Amendment of Revenue Memorandum Order No. 29-86 Dated September 3, 1986 as Amended by Revenue Memorandum Order No. 16-88 Dated April 18, 1988 Relative to the Payment of Capital Gains Tax on Extra-Judicial Foreclosure Sale Initiated by Banks, Finance and Insurance Companies

April 18, 1989 REVENUE MEMORANDUM ORDER NO. 27-89 SUBJECT : Amendment of Revenue Memorandum Order No. 29-86 Dated September 3, 1986 as Amended by Revenue Memorandum Order No. 16-88 Dated April 18, 1988 Relative to the Payment of Capital Gains Tax on Extra-Judicial Foreclosure Sale Initiated by Banks, Finance and Insurance Companies TO : All Internal Revenue Officers and Others Concerned PURPOSE : There is an Imperative Need to Amend Section 2.2 of RMO No. 29-86 Amended by RMO No. 16-88 in Order to Enhance our Capability of Collecting the 5% Capital Gains Tax Imposed Under Section 21(E) of the Tax Code, as Amended, from Banks, Finance and Insurance Companies Section 2.2 of RMO No. 29-86 as amended by RMO No. 16-88 reads as follows: cd "2.2 - The tax applies not only to ordinary sale transaction but also to pacto de retro sales and other forms of conditional sales. This accordingly, includes mortgage foreclosure sales, except extra-judicial foreclosure sale under Act No. 3135 , a s amended by Act No. 411 8 wherein the tax shall become due only upon the consolidation of title in the name of the financial institution (banks, finance and insurance company) concerned." Reports reaching this Office reveal that a number of unscrupulous banks, insurance companies and other financial institutions have been evading the payment of the capital gains tax by disposing of foreclosed real properties classified as capital assets upon the expiration of the one-year period of redemption without consolidating ownership over said properties as envisioned by RMO No. 16-88. cd This scheme of circumventing the law must be stopped immediately. To prevent the continuous drain of our just revenues from this source, Section 2.2 of RMO No. 29-86 as amended by RMO No. 16-88 is therefore amended to read as follows: "2.2 - The tax applies not only to ordinary sale transaction but also to pacto de retro sales and other forms of conditional sales. This accordingly, includes mortgage foreclosure sales, except extra-judicial foreclosure sales under Act No. 3135, as amended by Act No. 4118 wherein the tax shall become due only upon the expiration of the one-year period of redemption provided for under Act No. 3135, as amended by Act No. 4118." This Revenue Memorandum Order shall take effect immediately. (SGD.) JOSE U. ONG Commissioner of Internal Revenue