Revenue Regulations · RRTax credits / incentives

RR No. 2-2025

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Document type: RR
Number: 2
Year: 2025
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REVENUE REGULATIONS NO. 2-2025 issued on January 8, 2025 implements the tax provisions of RA No. 9267, otherwise known as “The Securitization Act of 2004.” The sale or transfer of assets to the Special Purpose Entity (SPE), including sale or transfer of any and all security interest thereto, made in accordance with the Securitization Plan shall be exempted from Value-Added Tax (VAT) and Documentary Stamp Tax (DST), or any other taxes imposed in lieu thereof. Moreover, pursuant to Section 28 of RA No. 9267, the transfer of assets by dation in payment (dacion en pago) by the obligor in favor of the obligee shall not be subject to Capital Gains Tax as imposed under Section 27 (D)(5) of the Tax Code. The original issuance of asset-backed securities (ABS) and other securities related solely to such securitization transaction, such as, but not limited to, seller's equity, subordinated debt instruments purchased by the originator, and other related forms of credit enhancement shall be exempt from VAT, or any other taxes imposed in lieu thereof, but shall be subject to DST. Secondary trades and subsequent transfers of ABS, including all forms of credit enhancement in such instruments, shall be exempt from DST and VAT, or any other taxes imposed in lieu thereof. The yield or income from the ABS shall be subject to a twenty percent (20%) Final Withholding Tax. However, the yield or income of investors from any low cost or socialized housing-related ABS shall be exempt from Income Tax. Such yield or income must come from the securitization of the mortgage and housing-related receivables of the government housing agencies. The low-cost or socialized housing-related ABS must be certified as such by the Department of Human Settlements and Urban Development and the Department of Finance.

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Issuance analysis

Structured from the available issuance text · Tax credits / incentives

Revenue Regulations No. 2-2025, issued January 8, 2025, implements the tax provisions of RA No. 9267 (The Securitization Act of 2004). It exempts from VAT and documentary stamp tax the sale or transfer of assets to a Special Purpose Entity under a Securitization Plan, exempts dacion en pago transfers from capital gains tax, exempts the original issuance of asset-backed securities (ABS) from VAT (but not DST), and exempts secondary trades of ABS from both DST and VAT. Yields from ABS are subject to a 20% final withholding tax, except yields on certified low-cost or socialized housing-related ABS, which are exempt from income tax.

Purpose

To implement the tax provisions of RA No. 9267, The Securitization Act of 2004, specifying the VAT, DST, capital gains tax, and income tax treatment of securitization transactions and asset-backed securities.

In brief

Implements the tax provisions of the Securitization Act of 2004 (RA No. 9267): VAT/DST exemptions for SPE asset transfers and secondary ABS trades, CGT exemption for dacion en pago, 20% final withholding tax on ABS yields, and income tax exemption for certified low-cost/socialized housing-related ABS.

Keywords

Securitization Act of 2004RA No. 9267Special Purpose Entity (SPE)asset-backed securities (ABS)VAT exemptiondocumentary stamp tax (DST) exemptiondation in payment (dacion en pago)Capital Gains TaxFinal Withholding Taxlow cost or socialized housing-related ABScredit enhancementDepartment of Human Settlements and Urban Development

Key points

The sale or transfer of assets to a Special Purpose Entity (SPE), including any security interest, made in accordance with the Securitization Plan is exempt from VAT and DST, or any other taxes imposed in lieu thereof.
Under Section 28 of RA No. 9267, the transfer of assets by dation in payment (dacion en pago) by the obligor in favor of the obligee is not subject to Capital Gains Tax under Section 27(D)(5) of the Tax Code.
The original issuance of asset-backed securities (ABS) and related securities (e.g., seller's equity, subordinated debt purchased by the originator, and other credit enhancement) is exempt from VAT but subject to DST.
Secondary trades and subsequent transfers of ABS, including all forms of credit enhancement, are exempt from both DST and VAT, or any other taxes imposed in lieu thereof.
Yield or income from ABS is subject to a 20% Final Withholding Tax, but yields of investors from low-cost or socialized housing-related ABS are exempt from income tax.
The income tax exemption for housing-related ABS requires that the yield come from securitization of mortgage and housing-related receivables of government housing agencies, and that the ABS be certified as low-cost or socialized housing-related by the DHSUD and the DOF.

Tax types

Value-Added Tax (VAT) — exemption on SPE asset transfers, original issuance of ABS, and secondary trades/subsequent transfers of ABS.
Documentary Stamp Tax (DST) — exempt on SPE asset transfers and secondary ABS trades, but imposed on the original issuance of ABS.
Capital Gains Tax under Section 27(D)(5) of the Tax Code — not imposed on transfers of assets by dacion en pago under Section 28 of RA No. 9267.
Final Withholding Tax at 20% on yield or income from asset-backed securities.
Income Tax — exemption on yields/income of investors from certified low-cost or socialized housing-related ABS.

Affected taxpayers

Originators/sellers transferring assets to a Special Purpose Entity under a Securitization Plan (VAT and DST exemption on the transfer).
Obligors and obligees in transfers of assets by dation in payment (dacion en pago) (exempt from capital gains tax).
Issuers of asset-backed securities and related credit enhancement instruments at original issuance (VAT-exempt but DST payable).
Investors in and traders of ABS on secondary trades and subsequent transfers (DST and VAT exemption).
Investors earning yield or income from ABS (subject to 20% final withholding tax), except investors in certified low-cost or socialized housing-related ABS (exempt from income tax).