RMC No. 58-2008: Clarifies the time within which to reckon the redemption period on foreclosed asset and the period within which to pay Capital Gains Tax or Creditable Withholding Tax and Documentary Stamp Tax on the forclosure of real estate mortgage by those governed by the General Banking Law of 2000 (RA No. 8791), as well as the venue for the payment of these taxes

Key points

1. Start of the redemption period. The one-year period for individual mortgagors, and the three-month period for juridical persons, is counted from the date of confirmation of the auction sale. That is the date the certificate of sale is issued.
2. Capital Gains Tax and withholding tax. If there is no redemption, Capital Gains Tax on a capital asset is due within thirty (30) days after the redemption period expires. For an ordinary asset, the creditable expanded withholding tax is due within ten (10) days after the end of the month in which the period expires.
3. VAT and Documentary Stamp Tax. Where VAT applies under Section 106 of the Tax Code, as implemented by RR No. 4-2007, the mortgagor pays it on or before the 20th or 25th day, whichever applies, of the month after the right of redemption prescribes. DST is paid and its return filed within five (5) days from the end of the month the redemption period expires. Taxes are based on the highest bidder’s bid price under RR No. 4-99.
4. Asset classification and statutory seller. Whether an asset is ordinary or capital depends on its nature in the mortgagor’s hands. The mortgagee banks, quasi-banks and trust companies are the statutory sellers, and they are expected to pay the taxes once the redemption period expires, without waiting for a later buyer.
5. Venue. Returns and payments, except VAT, are generally made where the foreclosed property is located. VAT is paid by the VAT-registered mortgagor at the RDO where the mortgagor is registered. If the statutory seller is a Large Taxpayer, the CGT/CWT and DST are paid with the Large Taxpayers Service office under RR No. 4-2008.
6. Certificate Authorizing Registration. On proof that the statutory seller paid its taxes, the CAR is issued without waiting for the mortgagor’s VAT compliance, in all cases where VAT applies. The BIR office over the statutory seller must notify the mortgagor’s RDO to collect the VAT.

Who is affected

• Banks, quasi-banking institutions and trust companies governed by RA No. 8791
• Mortgagors whose property is foreclosed
• Large Taxpayers acting as statutory sellers

Deadlines and effectivity

• Redemption period: one year for individuals, three months for juridical persons
• CGT due within 30 days after redemption period expires
• CWT due within 10 days after end of the month the period expires
• DST due within 5 days from end of the month the period expires