RR No. 9-2005: Amends pertinent provisions of Revenue Regulations No. 06-04 relative to the tax exemptions and privileges granted under Republic Act No. 9182, otherwise known as “The Special Purpose Vehicle Act of 2002”

Key points

1. Background. Under the Act, sales or transfers of Non-Performing Assets from financial institutions to an SPV, and dation in payment transfers, get tax and fee privileges for not more than two (2) years from effectivity of the IRR. The IRR was published on 28 March 2003 and took effect on 12 April 2003.
2. Amended Section 7(c). For transactions (a)(1) to (a)(6), the transaction must occur from April 17, 2003 to April 12, 2005, and the transfer must be an approved true sale. For (a)(7), (a)(8), (a)(11) and (a)(12), the NPL/ROPOA must be acquired from an FI between April 12, 2003 and April 12, 2005, and the transaction must occur within five (5) years from acquisition.
3. Dation in payment. For transactions (a)(9) and (a)(10), the dation in payment must settle an NPL acquired from an FI between April 12, 2003 and April 12, 2005. It must occur within five (5) years from that acquisition.
4. Amended Section 8 on SPV exemptions. The SPV is exempt from income tax on net interest income from new loans, in excess of existing loans, to a borrower with an NPL acquired within two (2) years from April 12, 2003, solely to rehabilitate the borrower’s business. Documents for those loans, and for the SPV’s capital infusion to such a borrower, are exempt from DST.
5. Amended Section 9 on FI privileges. A loss from transferring NPAs to an SPV within two (2) years from April 12, 2003 is an ordinary loss, which can be carried over for five (5) consecutive taxable years following the year of transfer. The privilege is lost on a merger unless the FI’s shareholders gain control of at least 75% of the surviving corporation, and the FI stays subject to MCIT of two percent (2%) of gross income.

Who is affected

• Special Purpose Vehicles
• Financial institutions transferring NPAs to an SPV
• Borrowers with NPLs acquired by an SPV

Deadlines and effectivity

• Covered transactions: April 17, 2003 to April 12, 2005
• Subsequent transactions after acquisition: within five (5) years
• Effectivity: immediately