The Bureau of Internal Revenue has issued Revenue Memorandum Circular No. 19-2018 which mandates that Revenue District Officers (RDO) are not authorized to consider the prior mortgage value of a property as basis for computation of Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) in sales transactions, especially when such mortgage values are higher than the present zonal or fair market value. RDOs are required to follow the provisions of law and use either the selling price, zonal value, or fair market value as shown in the schedule of values of the Provincial or City Assessor, whichever is higher, as the basis for computation of the CGT and DST.
The full text of Revenue Memorandum Circular No. 19-2018 is available
here.