Revenue Memorandum Circular · RMC

RMC No. 19-2022

The Circular was issued to provide clarification and guidance to the RDO, other internal revenue officers and others concerned on Section 8 of RR No. 5-2021, particularly the mandate to issue the CAR without prior BIR confirmation or tax ruling on tax-free exchanges of properties, while ensuring that proper taxes due the Government on subsequent sale or disposition are protected and collected through the establishment and proper monitoring of the correct substituted basis.

Bureau of Internal RevenueIndependent research copy

Document type: RMC
Number: 19
Year: 2022
Text quality: Not specified

Document text

Reference copy · verify against the official source

RMC No. 19-2022 clarifies Section 8 of RR No. 5-2021: for tax-free property exchanges under Section 40(C)(2) of the 1997 Tax Code as amended by CREATE (RA No. 11534), no prior BIR confirmation or tax ruling is required to avail of the exemption. The Revenue District Office (RDO) issues the Certificate Authorizing Registration (CAR) - at the RDO where the real property is located, or where the business is registered in case of shares of stock - subject to post-transaction audit. Because Section 40(C)(2) only defers recognition of gain or loss for income tax purposes, the Bureau is directed to establish and monitor the substituted basis so that subsequent sales or dispositions are properly taxed. Covered transactions are various forms of reorganization and transfers to a controlled corporation, with 'control' meaning at least 51% of total voting power measured collectively. The provided text ends mid-way through the substituted basis rules.