RMO No. 24-2016 — Prescribes the investigation of parties in transactions involving transfer/assignment/sale of properties

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARMENt OF FINANCE Quezon City BUREAU OF INTERNAL RHVENUE RECORDS MGT. DIVISION RECEIVED JUJN 0 8 2016 11: 25A. M. U0

June 7, 2016

REVENUE MEMORANDUM ORDER NO. 84-OD10

SUBJECT Prescribing the Investigation of Parties in Transactions Involving the Transfer/Assignment/Sale of Properties

TO All Revenue Officials, Personnel and Others Concerned

in the conduct of investigation on the capacity of a party/ies to acquire properties. This Revenue Memorandum Order is being issued to prescribe guidelines and procedure

Such transactions covered by this Order are, but not limited to, those subject to: (1) Final

sale, transfer or assignment of stocks not traded in the stock exchange; (3) expanded Capital Gains Tax (CGT) on sale of real properties considered as capital assets; (2) CGT on 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 NIRC. withholding tax (EWT) on the sale of real properties considered as ordinary assets; (4) donor's

I. GUIDELiNES ANd PROCEDURE. ---

In order to ensure the tax compliance of the parties, and to determine the capacity of the

Properties"), the following guidelines and procedure are hereby prescribed: parties to acquire and hold the properties subject of said transfer/assignment/sale ("Subiect

I. 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 shall, including all supporting documents required under existing BIR issuances and may be required thereafter as necessary, be evaluated for possible audit or investigation.

I. Parties to the said transactions may be subjected to an audit or investigation

determined that the seller/transferor has no capacity to acquire the Subject to determine their capacity to hold and/or acquire properties. If it is 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

the parties concern, in accordance with existing rules and regulations. (RDO) may recommend the issuance of the electronic Letter of Authority (eLA) for approval by the Regional Director (RD) having jurisdiction over

I'. In relation to this issuance, the Onc-Time Transactions (ONETT) Team shall tindertake the following procedures a. In all cases, verify with the Integrated Tax System (ITS) that the parties (seller/assignor/transferor and buyer/assignee/transferee) financial capacity. regularly files returns and report income sufficient to establish

For individuals not required to file an income tax return (e.g individual whose gross income does not exceed total personal

and additional exemptions for dependents, Minimum Wage the provision of the Tax Code and other laws, general or special. Earners or individual who is exempt from income tax pursuant to or those who are substituted tax filers), to establish his/her (l) why they are not required to file an income tax return, (2) total annual income, (3) source of their income financial capacity, he/she shall submit an affidavit stating therein

In addition, 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

of the Subject Property may be used to establish financial documents as the source of the consideration for the acquisition capacity.

D Financial capacity of the buyer to acquire the Subject Property

shall be determined during the application of CARs and TCLs.

If the buyer/transferee is proven to have no financial capacity to and donor's tax should be imposed and not capital gains, and a duly executed Deed of Donation shall be required. acquire the property, the transaction is not a sale but a donation

C 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 ONETT Team may recommend the issuance of eLA pursuant to paragraph (ii) above The processing and issuance of the CARs and TCLs shall

2003 any amendment thereto notwithstanding the impending audit or investigation. proceed in accordance to Revenue Memorandum Order No. 15-

I. 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 Law Division of the BIR National Office. And if it shall be determined that transferor/assignor does not have the capacity to acquire the property subiect

Investigation Division (NID) for investigation. of the tax-free exchange, the Law Division shall forward it to the National

a. To initiate an audit/investigation, the NID shali submit a memorandum- request directly to the Office of the Commissioner (OCIR) indicating the following:

The 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,

BUREAU OF HNTERNAL REVENUT RECORUS MGT. DVISION JUN 0 8 20i6 1: SA- M: Justifications for the conduct of an audit/investigation, or Such other information as may be required by the Commissioner of Internal Revenue.

UMALa RECEIVFM

b. The conduct of an audit/investigation (i.e.. submission of audit reports

issuance of Assessment Notices, etc.) shall observe the established rules and approval by the Commissioner. and regulations for the conduct of such activities, subject to final review

c. The processing of BIR Certification Ruling and issuance of CARs and TCLs on the transfer of property in exchange for shares of stock shall proceed notwithstanding the impending audit or investigation.

N The procedures and requirements contained in this issuance shall be One Million (P1,000,000) and transactions exempted from CGT/EWT. (e.g. tax-free exchange under Section 40 (c)(2) of the NIRC of 199'7). mandatory on sale/transfer/assignment of stocks not traded in the Stocks Exchange and other ONETT transactions involving tax payments of at least

HI. REPEALING CLAUSE.

provisions of this Order are hereby modified and/or repealed accordingly All other rules, orders or portions thereof that are contrary to or inconsistent with the

IHI. EFFECTIVITY. -

This Order shall take effect immediately

Commissione'r of Internal Revenue KIM S. JACINTO-HENARES

RECORDE MGT DIVISION BUREAU OF INTERNAL REVENUE JUN 0 8 2016 11:25A.M. i 3A 042072

RECEVED