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Taxes due from the involuntary sale of delinquent real properties
Let us say that a local government unit conducted a public auction for delinquent real properties. Annie participated in the public auction, and ended up as the winning bidder. There are no issues affecting the notice of levy of the subject property, the posting and publication of notice for the sale of subject property, and the conduct of the auction. The title to the property has no encumbrances/annotations other than the notice of levy. The delinquent taxpayer/original owner of the subject property failed to redeem the property within the applicable redemption period. The title to the subject property may now be consolidated under Annie’s name.
When Annie went to the Register of Deeds (“RD”), the RD refused to register the transfer of title unless Annie could present, among others, the Electronic Certificate Authorizing Registration (“eCAR”) from the Bureau of Internal Revenue (“BIR”). The eCAR serves as proof of payment of the national taxes due from the transfer. Annie thinks she is not required to pay any taxes to the BIR given that the subject property was sold in a public auction by the local government.
Are there taxes to be paid to the BIR following the non-redemption of delinquent real property sold in a public auction by the local government?
Yes. In case of non-redemption of properties sold during involuntary sales, regardless of the type of proceedings and personality of mortgagees/sellers, the following taxes shall be due from the sale:
| If the subject property is a/an: | Tax Due | Due Date |
| Capital Asset | capital gains tax (“CGT”) | Within 30 days from the expiration of the redemption period |
| Ordinary Asset | creditable withholding tax (“CWT”) | Within 10 days from the end of the month of expiration of the redemption period |
In the above cases, the buyer/winning bidder of the subject property is deemed to have withheld the CGT or CWT due from the sale. The buyer/winning bidder shall then file the CGT or CWT return and remit the tax due to the BIR.
The following taxes also generally apply unless the taxpayer has a legal basis for exemption:
| Tax | Due Date |
| Value-added tax (“VAT”) | On or before the 20th day or 25th day, whichever is applicable, of the month immediately following the month of expiration of the redemption period |
| Documentary stamp tax (“DST”) | On or before the 5th day of the month immediately following the month of expiration of the redemption period |
Anyone intending to bid for delinquent real properties for sale at public auctions conducted by the local governments should consider these taxes, among others, in their budget for the purchase of the properties.
The content on this website is for general information only and does not constitute legal or other professional advice. You should not rely on it as a substitute for advice from a qualified lawyer who is familiar with your particular circumstances.
