Revised Guidelines and Procedures on the Issuance of Certificates Authorizing Registration (CARs) and Reporting of Real and Personal Property Transactions

August 9, 1999 REVENUE MEMORANDUM ORDER NO. 66-99 SUBJECT : Revised Guidelines and Procedures on the Issuance of Certificates Authorizing Registration (CARs) and Reporting of Real and Personal Property Transactions TO : All Internal Revenue Officers and Others Concerned I. OBJECTIVES A. To prescribe a uniform Certificate Authorizing Registration (CAR) to be issued by both Integrated Tax System (ITS) and non-ITS RDOs for transactions involving the transfer of real and personal properties. B. To prescribe consolidated and updated guidelines and procedures for the audit/verification and processing of transactions involving sale, transfer, exchange or other disposition of real and personal properties, including issuance of the corresponding CARs. C. To ensure the proper reporting and monitoring of transactions arising from the sale, transfer, exchange and other disposition of real and/or personal properties through the periodic submission of required reports by concerned offices. II. POLICIES AND GUIDELINES A. The revised uniform Certificate Authorizing Registration (CAR) (Annex "A") shall be issued for the following transactions: 1. sale/transfer of real properties and shares of stocks not listed in the stock exchange whether subject to capital gains tax or creditable withholding tax; 2. transfer of real properties and shares of stocks arising from donation or inheritance; 3. transfer of real properties and shares of stock as property dividends to individual stockholders subject to final withholding tax. 4. tax-exempt sale, transfer, or exchange of real or personal properties as enumerated hereunder: 4.1 The merger of usufruct in the owner of the naked title. 4.2 The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary. 4.3 The transmission from the first heir, legatee or donee in favor of another beneficiary, in accordance with the desire of the predecessor. 4.4 All bequests devises, legacies or transfers to social welfare, cultural and charitable institutions, no part of the net income of which inures to the benefit of any individual, provided, however, that not more than thirty percent (30%) of the said bequests, devises, legacies or transfers shall be used by such institutions for administration purposes. 4.5 Dowries or gifts made by a resident on account of marriage and before its celebration or within one year thereafter by parents to each of their legitimate, recognized natural, or adopted children to the extent of the first ten thousand pesos (P10,000.00). 4.6 Gifts made by a resident and/or a nonresident alien to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government. 4.7 Gifts made by a resident in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, accredited non-government organization, trust or philanthropic organization or research institution or organization, provided that not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. 4.8 Gifts made by a nonresident alien in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization, provided that not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. 4.9 Sale or disposition of the principal residence of the seller, if proceeds of which will be used in acquiring or constructing a new residence within 18 months from the date of sale, provided that: 4.9.1 the Commissioner shall have been notified by the taxpayer within thirty (30) days from the date of sale or disposition through a prescribed return of his intention to avail of the tax exemption; 4.9.2 the tax exemption can be availed of once every ten years; and 4.9.3 if there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been realized from the sale or disposition shall be subject to capital gains tax. 4.10 Sale or exchange of property in pursuance of a plan of merger or consolidation in accordance with the provisions of Section 40 (C)(2) of the Tax Code. 4.11 Sales of real and personal properties exempt from imposition of capital gains taxes, withholding taxes, and/or documentary stamp taxes under special laws. B. CARs shall be issued by ITS and non-ITS Revenue District Offices (RDOs). For ITS RDOs, the Tax Clearance Certificate (TCL) shall continue to be computer-generated and the information therein shall be manually typewritten on the CAR. The CAR shall be issued to the taxpayer for presentation to the Register of Deeds or any concerned office while the system-generated TCL shall remain on file with the docket. C. CARs shall be printed as accountable forms, serially numbered, printed in four copies each and bound in fifty sets per pad. D. The Accountable Forms Division in the National Office shall be the custodian of blank CARs and shall be in charge of CAR issuance to the authorized revenue officials. It shall maintain a permanent record book where entries shall be made everytime blank CARs are requisitioned by these authorized revenue officials. E. Only the Revenue Regional Directors are authorized to requisition CARs from the Accountable Forms Division. The Revenue District Officers shall in turn requisition the forms from the Regional Directors. F. For the purpose of determining the jurisdiction of each RDO with respect to the filing and processing of tax returns involving transfers of properties, the following guidelines shall be applied: 1. For Transfer of Real Property Subject to Estate Tax 1.1 Estate tax return shall be filed by the executor, administrator or heir of the estate with the Accredited Agent Bank (AAB), Revenue Collection Officer (RCO) or Deputized Municipal Treasurer (DMT) and processed within the RDO where the decedent was domiciled or registered at the time of his death, regardless of the location of his properties. 