BIR lists transactions qualified for tax perks under FIST Act
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.