Tax Incentives on Gains from Property Transactions Involving Banks
- Gains from mergers or consolidations involving banks, non-bank financial intermediaries, or finance companies exchanging property solely for stock in similar institutions are exempt from tax for five years.
- Conditions for tax exemption include prohibition on disposal or transfer of involved shares within five years except upon death.
- Violations lead to immediate tax payment plus interest as per the National Internal Revenue Code (Section 51(d)).
Tax Exemption on Gains Reinvested in Capital Stock
- Gains from the disposition of property, if reinvested within six months in new stock issues of banks or financial intermediaries, are tax-exempt.
- Reinvestment and disposition must be registered with the Central Bank and the Bureau of Internal Revenue.
- Shares issued from reinvestment must not be transferred within five years except by inheritance.
- Refunds on income tax paid from reinvestment in real estate gains may be claimed within six months, subject to the same conditions.
Tax Exemption on Gains from Property Exchanges for Capital Stock
- Gains from exchanges of property for new bank stock that increase paid-in capital are also tax-exempt for five years under similar conditions.
- Shares subject to this exemption must carry a stamp indicating "EXEMPT UNDER PRESIDENTIAL DECREE NO." and have restricted transfer.
Penalties for Unauthorized Transfer of Shares
- Unauthorized transfers of exempted shares within five years incur fines of not less than Five Thousand Pesos and imprisonment of at least two years.
Recognition of Mergers and Corporate Authorization
- Banks or intermediaries formed by mergers after April 1, 1980, are recognized as existing for purposes of the decree.
- Corporations owning equity in banks must be registered and authorized by the Central Bank.
Definitions of Key Terms
- Bank: Institutions defined under General Banking Act No. 337, including commercial, thrift, rural, and government banks.
- Non-bank Financial Intermediary: Entities authorized by the Central Bank to perform quasi-banking functions.
- Quasi-Banking Functions: Activities involving borrowing funds via issuance or acceptance of debt instruments from multiple lenders for relending or purchase of obligations, excluding non-financial companies using such borrowing for their own needs.
- Finance Companies: Corporations or partnerships (excluding banks and insurance companies) organized primarily to extend credit facilities through loans, discounting commercial papers, or buying contracts for profit.
Rule-Making Authority
- The Ministry of Finance, together with the Bureau of Internal Revenue and the Central Bank, shall promulgate implementing rules.
- The rules shall provide for independent appraisal of property involved in transactions covered by the decree.
Effectivity
- The decree takes effect immediately upon issuance.