Tax Alert No. 33 [Revenue Regulations (RR) No. 8-2020 dated 1 April 2020, Revenue Memorandum Circular (RMC) Nos. 35-2020 dated 2 April 2020 and 36-2020 dated 3 April 2020]

Implementing Section 4(aa) of Republic Act (RA) No. 11469 or the “Bayanihan to Heal as One Act” and exemption from documentary stamp tax (DST) on relief for qualified loans

The Secretary of Finance has issued RR No. 8-2020 to implement Section 4(aa) in relation to Section 4(n) of RA No. 11469 which provides that all banks, quasi-banks, financing companies, lending companies, and other financial institutions (both public and private), including the Government Service Insurance System (GSIS), Social Security System (SSS) and Pag-ibig Fund must implement a minimum of a thirty (30)-day grace period for the following:

• Payment of all loans including but not limited to salary, personal housing, and motor vehicle loans as well as credit card payments, falling due within the Enhanced Community Quarantine (ECQ) period without incurring interest, penalties, fees and other charges. This includes extension of maturity periods that may result from the grant of grace periods for these payments, whether or not such maturity periods originally fall due within the ECQ.
• Credit restructuring, micro lending including those obtained from pawnshops and extensions thereof during the ECQ period.

Persons with multiple loans shall likewise be given a minimum 30-day grace period for every loan.

Subject to the provisions of Section 199(d) of the Tax Code, as amended, there shall be no additional DST to be imposed under Sections 179, 195 and 198 of the same Code on the abovementioned extensions. The new loan principal shall not be subject to DST.

RMC No. 36-2020 provide that the following shall be exempt from DST:

1. The new loan principal and the renewal or extension of the loan’s mortgage, pledge or deed of trust (collateral documentation) in relation to credit extensions for pre-existing loans that fall due during the ECQ period where the interest is paid but the principal is converted into a new loan with a new maturity date;
2. Credit restructuring which include pre-existing loans that fall due during the ECQ period where both the principal and interest are not paid but are consolidated and converted into a new loan principal with a new maturity date and the renewal or extension of the loan’s mortgage, pledge or deed of trust (collateral documentation); and
3. Credit restructuring which include pre-existing loans that fall due during the ECQ period where there is payment of interest and partial payment of principal on maturity while the remaining unpaid principal is converted into a new loan principal with a new maturity date and the renewal or extension of the loan’s mortgage, pledge or deed of trust (collateral documentation).

On the other hand, the following shall remain to be subject to DST:

1. Credit extensions for pre-existing loans that fall due during the ECQ period where the interest is paid but the principal is rolled-over or renewed as a new loan principal in accordance with a pre-agreed roll-over agreement and collateral documentation prior to the COVID-19 situation; and
2. Fresh loan availments, top-up to existing loans and new loan drawdowns during the ECQ period and its collateral documents, as applicable.

Reportorial requirement

Covered institutions but not limited to banks, quasi-banks, financing companies, lending companies, and other financial institutions public and private including the GSIS, SSS, and Pag-IBIG Fund shall submit in hard and soft copy, a summary listing of all pre-existing loans, pledges, and other instruments as of 17 March 2020 (commencement date of ECQ) which were granted extension of payment and/or maturity periods. Download the prescribed format of the summary listing below.

• Where and when to submit the summary listing?
  
  The summary listing shall be submitted to the Revenue District Office/ Large Taxpayers Service/ Large Taxpayers District Office where the taxpayer is registered within sixty (60) days from the lifting of the ECQ. A hard copy of the listing together with photocopies of the documents evidencing the credit extensions and restructuring shall be made under oath as to the completeness, truth and accuracy thereof by a duly authorized officer or representative of the taxpayer.
• What are the penalties for non-submission?
  
  Failure to submit the listing on the prescribed date will result in payment of additional DST that should have been imposed on the instrument by the covered institutions upon notice and demand by the Commissioner of Internal Revenue. Administrative penalties shall also be imposed.

You may access the full version of these issuances through the BIR website.