Tax Exemptions for Special Purpose Vehicles in NPAs

Approval Certificate: Issued by Securities and Exchange Commission (SEC) for SPV investment instruments.
Approved Plan: SPV plan approved by the SEC.
BSP: Bangko Sentral ng Pilipinas.
Commission: Securities and Exchange Commission.
Financial Institutions: Includes BSP, banks, financing companies, investment houses, government financial institutions (GFIs), government-owned or controlled corporations (GOCCs), and quasi-banking licensees.
Investment Unit Instruments (IUIs): Participation certificates or debt instruments issued by the SPV.
Non-Performing Assets (NPAs): Non-performing loans (NPLs) and real and other properties owned or acquired by financial institutions (ROPOAs).
True Sale: Transfer of NPAs to SPV without recourse, isolating assets legally and operationally.

Acquire, manage, and dispose of NPAs.
Engage third-party managers.
Restructure debts, including reducing principal and interest, extending repayment, converting debt to equity.
Dation in payment and foreclosure.
Issue IUIs to fund operations.
Borrow money and guarantee credits.
Advance funds under court orders or restructuring plans.

Applications must be filed within 18 months from IRR approval.
Minimum authorized capital of P500 million; minimum subscribed capital P125 million; minimum paid-up capital P31.25 million.

SPV Plan includes investment policies, subscription documents, IUI features, roles of trustees and auditors, credit enhancement details, and liquidation methods.
Approval Certificate issued by SEC upon plan approval.

Prior written notice to borrowers and encumbrancers required.
90-day period allowed for loan restructuring before transfer takes effect.
Transfer subject to certification of eligibility by regulatory authorities within 45 days.
True sale applies; GFIs and GOCCs subject to existing asset disposition laws.
SPV assumes all rights and obligations of transferring FI.

Exemptions from documentary stamp tax, capital gains tax, withholding taxes, VAT or gross receipts tax on transfers.
50% reduction on mortgage registration, foreclosure filing, and land registration fees.
Privileges apply for two years for FI to SPV transfers and five years for SPV to third party transfers.
Special provisions for socialized or low-cost housing.
Individual investors entitled to exemptions for single family residential ROPAs.

SPV exempt from income tax on net interest, documentary stamp tax and mortgage registration fees on new loans beyond existing loans to NPL borrowers.
Exempt from documentary stamp tax on capital infusion to borrowers.
Incentives valid for five years from NPL acquisition date.

Losses from NPA transfer treated as ordinary losses.
Special net operating loss carry-over for five years for losses within two years of IRR effectivity.
Tax savings retained as capital build-up; not for dividends.
Regulatory authorities to set accounting rules.

Penalties include fines, imprisonment, and refund of double the tax exemptions plus 12% interest per annum.

Borrowers entitled to redemption periods under banking laws, Rules of Court, or other relevant statutes.

SPVs to maintain accurate books, internal controls, and appoint acceptable external auditors.
SEC, BSP, and BIR authorized to examine SPV records.
Reporting requirements prescribed by regulators for SPVs and FIs.

SEC, BSP, DOF, and BIR to draft and implement IRR within 60 days.
Congressional Oversight Committee with Senate and House members to review and oversee IRR enforcement.

Violations result in fines from P50,000 to P1 million, imprisonment of 6 to 12 years, or both.
Juridical persons and responsible officers may face sanctions including license suspension or revocation.
Aliens deported after serving penalties.
Public officials disqualified from office.