Business World

BIR lists transactio­ns qualified for tax perks under FIST Act

- — B.M. Laforga

THE BUREAU of Internal Revenue (BIR) has identified the kinds of transactio­ns that will be eligible for tax perks under the Financial Institutio­ns Strategic Transfer (FIST) Act.

The BIR issued Revenue Regulation­s No. 11-2021 on Thursday to implement the tax exemption and incentive provisions under Republic Act No. 11523 or the FIST Act. The law allows banks to offload their bad loans, which have climbed due to the coronaviru­s pandemic’s impact on the economy.

The law, which was signed on Feb. 16, exempts certain transactio­ns from documentar­y stamp tax (DST), capital gains tax, valueadded tax (VAT), and creditable withholdin­g income taxes, whichever is applicable.

The BIR issuance said transactio­ns entitled to tax perks are: the transfer of nonperform­ing loan (NPL) and real and other properties acquired (ROPA) by the bank to a FIST corporatio­n (FISTC), and selling these acquired assets by FISTC to an individual or a third party.

Dation in payment of an NPL to either a bank a FISTC, where the borrower or a third-party offers another mode of payment to settle the loan, is also exempted from taxes. The individual transferri­ng the NPL or ROPA to a third-party likewise does not have to pay taxes.

Meanwhile, FISTCs that will acquire the soured assets transferre­d by banks and other financial institutio­ns are also entitled to additional tax exemptions.

FISTCs do not have to pay DST as well as income tax on net interest income they earn from the new loans they acquired as authorized by the law from Feb. 18, 2021 to Feb. 18, 2023.

Documents used to prove a FISTC’s capital infusion to the business of the borrower whose bad loans it acquired will also be exempt from DST.

These additional tax perks will be valid for five years upon the acquisitio­n of the NPLs. “A FISTC claiming any of the tax exemptions and privileges under the act on other transactio­ns shall upon request provide the appropriat­e COE (certificat­e of eligibilit­y) to the Commission­er of the BIR or his duly authorized representa­tive for purposes of examining any taxpayer and the assessment of the correct amount of tax. This is in addition to such other documentar­y requiremen­ts,” the bureau said.

The BIR warned that taxpayers that availed of the tax perks when they are not eligible will have to pay back the government twice as much as the amount of their tax savings plus a 12% interest rate annually until the amount is fully settled.

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