Amicus Curiae


Many businesses resorted to corporate reorganizations due to the COVID-19 pandemic. Corporations typically reorganize their corporate structure to increase efficiency in their operations, to increase revenue, and to attract more investors. These reorganizations usually involve acquisition of property in exchange for shares of stock which may be considered as tax-free exchanges (TFE).

TFEs shall not be subject to VAT (value-added tax) and DST (documentary stamp tax) while any gain or loss shall be deferred and recognized only when the properties or the shares are subsequently transferred. For original issuance of shares, a minimal tax shall be imposed. A Bureau of Internal Revenue (BIR) confirmation or tax ruling shall not be required for purposes of availing of the tax exemption of TFEs.

Corporations pursuing reorganizations must still apply for the issuance of a Certificate Authorizing Registration (CAR) of the properties subject of the TFE to effect the transfer of the properties in the names of their respective transferees.

Recently, the BIR issued Revenue Memorandum Circular 19-2022 (RMC 19-22) providing clarifications and guidelines for TFE transactions. RMC 19-22 reiterated existing rules on TFEs and provided the process and documentary requirements in applying for issuance of a CAR.

However, RMC 19-22 added several issues which require further clarification.

First, RMC 19-22 now mandates that the application for CARs of transactions involving multiple transfer of properties and share of stocks covered by different Revenue District Offices (RDO) shall be processed with the RDO having jurisdiction over the place where the transferee corporation is located. The use of the word “shall” indicates the mandatory character of the provision.

While this provision aims to simplify the process by mandating the application to be filed in one RDO, it appears to have created confusion as problems may arise since some of the documentary requirements will be secured from regions far from the RDO of the transferee corporation which will cause a delay in the processing of the application.

Second, in relation to the first item, RMC 19-22 did not address whether the applications for CARs to be filed in the RDO of the transferee corporation may be split to be filed per property or by batch, or if all properties must be included in a single application.

This is a problem when the transferee corporation has numerous real properties in different regions of the Philippines. This is typical in reorganization of conglomerates, banks, holding companies, or property developers.

The parties may encounter problems in securing requirements from the LGUs and registry of deeds (RD) where real properties subject of the TFE are located.

If the BIR will require the filing of a single CAR application for all the properties to be received by the transferee corporation, documentary requirements for some of the properties may be delayed which may affect the application and issuance of the CAR for properties which already have complete requirements.

Third, RMC 19-22 requires the submission to the RDO of the new TCT/CCT (Transfer Certificate of Title/Condominium Certificate of Title) of real properties subject of the TFE, within 90 days from the date of receipt of the CAR. Otherwise, the RDO shall refer the docket to the Legal Division for appropriate action.

Due to voluminous applications, enforcement of reduced workforce, closure of offices due to lockdowns, and other issues, the RDs might encounter delays in the issuance of the new TCT/CCT with the required annotation which may prevent the parties to the reorganization in complying with the 90-day requirement in RMC 19-22. The BIR might consider entering into a joint agreement with the Land Registration Authority (LRA) to further streamline the process.

While the BIR is commendable for finally issuing RMC 19-22, this author hopes that it will further clarify and improve the processes for the application and issuance of CAR for qualified TFE transactions as these corporate reorganizations are vital in the recovery of businesses, as well as our economy, from the effects of the pandemic.

This article is for general informational and educational purposes only and not offered as and does not constitute legal advice or legal opinion.


Rufino Gerard G. Moreno is an associate of the Tax Department of the Angara Abello Concepcion Regala & Cruz Law Offices (ACCRALAW).

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