Taga-Lakad

Once upon a time, a broker closed the sale of a condo unit. They had their trusted "taga-lakad" (TL) do the transfer works.

When the TL reviewed the documents, he called the broker to tell them they used the wrong BIR form (1706). He insisted that form 1606 be used since the Seller was registered as a sole proprietor with the BIR.

End of story.

This post is a horror story because the advice the trusted TL gave is absolutely wrong and would have exposed the Seller to over Php40 Mn in taxes. And that's just on the property being sold.

BIR Form 1606 is the document used when paying withholding tax on the sale of Ordinary Assets (as opposed to BIR Form 1706, which is for Capital Gains Tax). So if the broker blindly followed their TL, the filing of BIR form 1606 would have been tantamount to the Seller registering as a person engaged in RE business. The Seller's registration as a sole proprietor was for another type of business (not RE).

So the question now is, was the TL's suggestion to use form 1606 an honest mistake, or was it a deliberate trap?