RMC No. 57-2021: Circularizes Republic Act No. 11523 (An Act Ensuring Philippine Financial Industry Resiliency Against the COVID-19 Pandemic)

Key points

1. Tax exemptions. Transfers of NPAs from a Financial Institution (FI) to a Financial Institutions Strategic Transfer Corporation (FISTC), from a FISTC to a third party, and by dation in payment are exempt from Documentary Stamp Tax and Capital Gains Tax on capital assets. Also exempt are Creditable Withholding Income Tax on land or buildings treated as ordinary assets, and VAT or gross receipts tax, whichever applies.
2. Fee reductions. In place of the usual fees, 50% of the registration and transfer fees on real estate mortgages and security interests, 50% of foreclosure filing fees, and 50% of land registration fees apply.
3. Periods of entitlement. Transfers from FIs to a FISTC and dation in payment to an FI enjoy the privileges for not more than two (2) years from the Act’s effectivity. Transfers from a FISTC to a third party, and dation in payment to a FISTC, enjoy them for not more than five (5) years from the FISTC’s acquisition, and properties from GFIs or GOCCs used for socialized or low-cost housing cannot be converted to other uses.
4. Individuals. The same exemptions extend to an individual for a single family residential unit or empty lot (ROPA), or an NPL secured by a real estate mortgage on one. Only one (1) transaction of one (1) unit or lot per individual is allowed, and the two-year and five-year periods apply. A Certificate of Eligibility from the regulatory agency is sufficient proof of entitlement.
5. Additional FISTC privileges and losses. A FISTC is exempt from Income Tax on net interest income, Documentary Stamp Tax and mortgage registration fees on new loans exceeding existing loans to borrowers with acquired NPLs, and from Documentary Stamp Tax on capital infusion, for up to five (5) years from acquisition. An FI’s loss from transferring an NPA within the two-year period is an ordinary loss, carried over for five (5) consecutive taxable years, and tax savings from it are retained as capital build-up, not used for dividends.
6. Penalties, oversight and rules. A person who benefits without entitlement faces penalties under Section 24 and refunds double the exemptions availed of plus twelve percent (12%) interest per year. The FISTC keeps accurate accounts and an SEC-acceptable external auditor, which the SEC, BSP and BIR may inspect, and monthly databases of sales and transfers go to the SEC, BIR, Philippine Competition Commission and other agencies. Implementing rules are due within thirty (30) days from effectivity, and RA No. 9182, as amended by RA No. 9343, is repealed.

Who is affected

• Financial Institutions and Financial Institutions Strategic Transfer Corporations
• Individuals transacting a single residential unit or empty lot
• Borrowers with Non-Performing Loans

Deadlines and effectivity

• Transfers to a FISTC: privileges for not more than two (2) years from effectivity of the Act
• Transfers from a FISTC to third parties: not more than five (5) years from FISTC acquisition
• Implementing rules within thirty (30) days from effectivity