Financial Institutions Strategic Transfer (FIST) Act: Relief to Financial Institutions on their Non-Performing Assets (NPAs) and the Applicability of Five (5) Year Tax Exemption from Income Tax, DST, and NOLCO
R.A. No. 11523 otherwise known as the Financial Institutions Strategic Transfer (FIST) Act or the “FIST LAW” was enacted to ensure that banks and other financial institutions are able to maintain their financial health in order to cushion the adverse economic impact of the Covid-19 pandemic. It allow financial institutions to tap asset management companies to manage, operate, collect and dispose impaired loans.
1. Creation of Financial Institutions Strategic Transfer Corporation ( FIST)
a. The corporation cannot be incorporated as One-Person Corporation.
b. If the FISTC will acquire land, at least 60% of its outstanding capital stock shall be owned by Filipino citizens;
c. Required minimum authorized capital stock is Php 500,000,000.00. Minimum subscription capital of Php 125,000,000. 00 and minimum paid-up capital of Php 31,250,000.00 where land of foreign corporation is concerned, it must comply with the Constitution and;
d. Entities created under RA 9182, otherwise known as ” The Special Purpose Vehicle Act of 2002″ are qualified to avail the FIST Act.
e. Registration of FISTC shall be filed with the SEC within 36 months from the effectivity of the law.
2. Section 12: Transfer of Assets to FISTC
No transfer of NPAs to a FISTC shall take effect unless the FI concerned give prior notice to the borrower of the NPL, who shall be given 30 days to restructure or renegotiate the loan. Prior notice shall be given to all person holding prior encumbrances upon the assets. NPAs must be certified through the issuance of a Certificate of eligibility by the appropriate authority hearing jurisdiction on its operation otherwise the incentives and exemption privileges under the FIST law cannot be availed.
3. Section 13: Nature of Transfer
All sales on transfer of NPAs to a FISTC shall be in nature of a true sale after proper notice without need of a borrower’s consent, provided, that in transfer of NPLs the right of the debtor to reimburse the assignee or transferee under Article 1634 of the Civil Code shall not apply. No court, other than the CA and the SC may issue temporary restraining orders, preliminary injunctions and other injunctive relief against the transfer of NPAs
No transfer of NPL to a FISTC take effect unless FI concerned gives prior notice to the borrower of the NPL who shall be given 30 days to restructure or renegotiate the loan. Prior notice must also be given to all persons holding prior encumbrances upon the assets.
NPAs must be certified through the issuance of a Certificate of Eligibility by the appropriate regulatory authority otherwise the incentives and exemption privileges under the FIST Law cannot be availed.
4. TAX EXEMPTIONS AND PRIVILEGES
A. The transfer of NPAs from the FI to a FISTC, and from a FISTC to a third party or dation in payment by the borrower or by the third party in favor of the FI or FISTC shall be exempt from the following taxes:
a. Documentary stamp tax;
b. Capital gains tax;
c. creditable withholding tax; and
d. value-added tax or gross receipts tax (whichever is applicable).
B. Reduced rates in lieu of applicable fees:
1. Fifty percent (50%) of the registration and transfer fees on transfer of real estate mortgage and security interest to and from the FISTC;
2. Fifty percent (50%) of the filing fees for any foreclosure proceeding; and
3. Fifty percent (50%) of the land registration fees.
C. All sales or transfer of NPAs from FIs to a FISTC or transfers by way of dation in payment by the borrower or by a third party to the FI shall be entitled to the enumerated privileges for two (2) years from the date of effectivity of the FIST Law.
D. Transfer of NPAs from a FISTC to a third party within such two (2)-year period, or within such extended period, or transfers by way of dation in payment by a borrower or by a third party to the FISTC shall enjoy the privileges for five (5) years from the date of acquisition by the FISTC.
E. The enumerated privileges may be extended to any individual, provided that: (a.) the transaction is limited to a Real or Other Property Acquired, a property acquired by an FI in settlement of a loan, or NPL secured by a real estate mortgage, (b.) there shall only be one (1) transaction consisting of one (1) residential unit or empty lot per individual, and (c.) The two (2)-year transfer period, including its extension, and five (5)-year entitlement period granted to the NPA shall also apply to said single family residential unit or empty lot.
F. The following privileges may also apply for five (5) years from the date of acquisition of NPL by FISTC:
a. The FISTC shall be exempt from income tax on net interest income, documentary stamp tax, and mortgage registration fees on new loans in excess of existing loans extended to borrowers with NPLs which have been acquired by the FISTC; and
b. In case of capital infusion by the FISTC, the borrower with NPLs, the FISTC shall be exempt from documentary stamp tax. G. Lastly, in addition to the foregoing privileges, any loss of an FI as a result of the transfer of an NPA within the two (2)-year period shall be treated as an ordinary loss. Such loss may be carried over for five (5) consecutive taxable years.
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