1.2 If the decedent was a non-resident citizen and the estate tax return was filed with the Philippine Embassy or Consulate in the country where he was a resident at the time of death, the return shall be processed by RDO No. 51 - Pasay City. 1.3 If the decedent is a non-resident and has no legal residence in the Philippines, the estate tax return shall be filed with the Office of the Commissioner through RDO No. 39 - South Quezon City. The return shall likewise be processed by the said RDO. 2. For Transfer of Property Subject to Donor's Tax 2.1 Donor's tax return shall be filed by the donor with the AAB, RCO, or DMT and processed within the RDO where the donor is a resident or is registered. 2.2 If the donor is a non-resident and the donor's tax return is filed with the Philippine Embassy or Consulate in the country where he is a resident, the donor's tax return shall be processed by RDO No. 51 - Pasay City. 2.3 If the donor is a non-resident and has no legal residence in the Philippines, the donor's tax return shall be filed with the Office of the Commissioner through RDO No. 39 - Quezon City. The return shall be likewise be processed by the said RDO. LLcd 3. For Transfer of Real Property Subject to Capital Gains Tax 3.1 For sale/transfer of real property, the capital gains tax return shall be filed by the seller/transferor with the AAB, RCO or DMT and processed within the RDO having jurisdiction over the place where the property being transferred is located. 3.2 In case of sale/transfer of shares of stock and other personal properties, the return shall be filed with the AAB, RCO or DMT and processed within the RDO where the seller/transferor is registered. 4. For Transfer of Property Subject to Creditable Withholding Tax 4.1 In case of sale of real property and notwithstanding the provision under Section 2.58(A)(1) of Revenue Regulations No. 2-98, the creditable withholding tax return shall be filed by the withholding agent/buyer with the AAB, RCO or DMT and processed within the RDO having jurisdiction over the place where the property being transferred is located. 4.2 For sale or shares of stock and other personal properties, the return shall be filed with the AAB, RCO or DMT and processed within the RDO where the seller/transferor is registered. 5. For Transfer of Real Property Subject of Final Tax 5.1 In case of transfer of real properties as property dividends to individual stockholders, the final withholding tax return shall be filed with the AAB, RCO or DMT and processed within the RDO having jurisdiction over the place where the property is located. 5.2 In case of transfer of shares of stock as property dividends to individual stockholders, the final withholding tax return shall be filed with the AAB, RCO or DMT and processed within the RDO where the transferor is registered. 6. For Tax-Exempt Transfers 6.1 In case the property being transferred is real property, the corresponding tax return shall be filed and processed within the RDO having jurisdiction over the location of the property, where the decedent was domiciled or registered at the time of death or where the donor is a resident or registered, whichever is applicable. 6.2 If the property being transferred involves shares of shares of stock not traded in the stock exchange, the corresponding tax return shall be filed within the RDO where the seller is registered, where the decedent was domiciled or registered at the time of death or where the donor is a resident or registered, whichever is applicable. 6.3 If the properties being sold, transferred or assigned are within multiple locations covered by different RDOs and such sale, transfer or assignment is embodied in only one document, the tax return shall be filed and processed within the RDO where the seller/transferor/assignor is registered. G. To authorize the audit/verification and processing of the return, a Letter of Authority (LA)/Tax Verification Notice (TVN) shall be issued by the authorized revenue official in accordance with existing rules and regulations. Cases involving transfers of property shall be processed only upon receipt by the Assessment Section in the RDO of the official copies of tax returns from AABs, RCOs, or DMTs. However, in cases where issuance of CAR(s) need to be made immediately due to meritorious reasons, the RDO may authorize the audit/verification of these tax returns provided that extra efforts were exerted by the concerned revenue officers and officials to establish the authenticity of the return presented by the taxpayer and the validity of the information contained therein. Otherwise, the concerned revenue officers and officials shall be held responsible for any act of omission or commission found to be connected therewith. H. CARs shall be issued by the RDO