BIR Form 1606 is a withholding tax remittance return mandated by the Bureau of Internal Revenue (BIR) for reporting and remitting taxes withheld on the onerous transfer of real property classified as ordinary assets in the Philippines.

This form applies specifically to real estate transactions where the property sold is not a capital asset—meaning it is held for sale in the ordinary course of business, such as properties sold by real estate brokers, developers, or dealers.

Key Provisions

Purpose: Remittance of creditable withholding tax on the sale, transfer, or exchange of real property classified as ordinary assets
Applicable Tax: Expanded withholding tax on real property transactions
Tax Base: The higher of zonal value, assessed value, or selling price
Taxable Transactions: Sales of lots, houses, condominiums, and other real properties held as inventory or used in trade/business
Exempt Transactions: Must still be reported using this form with zero tax due

Who is Affected?

The following parties have obligations related to BIR Form 1606:

Withholding Agents/Buyers – Required to file and remit the withholding tax
Real Estate Developers – When selling properties classified as ordinary assets
Real Estate Brokers – When receiving commissions subject to withholding tax
Property Sellers – Individuals or entities selling real property as part of their trade or business
Licensed Real Estate Service Practitioners – Subject to creditable withholding tax on professional fees

Withholding Tax Rates

For licensed real estate brokers and salespersons, the following rates apply under BIR Revenue Regulations No. 2-98:

Gross Income Threshold	Withholding Tax Rate
₱720,000 and below	10%
Exceeds ₱720,000	15%

You must provide a sworn declaration of your gross income to the withholding agent so they can apply the correct rate. The withheld amount becomes a tax credit against your annual income tax return.

When to File

File BIR Form 1606 on or before the 10th day following the end of the month when the transaction occurred.

For installment sales:

File upon receipt of the first down payment (equity)
File for each subsequent installment payment

Where to File

Submit the return to any Authorized Agent Bank (AAB) under the jurisdiction of the Revenue District Office (RDO) where the property is located. You can also use the BIR's eFiling system for electronic submission.

Penalties

Failure to comply with filing and remittance requirements results in:

25% Surcharge – For late filing or payment
50% Surcharge – For willful neglect or fraudulent returns
Interest – Double the legal interest rate set by BSP from due date until full payment
Compromise Penalty – As determined by the BIR

Required Documents

When securing a Certificate Authorizing Registration (CAR), submit:

Taxpayer Identification Number (TIN) of seller and buyer
Notarized Deed of Absolute Sale
Certified True Copy of Tax Declaration from the Local Assessor's Office
Certified True Copy of TCT/CCT (Transfer Certificate of Title or Condominium Certificate of Title)
Special Power of Attorney (if applicable)
Sworn Declaration of No Improvement (if applicable)
Validated return with Official Receipt or Deposit Slip

Real-World Application

For real estate brokers and practitioners in the Philippines, understanding BIR Form 1606 is essential for proper tax compliance. When you facilitate a property sale:

The buyer (as withholding agent) deducts the applicable withholding tax from your commission
They remit this using BIR Form 1606 and issue you BIR Form 2307 as proof
You claim the withheld amount as a tax credit when filing your annual BIR Form 1701

Real estate software platforms can help automate BIR tax report generation and track withholding tax certificates, ensuring you claim all eligible credits.

References

BIR Form 1606 Guidelines (January 2018 ENCS) - Bureau of Internal Revenue Official Guidelines
BIR Form 1606 PDF - Official Form from BIR
Bureau of Internal Revenue (Philippines) - Wikipedia
Tax Withholding - Wikipedia

BIR Form 1606