REVENUE MEMORANDUM ORDER NO. 24-2016 issued on June 8, 2016 prescribes the
guidelines and procedures in the conduct of investigation of parties in transactions involving the
transfer/assignment/sale of properties.
Such transactions covered by the Order are, but not limited to, those subject to: (1) Final
Capital Gains Tax (CGT) on sale of real properties considered as capital assets; (2) CGT on sale,
transfer or assignment of stocks not traded in the stock exchange; (3) Expanded Withholding Tax
(EWT) on the sale of real properties considered as ordinary assets; (4) Donor’s Tax; (5) Estate Tax;
(6) other taxes including Documentary Stamp Tax related to the sale/transfer of properties and (7)
those covered by tax-free transfer under Section 40 of the National Internal Revenue Code (NIRC).
The application for the issuance of Certificate Authorizing Registrations (CARs) and Tax
Clearance (TCLs) covering sale/transfer/assignment of properties under Revenue Memorandum
Order (RMO) No. 15-2003 and other related issuances, including all supporting documents
required under existing BIR issuances and may be required thereafter as necessary, shall be
evaluated for possible audit or investigation.
Parties to the said transactions may be subjected to an audit or investigation to determine
their capacity to hold and/or acquire properties. If it is determined that the seller/transferor has no
capacity to acquire the Subject Property he/she/it is selling/assigning/transferring and/or the
buyer/transferee has no capacity to acquire the Subject Property, the Revenue District Officer
(RDO) may recommend the issuance of electronic Letter of Authority (eLA), for approval by the
Regional Director (RD) having jurisdiction over the parties concerned.
The One–Time Transactions (ONETT) Team shall verify with the Integrated Tax System
that the parties (seller/assignor/transferor and buyer/assignee/transferee) regularly files returns and
report income sufficient to establish financial capacity. For individuals not required to file an
Income Tax Return, they will be asked by the ONETT Team to submit an affidavit stating therein
(1) why they are not required to file an Income Tax Return; (2) total annual income; and (3) source
of their income.
Presentation of documents, such as but not limited to Income Tax Return, Certificate of
Creditable Tax Withheld at Source, Certificate of Final Tax Withheld at Source or loan documents
as the source of the consideration for the acquisition of the Subject Property, may be used to
establish financial capacity.
The financial capacity of the buyer to acquire the Subject Property shall be determined
during the application for CARs and TCLs. If the buyer/transferee is proven to have no financial
capacity to acquire the property, the transaction is considered not a sale but donation, which shall
be imposed Donor’s Tax and not Capital Gains Tax, and shall be required to present a duly
executed Deed of Donation.
The lack of financial capacity of the seller/assignor/transferor shall not stop the processing
and issuance of the CARs and TCLs relating to the Subject Property. The processing and issuance
of the CARs and TCLs shall proceed in accordance to RMO No. 15-2003 and any amendment
thereto, notwithstanding the impending audit or investigation.
For application of BIR Certification Ruling on the consequence of a tax-free exchange
transactions, the taxpayers shall submit all supporting documents required under existing rules and
regulations, in quadruplicate, to the BIR Law Division. If it is determined that the
transferor/assignor does not have the capacity to acquire the property subject of the tax-free
exchange, the Law Division shall forward the application to the National Investigation Division
(NID), for investigation.
To initiate an audit/investigation, the NID shall submit a memorandum-request directly to
the Office of the Commissioner indicating the following:
Parties to be audited (the transferor/s and the transferee/s);
Brief background of the tax-free exchange transaction;
Tax compliance history of the parties based on internal revenue information;
Justifications for the conduct of an audit/investigation; and
Such other information as may be required by the Commissioner of Internal Revenue.
The processing of BIR Certification Ruling and issuance of CARs and TCLs on the transfer
of properly in exchange for shares of stock shall proceed notwithstanding the impending audit or
The procedures and requirements contained in this issuance shall be mandatory on
sale/transfer/assignment of stocks not traded in the Stocks Exchange and other ONETT
transactions involving tax payments of at least One Million (P1,000,000) and transactions
exempted from Capital Gains Tax/Expanded Withholding Tax (e.g. tax-free exchange under
Section 40 (c)(2) of the NIRC of 1997).