which processed the return as follows: 1. CARs on sale/transfer of property subject to capital gains/creditable withholding tax shall be issued to the taxpayer immediately after approval of the verification report at the RDO level. The verification report on capital gains tax shall be subsequently reviewed by the Assessment Division for approval of the Regional Director after the issuance of the CAR by the RDO. 2. CARs on transfers of property(ies) subject to estate/donor's tax shall be issued to the executor, administrator or heir/donor after approval of the audit/verification report and issuance of Confirmation Letter (Annex "B") by the Regional Director. cdt Confirmation Letters (CLs) (Annex "B) shall sequentially numbered and issued in triplicate as follows: Original - to RDO where the property is located Duplicate - to be attached to the docket Triplicate - file copy of the office of the Regional Director CLs shall be numbered in such a manner that the Regional Office and RDO Numbers together with the year of issue are indicated thereat. For example, the first CL to be issued by Revenue Region No. 7, Quezon City, in favor of RDO No. 39, South Quezon City for the year 1999 shall be numbered as: 07-039-0001-99 3. For transfers exempt from capital gains, estate or donor's tax, the CAR shall be issued only after the approval of the audit/verification by the Regional Director and the issuance of Confirmation Letter(s) to the RDO(s) having jurisdiction over the location(s) of the real property(ies) being transferred and/or over the registered address of the seller/transferor of shares of stocks and other personal properties, as the case may be. I. No CAR shall be issued by the Revenue District Officer unless: 1. The original copy of the OR(s) evidencing payment of the corresponding tax(es) for the transaction and deficiency tax, if any, is presented to the Revenue Officer together with the complete documentary requirements necessary for the processing of the return; 2. The audit/verification report is rendered by the concerned revenue officer and approve by the Revenue District Officer/Regional Director, whichever is applicable; and/or 3. The original copy of the Confirmation Letter duly signed and issued by the Regional Director for cases involving transfers of properties on account of death or donation has been officially transmitted to him. J. For transfers arising from inheritance and/or donation involving properties in multiple locations covered by different RDOs or where the estate tax return was processed and verified by a district office without jurisdiction over the place where the properties are located, the Regional Director shall issue to all concerned RDOs individual Confirmation Letters containing only details of the property being transferred within the jurisdiction of each RDO. K. The CARs shall be issued sequentially by the RDOs. Any cancellation of CARs due to spoilage of any other valid reason shall be included in the Monthly Report of Assessments/Collections from Property Transactions and CARs Prepared and Issued (Annex "C"). L. The RDO shall prepare the required CARs in four (4) copies to be issued and distributed as follows: Original Copy - to the taxpayer for presentation to the Register of Deeds or other concerned office Duplicate Copy - taxpayer's copy Triplicate Copy - RDO's copy Quadruplicate Copy - to be attached to the docket M. All necessary information in applicable sections of the CARs shall be properly and completely filled-up. The following instructions in accomplishing the form shall be observed: 1. The appropriate box(es) under the Certification Section must always be filled up by indicating an "X" mark thereon. For tax-exempt transaction, the "X" mark must be placed in Box 7 as well as in the appropriate Transaction Code - Tax Exempt as indicated in Boxes 7a to 7f. In case the tax-exempt transaction falls under Box 7f or the XX Classification, the specific law granting the exemption and the nature of the transaction must be indicated on the last line of Transaction Code-Tax Exempt as appearing in the last line of the lowest box of the CAR form. 2. For transfers involving real properties, the Real Property Classification Code(s) enumerated in Annex "D" of this Order must always be indicated in the Classification Column under Section A of the CAR. In case the tax-exempt transaction falls under Box 7C - sale of principal residence by an individual seller with the intent to construct/purchase another residence within eighteen (18) months from sale/disposition, the notation "Conditionally tax-exempt from ________ to ________ pursuant to Section 24 (D)(2) of the NIRC" shall be indicated on the blank space beside the portion provided for the dry seal of the form. 3. The Details of Payment must always be indicated in Section C of the CAR. In case the transaction covered by the CAR is exempt from tax, the notation "TAX-EXEMPT TRANSACTION-NO TAX PAID" shall be written in Section C thereof. 