Question & AnswerQ&A (BIR REVENUE MEMORANDUM ORDER NO. 6-92)
The main subject is the amendment of Revenue Memorandum Order No. 29-86 regarding the payment of capital gains tax on extra-judicial foreclosure sales initiated by banks, finance, and insurance companies.
The capital gains tax applies not only to ordinary sale transactions but also to pacto de retro sales, other forms of conditional sales, and includes both judicial and extra-judicial mortgage foreclosure sales.
The exception was that in extra-judicial foreclosure sales under Act No. 3135 as amended by Act No. 4118, the capital gains tax becomes due only upon the expiration of the one-year period of redemption.
The creditor-financial institution (banks, finance, and insurance companies) is the statutory seller, representing the owner-mortgagor of the real property.
The capital gains tax becomes due based on the bid price in the auction sale upon the foreclosure sale.
Yes. They may get reimbursement or recover the capital gains tax paid if the right of redemption is exercised by the debtor-mortgagor or when the property is subsequently sold to any party.
It amended Section 2.2 to clarify that the tax applies to all mortgage foreclosure sales, both judicial and extra-judicial, removing the previous distinction and exception for extra-judicial foreclosures.
Act No. 3135 as amended by Act No. 4118 governs extra-judicial foreclosure sales.
Act No. 4118 amends Act No. 3135 and provides for the one-year period of redemption and conditions related to extra-judicial foreclosure sales.
The Revenue Memorandum Order took effect immediately upon its adoption on January 15, 1992.