Tax Exemptions on Gains from Sales or Exchanges of Property
- Gains from certain mergers or consolidations involving banks, non-bank financial intermediaries, finance companies, or corporations owning equity in banks are exempt from tax for five years following the decree's approval.
- Shareholders exchanging stocks under these conditions are also exempt, provided shares are retained for five years (except in cases of death transmission).
- Disposal or transfer of shares within five years triggers immediate payment of all taxes and interest due.
Tax Exemptions on Gains Reinvested in New Capital Stock
- Gains from disposition of property re-invested in new capital stock of banks or related financial institutions within six months are exempt from tax, subject to registration with the Central Bank and Bureau of Internal Revenue.
- Shares acquired through such investment must not be disposed of within five years, except upon death.
- Failure to comply results in immediate due taxes and interest.
- Income tax paid on gains from real estate disposition that are reinvested will be refunded, subject to the same conditions.
Tax Exemptions on Gains from Exchange of Property for New Stock Issues
- Gains realized from exchanging property for new stock issues that increase an institution's paid-in capital are exempt from tax, provided the stock is retained five years.
- Transfer or disposal within this period incurs immediate taxation and interest.
Requirements for Shares under Tax Exemptions
- Original capital stock shares must be stamped "EXEMPT UNDER PRESIDENTIAL DECREE NO." to identify tax exemption.
- Transfer of ownership within five years without proof of tax payment is prohibited.
- Violations will result in fines of at least Five Thousand pesos and minimum two (2) years imprisonment.
Definition of Entities Covered by the Decree
- Bank: Defined as per the General Banking Act including commercial, thrift, rural, or specialized government banks.
- Non-Bank Financial Intermediary: Entities authorized to perform quasi-banking functions as per the General Banking Act.
- Quasi-Banking Functions: Includes borrowing through instruments other than deposits for relending or purchasing receivables; limited loans from non-financial companies excluded.
- Finance Companies: Corporations or partnerships extending credit facilities through loans, factoring, leases, or other credit instruments primarily for profit.
Rules on New or Consolidated Institutions
- Banks or intermediaries resulting from mergers or consolidations after April 1, 1980, are considered existing for the Decree's purposes.
- Corporations owning equity in banks must register and be authorized by the Central Bank.
Implementation and Regulation
- The Ministry of Finance, with BIR and Central Bank consultation, shall issue implementing rules and regulations.
- Provisions will require independent appraisals of properties sold, transferred, or exchanged under this Decree.
Effectivity
- The Decree takes effect immediately upon issuance.