4. If the real property transferred is land without any improvement, the notation "NO IMPROVEMENT" should be indicated in Section A of the CAR form. 5. All unfilled up spaces in Sections A and B of the CAR must be crossed out to avoid any possible unauthorized insertion. For example, if the CAR involves transfer of only one (1) parcel of land and only the first line in Section A was filled up, the words "NOTHING FOLLOWS" shall be indicated immediately on the second line of the CAR form. Spaces for Sections B.1 to B.3 shall be crossed out by indicating the words "NOT APPLICABLE". cdtech 6. In case the spaces provided for in Sections A and B of the form are not sufficient to accommodate all the properties to be transferred covered by the CAR, the back page of the form may be used for the purpose. However, appropriate notation shall be made thereon pursuant to Section II.M.5 hereof to avoid possible insertions. The RDO shall affix his signature immediately below the last line of the list of properties covered by the CAR. 7. The CARs to be issued must always be typewritten. 8. No CARs containing erasures shall be issued to taxpayers to avoid nullification by the Register of Deeds or any other registering office. For this purpose, the RDOs shall ensure that utmost care is exercised in the preparation of CARs to minimize spoilage of the forms. N. The CAR shall always bear all the printed names and signatures of the authorized revenue officers who processed the certificate, namely: Revenue Officer, Group Supervisor and the Revenue District Officer. However, CARs issued on transfers subject to estate and donor's tax may not bear the signatures of the Revenue Officer and Group Supervisor where such revenue personnel have already been assigned to another RDO, resigned, returned from the government office, or on official leave for a prolonged period of time or where the audit/verification was conducted by another RDO in accordance with Section II.F of this Order. O. The authorized Revenue District Officers must ensure that all copies of the signed CARs must bear the official dry seal of the Bureau before their release to taxpayers to avoid invalidation of the same upon presentation to the Register of Deeds and other concerned offices. P. In order to preclude any possible irritants arising from the delay in the issuance of CARs that may unduly jeopardize the interest of the taxpayers, CARs shall be issued within five (5) days from the issuance of the TVNs. For cases covered by LAs, CARs shall be issued within two (2) days from receipt of the original copies of CLs duly issued by the Regional Directors. Q. The Revenue District Officers shall maintain a permanent record book where entries on CAR requisition and issuance are made and updated. R. The revised CAR form shall be used starting September 1, 1999. Accordingly, the old CARs (BIR Form Nos. 1954, 1954 A and 1954 B) shall be used only until the end of the working hours of August 31, 1999. S. It shall be incumbent upon the RDOs, Chiefs of the Administrative Division in the Regional Offices, Regional Directors, and Chief of the Accountable Forms Division in the National Office to monitor their CAR forms inventory in their respective areas of jurisdiction to ensure that sufficient supply of these forms are available any time to forestall any undue delay in the issuance of CARs to concerned taxpayers. T. The Asset Valuation Division, Assessment Service shall monitor, review and cross-check with internal and external records terminated cases of real and personal property transactions. The said division shall likewise submit to higher authorities quarterly and ad hoc compliance and analytical reports in this regard. III. TRANSITORY PROVISIONS All Revenue Regional Directors, Revenue District Officers, and Chiefs of Administrative Division in the Regional Offices shall prepare a certified Inventory of all Unused CARs (Annex "E") in their possession as of August 31, 1999 and submit the same to the Asset Valuation Division, Assessment Service, National Office not later than September 10, 1999. The said inventory list shall be accomplished in four (4) copies to be distributed as follows: Original - Asset Valuation Division, Assessment Service, National Office Duplicate - Regional Director Triplicate - Accountable Forms Division, National Office Quadruplicate - Issuing Offices (RDO, Regional Director of Administrative Division in the Regional Office) In case any of these offices has no inventory of unused CARs, the Head of Office shall nevertheless accomplish the said list with the notation "NO UNUSED CAR FORMS AS OF AUGUST 31, 1999". All unused CARs as of August 31, 1999 shall be officially surrendered by all concerned offices to the Chief, Accountable Forms Division on or before September 10, 1999. The Chief, Accountable Forms Division shall prepare a written report to the Commissioner regarding compliance with this directive, copy furnished the Assistant Commissioner, Assessment Service, not later that September 30, 1999. IV. REPORTING REQUIREMENTS The RDO shall submit a Monthly List of Requisitioned Certificates Authorizing Registration (Annex "F") and A Monthly Report of Collections from Property Transactions and Certificates Authorizing Registration (CARs) Prepared and Issued (Annex "C") within ten (10) days after the end of every month to the Assistant Commissioner, Assessment Service. Likewise, the Regional Director shall submit a Monthly Report of Confirmation Letter Issued (Annex "G") within ten (10) days after the end of every month to the Assistant Commissioner, Assessment