Taxability of Certain Bangko Sentral ng Pilipinas (BSP) Acquired Assets

August 10, 2005 BIR RULING NO. 011-05 204; R.A. 9243 000-00 Bangko Sentral Ng Pilipinas Asset Management Department Maynila, Pilipinas Attention: Mr. Ramon V. San Jose, III Asset Management Consultant Gentlemen : This refers to your letter dated January 24, 2005 requesting a definitive ruling on the taxability of the Bangko Sentral ng Pilipinas (BSP) Acquired Assets, specifically on the following, to wit: 1) Exemption of the BSP from the payment of Documentary Stamp Tax (DST) in the consolidation of titles as required by the Revenue District Offices (RDOs) pursuant to Republic Act (R.A.) No. 9243; and to request for tax credits of DST payments made subsequent to the effectivity of R.A. 9243. 2) That in the payment of the Capital Gains Tax (CGT) on the installment sales of acquired assets, BSP be allowed to file/transmit the monthly returns together with the BSP credit advise on tax payments either through registered mail or fax transmittal to the RDOs having jurisdiction over the places where the properties are located, or directly to RDO No. 33 in Intramuros, Manila. Legal and Factual Background 1. On the exemption of BSP from payment of DST Item (1) of Republic Act (R.A.) No. 9243 dated February 7, 2004 exempts the BSP from the payment of DST in all its contracts, deeds, and transactions related to the conduct of its business. Prior to the enactment of RA 9243, the Asset Management Department (AMD) in the consolidation of acquired assets in BSP's name, has been paying DST equivalent to 1.5% of the bid price. TSCIEa To date, various applications for the consolidation of titles are still pending with some RDOs as they require the BSP to secure a definitive ruling from this Office on the exemption granted under R.A. 9243. The BSP has either stopped the payment of DST or has paid under protest. 2. On the filing and payment of the monthly CGT returns by way of registered mail or fax transmittal together with the BSP credit advise on tax payments to RDOs having jurisdiction over the places where the properties are located or directly to RDO No. 33, Intramuros, Manila BSP has represented that the maximum term of sale of acquired assets on installment basis is fifteen years. Under the installment plan, the BIR requires the filing and payment of CGT return, based on collection, with any Accredited Agent Bank (AAB) of the RDO which has jurisdiction over the place where the property is located. In places where there are no AABs, the return shall be filed with the Revenue Collection Officer or duly authorized City or Municipal Treasurer of the RDO having jurisdiction over the place where the property is located. BSP further implied that since its buyers pay on a monthly basis, the foregoing rule would be very costly for BSP as they would have to send AMD personnel nationwide for the monthly filing and payment of CGT due. It also informed this Office that in its letter dated April 12, 2004, BSP had requested that it be allowed instead to pay and file the monthly CGT due with RDO No. 33 in Intramuros, Manila. Unfortunately, the BIR has denied the request. It now comes to this Office requesting reconsideration of said decision invoking the following: a) That the BSP is also a government agency; b) That BSP is already paying all BIR taxes due through direct credit to the demand deposit account of the Treasurer of the Philippines maintained with the BSP for the account of the BIR as authorized under BIR's letter to the BSP dated April 20, 2004; and ECaTDc c) Considering the austerity measures being undertaken by President Gloria Macapagal Arroyo. Requested Ruling We reply as follows: 1) On the exemption from payment of DST pursuant to R.A. 9243, and consequently, the tax credits of DST payments made after the effectivity of R.A. 9243 . Section 9 of R.A. 9243 provides, viz. : "SEC. 9. Section 199 of the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows: 'SEC. 199. Documentary and Papers Not Subject to Stamp Tax . The provisions of Section 173 to the contrary notwithstanding, the following instruments, documents and papers shall be exempt from the documentary stamp tax: xxx xxx xxx (l) All contracts, deeds, documents and transactions related to the conduct of business of the Bangko Sentral ng Pilipinas." It is clear from the foregoing provisions of R.A. 9243 that all contracts, deeds, documents and transactions entered into by the BSP which is related to the conduct of its business are exempt from the payment of DST. Thus, after the effectivity of R.A. 9243, BSP shall be exempt from the payment of DST in accordance with the aforementioned provision of R.A. 9243. With regard to the payments made by BSP after the effectivity of R.A. 9243 arising from its execution of contracts, deeds, documents and transactions related to the conduct of its business, the BSP may claim for tax credit or refund within two (2) years after the payment of the tax in accordance with Section 204 (C) of the Tax Code of 1997, as amended. 2) On the filing and payment of the monthly CGT returns by way of registered mail or fax transmittal together with the BSP credit advise on tax payments to RDOs having jurisdiction over the places where the properties are located or directly to RDO No. 33, Intramuros, Manila We have noted your contention with respect to the existence of an account of the Treasurer of the Philippines with BSP in trust for the BIR which can be used as payment facility to cover CGT/CWT payments of BSP. We understand that the scheme would involve the use of a BSP credit advice which BSP shall have to file together with the return/s to the BIR-RDO. The payment is thus made through direct credit to the demand deposit account of the Treasurer of the Philippines being maintained with the BSP for the account of the BIR . In short, the amount of taxes due in respect to the CGT/CWT from the sale of BSP's Acquired Assets will be credited and remitted directly as revenue collection. cSCADE After due consideration, this Office finds the foregoing scheme acceptable inasmuch as the change of venue for filing and payment of the tax does not necessarily mean that the revenue collection of the BIR has been compromised. Rather, the direct credit of the amount of tax to the demand deposit account of the Treasurer of the Philippines being maintained with BSP for the BIR's account assures an immediate and direct remittance to the Government. Such being the case, this Office hereby authorizes the BSP to pay and file its CGT returns at BIR RDO No. 33 in Manila using the above payment scheme. This will serve as authority for the Revenue District Officer of RDO No. 33 to process the Certificate Authorizing Registration (CAR) corresponding to the property/ies and release the same to the BSP, when CGT is paid under this arrangement. Upon receipt of the CAR, the BSP will now distribute the CARs to its respective buyers nationwide. Before presenting the CAR to the concerned Register of Deeds, the buyer shall cause the Revenue District Officer (where the property is located) to countersign the CAR originally issued by the Revenue District Officer of RDO No. 33 and to make an endorsement to the Register of Deeds of the place where the property is located. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null or void. Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue