
REVENUE MEMORANDUM CIRCULAR NO. 57-2021 issued on May 3, 2021 circularizes Republic Act No. (RA) 11523, titled “An Act Ensuring Philippine Financial Industry Resiliency Against the COVID-19 Pandemic” or “Financial Institutions Strategic Transfer (FIST) Act”.
Any existing law to the contrary notwithstanding, the transfer of Non-Performing Assets (NPAs) from the Financial Institutions (FI) to a Financial Institutions Strategic Transfer Corporation (FISTC), and from a FISTC to a third party or dation in payment by the borrower or by a third party in favor of an FI or in favor of a FISTC shall be exempt from the following taxes:
a. Documentary Stamp Tax on the abovementioned transfer of NPAs and dation in payment as may be imposed under Title VII of the National Internal Revenue Code (NIRC) of 1997, as amended by RA No. 10963 (Tax Reform for Acceleration and Inclusion [TRAIN] Act);
b. Capital Gains Tax imposed on the transfer of lands and/or other assets treated as capital assets as defined under Section 39(A)(1) of the NIRC of 1997, as amended;
c. Creditable Withholding Income Taxes imposed on the transfer of land and/or buildings treated as ordinary assets pursuant to BIR Revenue Regulation (RR) No. 2-98, as amended;
d. Value-Added Tax on the transfer of NPAs as may be imposed under Title IV of the NIRC of 1997, as amended, or gross receipts tax under Title V of the same Code, whichever is applicable pursuant to regulations of the BIR.
The abovementioned transfers shall also be subject to the following, in lieu of the applicable fees:
a. Fifty percent (50%) of the applicable registration and transfer fees on the transfer of real estate mortgage and security interest to and from the FISTC, as imposed in accordance with the existing circulars of the Land Registration Authority (LRA);
b. Fifty percent (50%) of the filing fees for any foreclosure initiated by the FISTC in relation to any NPA acquired from an FI, as prescribed by the Rules of Court; and
c. Fifty percent (50%) of the land registration fees prescribed under the existing circulars of the LRA.
All sales or transfers of NPAs from the FIs to a FISTC or transfers by way of dation in payment by the borrower or by a third party to the FI shall be entitled to the privileges enumerated herein for a period of not more than two (2) years from the date of effectivity of the Act.
Transfers from a FISTC to a third party of NPAs acquired by the FISTC within such two (2)-year period, or within such extended period, or transfers by way of dation in payment by a borrower or by a third party to the FISTC shall enjoy the privileges enumerated herein for a period of not more than five (5) years from the date of acquisition by the FISTC: Provided,
That properties acquired by a FISTC from Government Financial Institutions (GFIs) or Government-Owned or -Controlled Corporations (GOCCs) which are devoted to socialized or low-cost housing shall not be converted to other uses.
The tax exemptions, incentives, and fee privileges given to FIs and FISTC at the various stages of the transactions under Section 15 of the RA shall likewise be extended to any individual: Provided, That:
a. The transaction is limited to a Real and Other Properties Acquired (ROPA) that is either a single family residential unit or an empty lot, or to Non-Performing Loans (NPL) secured by a real estate mortgage on a residential unit or an empty lot;
b. There shall only be one (1) transaction consisting of one (1) residential unit or empty lot per individual;
c. The two (2)-year transfer period, including its extension, and the five (5)-year entitlement period granted to NPA shall also apply to said single family residential unit or empty lot.
To prevent inordinate delay in the grant of incentives and exemption privileges, the Certificate of Eligibility duly issued by the appropriate regulatory agency is sufficient proof of the entity’s entitlement thereto.
To encourage the infusion of capital and financial assistance by the FISTC for the purpose of rehabilitating the borrower’s business, the following additional tax exemptions and privileges shall be enjoyed:
a. The FISTC shall be exempt from Income Tax on net interest income, Documentary Stamp Tax and mortgage registration fees on new loans in excess of existing loans extended to borrowers with NPLs which have been acquired by the FISTC;
b. In case of capital infusion by the FISTC to the borrower with NPLs, the FISTC shall also be exempt from the Documentary Stamp Tax: Provided, That the tax exemptions and fee privileges granted under Section 16 of the RA shall apply for a period of not more than five (5) years from the date of acquisition of NPLs by the FISTC.
Any loss that is incurred by an FI as a result of the transfer of an NPA within the two (2)-year period from the effectivity of the Act, shall be treated as ordinary loss: Provided, That the accrued interest and penalties shall not be included as loss on said loss carry-over from operations, subject to the provisions of the NIRC of 1997 on Net Operating Loss Carry-Over (NOLCO). Such loss incurred by the FI from the transfer of NPAs within the two (2)-year period from the effectivity of the Act may be carried over for a period of five (5) consecutive taxable years immediately following the year of such loss: Provided, further, That for purposes of corporate gain or loss, the carry-over shall be subject to pertinent laws: Provided, finally, That the tax savings derived by FIs from the NOLCO shall not be made available for dividend declaration but shall be retained as a form of capital build-up. The DOF, upon the recommendation of the BIR, shall issue the rules and regulations to effectively implement the provisions of Section 17 of the Act.
The regulatory authority concerned shall promulgate the necessary rules and regulations governing the treatment of any loss of the FIs in the books of accounts as a result of the transfer of the NPAs.
In the case of GFIs and GOCCs enumerated in Section 3(e) of the RA, the DOF, inconsultation with the Commission on Audit (COA), shall promulgate the necessary rules and regulations governing the treatment: of any loss in their books of accounts as a result of the transfer of their NPAs.
Any person, natural or juridical, who benefits from the tax exemptions and privileges herein granted, when such person is not entitled thereto, shall be subject to the penalties provided in Section 24 of the RA. In addition, the offender shall refund to the government double the amount of the tax exemptions and privileges availed of under the Act, plus interest of twelve percent (12%) per year from the date prescribed for its payment, until full payment thereof.
The FISTC shall set and keep accurate accounts and internal financial controls, and shall appoint an external auditor that is acceptable to the Securities and Exchange Commission (SEC). The SEC, BSP and BIR may look into the books of accounts and records of the FISTC at reasonable hours on business days after due notice.
The SEC, the regulatory authorities, and the BIR shall prescribe the submission of reports from the FISTC and the FIs for the proper implementation of the Act. To guide in their market monitoring activities, a database of the sales and transfers consummated in accordance with Section 12 of the RA shall be submitted by FISTCs and Fls to the SEC, BIR, Philippine Competition Commission, and other relevant agencies, on a monthly basis: Provided, That the beneficiaries of the tax exemptions and fee privileges under the Act shall submit the data necessary for the DOF and the National Economic and Development Authority to review and analyze the impact of the incentives availment
Within thirty (30) days from the effectivity of the Act, the SEC, jointly with the BSP, DOF, BIR and LRA, shall promulgate the necessary rules and regulations for the effective and faithful implementation of the Act: Provided, That within thirty (30) days from the effectivity of the Act, the DOF, upon recommendation of the BIR, shall promulgate the revenue regulations implementing the fiscal incentives under the Act. All the issuances pursuant to the Act must strictly comply with Republic Act No. 11032 (Ease of Doing Business and Efficient Government Service Delivery Act of 2018).
The non-promulgation of the implementing rules and regulations shall not prevent the implementation of the Act upon its effectivity. RA No. 9182, as amended by RA No. 9343 (The Special Purpose Vehicle Act of 2002) is repealed by RA No. 11523.