Sales That Can Be Reported in Installments

1.) Sale of personal property by a dealer

2.) Casual sale of personal property, provided:

a.) The selling price is more than Php1,000.00;

b.) Initial payments don't exceed 25% of the selling price; and

c.) The property sold isn't the kind that will be included in the inventory if on hand at the end of the taxable year

3.) Sale of real property, provided the initial payments don't exceed 25% of the selling price

The income from these sales can be reported using the installment method.As a consequence, these capital gains taxes can also be paid in installments:

1.) Final capital gains tax from the sale of real property (capital asset,) provided that the initial payments don't exceed 25% of the selling price

2.) Final tax on net capital gains from installment sales of shares of stock not listed and traded in the stock exchange, provided that the initial payments don't exceed 25% of the selling price

The formula for computing the final tax due in both is here:

Final Tax Due = Installments Received x Final Tax

                               Contract Price

The tax base for the formula is the net capital gain. The rate is 5% if the gain is not more than Php100,000.00 and 10% if more than Php100,000.00.

Installment sales of capital assets can also be subjected to the holding period rule (see Net Capital Gains Tax and Final Capital Gains Tax) Remember, however, that the holding period won't apply to capital assets subject to a final capital gains tax (real property and shares of stock listed and traded in the stock exchange.) The holding period applies only to those capital gains and losses that must be reported in the ITR.

Deferred-Payment Sale

This is a sale where the payments received in cash or property other than evidence for the purchaser's indebtedness during the taxable year when the sale is made exceeds 25% of the selling price. The income of such a sale can't be reported in installments. The obligations the vendor receives from the purchaser are considered as the equivalent of cash; so the tax shall be paid in full in the year of sale.

"Initial payment" means downpayment and all payments within the year of the sale