ee November 28, 2001 REVENUE MEMORANDUM ORDER NO. 32-01 SUBJECT : Guidelines Implementing Revenue Regulations No. 18-2001 on the Monitoring of the Basis of the Property Transferred and Shares of Stock Received Pursuant to Section 40(C)(2) of the Tax Code of 1997, Revising and Updating the Requirements and Conditions Precedent to the Non-Recognition of Gain or Loss in Transactions Falling Thereunder, and Prescribing the Forms Therefor TO : All Internal Revenue Officers and Others Concerned In order to facilitate the monitoring of the basis of properties transferred and shares received in an exchange transaction, and in the determination of whether a transaction involving the transfer of properties by individual/s or corporation/s in exchange for shares of stock of another corporation or unit of participation in a partnership, as well as a transaction involving a merger or consolidation, is a tax-free exchange that falls under Section 40(C)(2), in relation to Section 40(6)(b) and (c) of the Tax Code of 1997, the requirements hereunder stated must be complied with by both .transferor(s)absorbed corporation and _transferee/surviving/consolidated corporation. ‘The procedures outlined hereunder implement and complement Revenue Regulations No. 18-2001 dated November 13, 2001, and shall be observed in the monitoring and investigation of the basis of such properties transferred pursuant to a tax-free exchange, to ascertain compliance with the conditions set forth in the Certification/Ruling issued by this Office, and in the consequent assessment of tax liabilities if any, due upon subsequent disposition of the properties involved in the exchange. 1 DOCUMENTATION REQUIREMENTS, ‘A. BIR Certification/Ruling — Any application to be filed with the Law Division for a BIRsees Tenification/Ruling on the tax consequence of the exchange of properties described hereunder shall be made in a form which the BIR will provide for the purpose under the cover of a transmittal letter providing a brief overview of the transaction that contains all the material facts of the exchange transaction, and shall be accompanied by three (3) copies of each of the following documents: (1) In the case of transfer of property to a controlled corporation/partnership — (a) Deed of Transfer/Assignment/Exchange; (6) Duly registered Articles of Incorporation or Partnership with SEC of the transferor corporation and transferee corporation/partnership, and By-Laws; (©) Copies of the Transfer Certificates of Title/Condominium Certificates of Title/Certificates of Stock to the properties to be transferred pursuant to the tax-free exchange, as certified by the appropriate Registrar of Deeds or Corporate Secretary, as the case may be: (@) Copies of the latest Tax Declaration of the properties to be transferred pursuant to the tax-free exchange, as certified by the appropriate local government unit's Assessor. It is understood that any improvement is separately declared and therefore, covered by a Tax Declaration distinct from the Tax Declaration on the land. Further, if the tax declaration was issued three (3) or more years prior to the exchange transaction, the Transferor shall include in the certification by the local government unit's Assessor that such declaration is the latest tax declaration covering the real property; (&) Certification of the fair market value or zonal value of the real property involved in the exchange. The zonal value shall be certified, as a general rule, by the Chief, Asset Valuation Division at the 10th Floor, BIR National Office. However, the Revenue District Officer or the Revenue Regional Director can also issue the certification whenever access to the latest schedule of zonal values is electronicallyse available to them. (8 Swom certification by the individual transferor or in the case of a juridical person, by the Chief Financial Officer or his equivalent as to the basis of the property to be transferred. The original or adjusted basis, as the case may be, of each real property/share of stock/or other property transferred must be itemized in the certification, instead of a single lump sum in order to enable the Registrar of Deeds or the corporate secretary, as the case may be, to annotate the substituted basis on the reverse side of the Transfer/Condominium Certificate of Title to the real property involved or of the Certificate of Stock, and in order to facilitate the determination of gain or loss from a subsequent disposition of real properties/shares of stock and other properties received in the exchange. (g) Sworn statement of the amount and nature of any liabilities assumed upon the exchange, and the amount and nature of any liabilities to which any of the properties acquired in the exchange is subject. The proper officer to issue the statement shall be the Chief Financial Officer or his equivalent and confirmed by the President or the Chief Executive Officer or Country Chairman or their equivalent; (h) Audited Financial Statements of Transferor-corporation, as of the transaction date. (2) Inthe case of Merger or Consolidation — (a) The documents stated in (1) above; (b) Plan of Corporate Merger or Consolidation; (c) Statement of the amount and nature of the assets to be transferred by the absorbed corporation to the surviving/consolidated corporation. (@) Articles of Incorporation duly registered with SEC of the merged or consolidated corporation; and Copy 19862014 CO Teepe Ane eaten 2018 3