Capital Gains Tax

Once upon a time, a broker sold a condo unit and was tasked to transfer the title to the buyer's name.

In the Capital Gains Tax (CGT) form, he filled up the seller's Revenue District Office (RDO–which was 49 or North Makati) and the Buyer's (48–West Makati). The property was located under the jurisdiction of 047–East Makati. He triple-checked the form and found everything was correct.

The following day, he paid the CGT at an authorized agent bank. He didn't want to wait until the last day, but the Sellers went abroad and could only have the Manager's Checks (MCs) when they got back. Anyway, he was relieved he met the deadlines. He then submitted the deposit slips and bank-stamped forms to the BIR. The BIR then asked him to return after a week.

When he returned, the examiner said they didn't receive any payment. He argued that he had submitted the deposit slips the last time he visited. After a lengthy discussion, they discovered the payments went to the wrong: RDO–049. The bank teller was the one who made the mistake.

He thought it should be fine since they paid the correct person on time; it just went to a different pocket of his, right?

Nope. Since RDO-047 didn't receive the payment, that's equivalent to non-payment of taxes. Therefore, the transaction was penalized 25% for non-filing, and the broker had to pay hundreds of thousands in penalties.

End of story.

See, some banks accept payments for multiple RDOs. In this story, the teller likely got confused since the RDOs of the seller, buyer, and property belonged to the same city. The filing should be done in the RDO of the property. This is why some brokers are taught to put the RDO of the property for both the seller and the buyer–even if they were under other RDOs. In newer versions of the CGT form (one with the bar code), the BIR no longer asks for the RDO of the seller/buyer–just the RDO of the property.

If the broker discovered that the payment went to the wrong RDO before the deadline, he could have filed a document to transfer the amount to the correct RDO. This is allowed by the BIR for as long as it's completed before the deadline.

Funny how one mistyped number can cost hundreds of thousands in penalties.