BIR Ruling [DA-284-05]

June 23, 2005 BIR RULING [DA-284-05] R.A. 9182; R.R. Nos. 6-2004 & 9-2005; DA-267-2005 Hon. Nestor A. Espenilla, Jr. Deputy Governor Supervision and Examination Sector Head, SPV Steering Committee Bangko Sentral ng Pilipinas A. Mabini St., Malate Manila S i r : This refers to your letter dated June 20, 2005 requesting confirmation on certain issues relative to the implementation of R.A. No. 9182, otherwise known as the "Special Purpose Vehicle (SPV) Act of 2002." Your request is purposely to address existing situations where sale of non-performing assets (NPAs) are documented by an Asset Sale and Purchase Agreement (ASPA) between the selling FI and a buying counterparty, not an SPV, which is dated and notarized on or before April 12, 2005. However, a subsequent Accession Agreement is executed after April 12, 2005 but not later than June 26, 2005 to cede all the rights and obligations of the said buying counterparty to an SPV. On the other hand, the Deed of Absolute Sale, which is dependent on the delivery of the Certificate of Eligibility (COE), may be executed and notarized not later than July 11, 2005 to allow a delivery time of fifteen (15) days. A review of BSP Memorandum to All Banks and Non-Bank Financial Institutions Performing Quasi-banking Functions (NBQBs) dated March 4, 2005 on the implementation of the SPV Act disclosed that for the purpose of determining whether a transaction is within the prescribed April 12, 2005 deadline, relevant documents supporting the transaction, e.g ., Asset Sale and Purchase Agreement (ASPA), Deed of Assignment, Deed of Dacion, etc., should have been notarized not later than April 12, 2005 and that under Rule 12 (c) of the IRR, the BSP shall issue COEs within forty-five (45) days after the deadline for submission of applications for COEs, or until June 26, 2005. We reply as follows: For purposes of tax exemptions granted under R.A. No. 9182, as implemented by its Implementing Rules and Regulations and Rev. Reg. No. 6-2004, as amended by Rev. Reg. No. 9-2005, the transaction date appearing in the instrument ( e.g ., ASPA, Deed of Sale, Deed of Dacion, etc.) should be specific date covered by the 2-year period of tax exemption availment which in no case beyond April 12, 2005. cAHIST In view of the foregoing, this Office is of the opinion that sale of NPAs may be documented by an ASPA between the selling FI and the buying counterparty (which may or may not be an SPV) which should have been dated and notarized on or before April 12, 2005. However, in case the buying counterparty is not an SPV, an Accession Agreement should be executed to cede all the rights and obligations of the original buying counterparty which may be dated and notarized not later than June 26, 2005. Moreover, the Deed of Absolute Sale between the FI and the SPV that is executed upon delivery of the Certificate of Eligibility (COE) issued by the BSP may be dated and notarized not later than July 11, 2005 or fifteen (15) days after June 26, 2005, BSP's deadline for issuance of COE. Hence, we confirm your position that the arrangement described-above are also deemed to have been entered within the prescribed period and are qualified for the incentives under R.A. No. 9182. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group