Service. V. VIOLATIONS Any unauthorized deviation from the foregoing policies and instructions and/or violation of any provision of this Order will result in the imposition of disciplinary action to the concerned revenue officers and officials and shall be referred by the concerned revenue official, thru the ACIR, Assessment Service, to the Internal Affairs Service for appropriate investigation. In this regard, the ACIR, Assessment Service may recommend to the Commissioner the relief, reassignment, or transfer of any revenue official violating any of the provisions and instructions prescribed in this Order. The Regional Director may also recommend to the Commissioner the replacement/removal of Revenue District Officers due to non-compliance with this Order. aisadc VI. REPEALING CLAUSE The provisions of existing issuances inconsistent herewith are hereby repealed. VII. EFFECTIVITY This Order shall take effect immediately upon. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue ANNEX A Certificate Authorizing Registration Schedule 1 ANNEX B REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Revenue Region No. ____ ________________________ No. _______ CONFIRMATION LETTER __________ Date MEMORANDUM TO: The Revenue District Officer Revenue District Office No._____ __________________________ RE: ____________ Return of _______________________ _______________________ This is to confirm the termination of the investigation/verification of the tax return of the above-cited taxpayer with TIN ______________ and registered address at ____________________ in connection with the sale/donation/transfer of properties to __________________ with TIN _____________ and registered address at ____________________ on __________________, as authorized under LA/TVN No. ________ dated _________________ with the following information: I. Transfer Subject to Estate/Donor's Tax Gross Taxable Estate/Donation P____________ Estate/Donor's Tax Paid Upon Filing of Return P____________ Official Receipt No. ____________ Bank Code ____________ Validation Code ____________ Date of Payment ____________ Deficiency Estate/Donor's Tax Paid Upon Investigation/Verification P____________ Penalties P____________ Official Receipt No. ____________ Bank Code ____________ Validation Code ____________ Date ____________ Deficiency Estate/Donor's Tax Paid After Review P____________ Penalties P____________ Official Receipt No. ____________ Bank Code ____________ Validation Code ____________ Date of Payment ____________ Total Payments P____________ II. Sale/Transfer Exempt from Capital Gains, Withholding, Estate or Donor's Tax Total fair market value/ P____________ Zonal value of property transferred P____________ Selling price P____________ Property received as consideration ____________________________________________________________________________ ________________________________________ Total fair market value/zonal value or amount of consideration P____________ Reason for exemption: (mark "x" the appropriate box): [ ] PD - Property dividends received by a domestic corporation/resident foreign corporation from a domestic corporation. [ ] PS - Property exchanged for shares of stocks of a corporation under Sec. 40 (C) (2) [ ] SR - Sale of principal residence by an individual seller with the intent to construct/purchase another residence within 18 months from sale/disposition. (Indicate beside the seal on the CAR the phrase, "Conditionally tax-exempt from ______ to ______ pursuant to Section 24 (D) (2) of the NIRC"). [ ] DE - Exempt donation [ ] EE - Transfer exempt from estate tax [ ] XX - Others (Specify) _____________________ The details of property(ies) covered by this Confirmation Letter are shown in Schedule 1 hereof. cdti _______________________ Regional Director ANNEX C Monthly Report of Assessment/Collections from Property Transactions and Certificates Authorizing Registration (CARs) Prepared and Issued ANNEX D REAL PROPERTY CLASSIFICATION CODE CODE CLASSIFICATION CODE CLASSIFICATION RR Residential Regular GL Government Land CR Commercial Regular GP General Purpose RC Residential Condominium I Industrial CC Commercial Condominium X Institutional APD Area for Priority Development AGRICULTURAL LANDS CODE CLASSIFICATION CODE CLASSIFICATION A1 Riceland Irrigated A26 Bamboo Land A2 Riceland Unirrigated A27 Peanut land A3 Upland A28 Soy beans Land A4 Coco Land A29 Grape vineyard A5 Citrus Land A30 Pepper Land A6 Fishpond A31 Mineral Land A7 Swamp A32 Non Metallic Mineral Land A8 Nipa Land A33 Coal Deposit A9 Cotton Land A34 African Oil Land A10 Cogon A35 Rubber Land A11 Abaca Land A36 Forest Land/timber Land A12 Orchard A37 Horticultural Land A13 Pineapple Land A38 Salt Beds A14 Banana Land A39 Seashore A15 Pasture Land A40 Resort A16 Corn Land A41 Sandy/Stony A17 Sugar Land A42 Prawn Pond A18 Tobacco Land A43 Sorghum A19 Cacao A44 Ipil-Ipil A20 Lanzones A45 Kangkong A21 Durian A46 Zarate A22 Rambutan A47 Vegetable Land A23 Mango A48 Coffee A24 Mangrove A49 Mountainous / Hilly Area A25 Camote/Cassava A50 Other Agricultural Lands ANNEX E Inventory of Unused Old Certificates Authorizing Registration Forms ANNEX F List of Requisitioned Certificates Authorizing Registration ANNEX G Monthly Report of Confirmation Letters Issued for the Month of ___________, ___________