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RE,vtrNLiE &,ItrR{GR4NBIM oRBER IitG.

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Prescribing the Investigation of Parties in Transactions Invclving

Tran si'er/A ss i gninentlSal e of Properti es

SL]BJECT

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AII Revenue Officiais, Ferson]rel anci Others Concerned

TO

This Revenue Memorandr:m Order is being issr"red to prescribe guidelines and procedure
in tlre conduct of investigation on the capacity of a party/ies to acquire properties.
Such transactions covered by this Order are, bLrt not limited to, tlrose subject to: (1) Final
Capitai Gains J'ax (CGT) on sale of real properties considered as capital assets; (2) CGT on
sa1e, transfer or assignment of stocks not traded in the stock exchange; (3) expanded
rvithholding tax (EWT) on the sale of real properties considered as ordinary asscts; (4) donor's
tax; (5) estate tax; (6) other taxes including documentary stamp tax related to the saie/transfer
of properties, and (7) those covered by tax-free transfer under Section 40 of the NIRC.

I.

GUIDELINES AND PROCEDURT.

In order to ensure the tax compliance of the parlies, and to determine the capacity of the
parties to acquire and hold the properties subject of said transfer/assignment/sale ("Subject
Properties"), the tbllowing guidelines and procedure are hereby prescribed:

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 supporling documents required
under existing BIR issuances and may be required thereafter as necessary, be
evaluated for possible audit or investigation.

Application

t1

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

determine their capacity to hold andlor acquire properties. If it is

determined that the seller/transferor has no capacity to acquire the Subject
Properly he/she/it i s sel l i n g/assi gning/transferri ng and/or the buyer/transferee
has no capacity to acquire the Subject Property, the Revenue District Officer
(RDO) may recommend the issuance of the electronic l,etter of Authority
(eLA) for approval by the Regional Director (RD) having jurisdiction over
the parlies concern, in accordance with existing rules and regulations.

to

ili.

laiion to this issi;ance. tlie Llnl"-Time'l-ransactions (ONEr'l--f) Tci:;;'r shali

i]ldertal<.: th e fo 1 lowi

re

.)

(L.

rr g prccecl ur,.i,q
cases, veriry wiih the Integrat*ii 'l-iix S3,'stein (ll'3) that the
i:artir:s (seI1er'/assignor'/transfe rcr anci buver/assigrree/transfere e )
reglllariy files returris; einrl repori inccr:le suffjcieiit ic esrabiisli
flnanciai capacit),.
.

Iil all

F'or ii:riividuials not l'eiiLlired to file an incorle tilx reti.rl'it (c.9.

illrli'r,'icIual,i,vhcsi: il;'rs:r i i-lccrle does not excee tl ii:i:::1 llL'r'sorlaI
I
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and adclitionai exenrpiions for iependeiits. Minirlrurn S-iage

E,arners cr individual who is exempt frcm income tar plli"suar:t to
the proriision of the Tax Ccde and other lau,s, senerai cr speciai.
cr those u,ho are substituted tax fiiers), to estabiislr hislirer'
financiai cailacity, he/she shal] submit an affidavit stating tl-rerejn
(1) r,vhy they are not required tc t'ile an incoine tax return, {2)
total annlial incoille, (3) source of their incoine

in addition, presentatiotr of clocuments sucir as but not limited to

Income Tax Return, Certif;cate of Creditabie Tax WithlieiC at
Scurce, Certificate of Final Tax Withlield al Scurce, or loan
docurnents as tlie source of the consideration for ihe acquisition
of the Subj ect llropert.1 may be used to establish financial
capacity.

b.

Financial capacity of ttrre buyer to acquire the Subiect Proi:erty

shall be detei'inined duririg the applicaiion ol CARs ancl TCLs.

i{'the buyerltransferee is ilroven to }rave i"ro financial capiicity tc

acquire the property, the t:'ansaction is not a sale but a donation
and clonor's tax should be irnposed ancl not capital gains, and a
duly executed Deed of l)onation slrall be required.

c.

The lack of financial capacity of the Seiier/assignor/transferor

shail not stop the processing and issuance of ihe CAR.s and TCLs
relating to tl.re Subjer:t Property. The ONETT Team may
recomrnenC tiie issuancr: cf eLA illlrsuant to paragraph (ii) abo\*ie
'lhe processing and issuance of tlie CARs and TCLs si:all
proceed in accorciance to Revenlie klernoraneium Order IJo. 1520A3 any amendnient theretc notwitlistandirrg ihe impending
audit or investigation.
.

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 quadrupiicate 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 properly sr"rbject
of the tax-free exchange, the Law Division shall forward it to the National
Investi gati on Division (NI D) for i nvesti gation.

1\/
I Y.

a.

To initiate an audit/investigation, the NID shali submit a memoiandumrequest directly to the Oftrce of the Cornmissioner (OCIR) indicating the
flollowing:
The parties to tre auditecl (the transf-ercr/s and the ti^ansfereer's),

Brief backgrollnd of the tax-free exchange transactioil,

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crl:nlliiance history of tlie parties bn:i'.'ci on iirternai revenue

fonii ltt i on.

iusti I'rcations

1-or

the coilciuct of aii ir,-rditlinve stigatioi'i. or

Such otirer irrforiiration

oi internai Revenue.

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be requircil i;y the Ccnrnis:;iolrer

The conduct of an audit/investigation (i.e." subrlission of audit reports.

issuance of Assessrnent Notices. etc.) shall observe the established rules
and regulations for the conduct of such activities. subject to final revieu,
and approval by the Cornmissioner.

The processing of BIR Certification Ruling and issuance of CARs and

TCLs on the transfer of properly in exchange for shares of stock shall
proceed notwithstanding the impending audit or investigation.

The procedures and requirements contained in this issuance shall be

mandatory on sale/transfer/assignment of stocks not traded in the Stocks
Exchange and other ONETT transactions involving tax payments of at least
One Million (P1,000,000) and transactions exempted from CGT/EWT. (e.g.
tax-free exchange under Section a0 (c)(2) of the NIRC of 1997).
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rEffiPffiALITG CLqUSffi.

All other i'ules, orders or portions thereof that are oontrary to or incoirsistent r.vith the
provisions of this Order are hereby inodified and/or repealed accordingly.
III, EFFHCTIVITY.

This Crder shall take effect irnmeiliately.

KIM

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