Issuance of Certification Authorizing Transfer of Title to Real Property Acquired By Banks Through Foreclosure Sales; and Verification to Collect the Capital Gains Tax Due

November 19, 1981 REVENUE MEMORANDUM ORDER NO. 33-81 SUBJECT : Issuance of Certification Authorizing Transfer of Title to Real Property Acquired By Banks Through Foreclosure Sales; and Verification to Collect the Capital Gains Tax Due TO : All Internal Revenue Officers and Others Concerned Pursuant to Sec. 34(h) of the Tax Code, as amended by Batas Pambansa Blg. 37, no registration of any document transferring real properties shall be effected by the Register of Deeds unless the Commissioner or his duly authorized representative certifies that such transfer has been reported and the capital gains tax, if any, has been paid. aisa dc It appears that in real estate mortgage contracts executed between banks and debtor-mortgagors, wherein the real property given as collateral is foreclosed, the Bank encounters difficulty in registering the Sheriff's Certificate of Sale/Deed of Sale in favor of the bank because the Register of Deeds requires the presentation of the certification from the Bureau of Internal Revenue that the capital gains tax has been duly paid; and said certification cannot be produced because the mortgagor has not filed the corresponding return. It will be noted that under the foregoing transaction, the capital gains tax is payable by the debtor-mortgagor because it is the party normally realizing the income on account of the sale or disposition of the capital asset. Such income is realized if the proceeds of the loan exceed the cost of the property mortgaged. And it is presumably for this gain derived that the debtor-mortgagor did not pay the loan anymore and allowed the foreclosure of his property; and he did not also bother to file the return and pay the tax for such gain. Under such circumstances, the Bank cannot effect the transfer of the title to the foreclosed property in its name. In order to remedy the situation, the Bureau of Internal Revenue shall allow the registration of the foreclosure sale and, ultimately, the consolidation and issuance of title in favor of the bank under the following procedure: The Bank shall, within 30 days after the foreclosure sale, apply for the issuance of the certification required by Sec. 34(h) of the Tax Code with the Revenue District Officer of the place where the debtor-mortgagor has his legal residence or principal place of business. In said application, the Bank shall furnish the Revenue District Officer pertinent facts, including information on the following: a. Name of debtor-mortgagor, his legal residence or principal place of business b. Amount of loan c. Fair market value of property mortgaged Copies of the Deed of Real Estate Mortgage and the certificate of sale executed by the Sheriff should be furnished the Revenue District Officer. Upon receipt of the application containing the foregoing facts and information, with the required attachments, the said Revenue District Officer shall issue the certification authorizing transfer of title to the Bank in the Form prescribed herein as Annex "A". Thereafter, the Revenue District Officer shall then conduct the necessary investigation to ascertain the capital gains tax due from the debtor-mortgagor in accordance with the procedure prescribed by Revenue Memorandum Order No. 21-80 dated May 28, 1980. All are enjoined to comply with the provisions of this Memorandum Order. RUBEN B. ANCHETA Acting Commissioner Republika ng Pilipinas Ministri ng Pananalapi KAWANIHAN NG RENTAS INTERNAS Quezon City ANNEX "A" C E R T I F I C A T I O N This is to certify that ____________________________ (Name of Bank) with office address at _________________________ as mortgagee, acquired the real property covered by OCT/TCT Tax Declaration No. _________________ located at _________________ during a foreclosure sale held on ___________________________. The mortgagor is ___________________________________ with residence at ______________________________. Pending investigation, the documents covering the transfer of the above-described property in the name of the said Bank may be registered by the Register of Deeds. This certification is issued pursuant to and shall be used only for purposes of complying with the requirements of Sec. 34(h) of the National Internal Revenue Code and does not preclude the Bureau of Internal Revenue from assessing and collecting the corresponding capital gains tax that may be due after investigation. RUBEN B. ANCHETA Acting Commissioner By: REVENUE DISTRICT OFFICER Certification fee of P1.50 paid under CR No. ______________ dated _______________ and documentary stamps of P1.50 affixed to the original hereof. cdt