, who is deemed to have withheld the CGT or CWT due from the sale, shall then file the CGT return and remit the tax to the BIR within 30 days from the expiration of the applicable statutory redemption period.

They can file the CWT return and remit the tax to the BIR within 10 days following the end of the month after expiration of the applicable statutory redemption period, provided that for taxes withheld in December, the CWT return shall be filed and the taxes remitted to the BIR on or before Jan. 15 of the following year.

If the property sold through involuntary sale is under the circumstances which warrant the imposition of VAT, the said tax must be paid to the BIR by the VAT-registered owner/mortgagor on or before the 20th day or 25th day, whichever is applicable, of the month following the month when the right of redemption prescribed.

The DST return shall be filed and the said tax paid to the BIR within 5 days after the close of the month after the lapse of the applicable statutory redemption period.

The CGT, CWT, VAT and DST shall be based on whichever is higher of the consideration (bid price of the highest bidder) or the fair market value or the zonal value.

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