WHEREAS, it
is recognized that the attainment of development goals for
industry and agriculture depends, to a large extent, on the
capability of banks to sustain the investment and credit
requirements of industrial and agricultural projects; chanroblesvirtualawlibrary
WHEREAS, to insure that funds are available for investment and
credit requirements, there is a need to increase the resources of
banks; and
WHEREAS, to create the ideal climate conducive to the increased
capitalization of banks, certain changes in the fiscal regime
appeal warranted.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers vested in me by the
Constitution, do hereby order and decree:cralaw:red
Section 1. The banking industry is hereby declared as
indispensable to the growth of national economy and, the
provisions of the National Internal Revenue Code to the contrary
notwithstanding, gain realized from the following sales or
exchanges of property for a period of five years from the date of
approval of this Decree shall not be subject to tax:cralaw:red
(a) Gains arising from merger or consolidation
whereby: (i) a bank, a non-bank financial intermediary or a
finance company exchanges property solely for stock in another
bank, a non-bank financial intermediary or a corporation
organized primarily for the purpose of owning equity in banks and
(ii) a shareholder exchanges stock in a bank, a non-bank
financial intermediary or a finance company solely for the stocks
of another bank, a non-bank financial intermediary or a
corporation organized primarily for the purpose of owning equity
in banks: Provided, That the shares of stocks which are subject
of the exchange are not disposed of, transferred, assigned or
conveyed, except in cases of transmission on account of death,
within a period of five (5) years from the date of issue;
otherwise all the taxes due including interest on the gains
realized from the original transfer, sale or disposition of
the assets shall immediately become due and payable, subject to
the provisions of Section 51 (d) of the National Internal Revenue
Code.
(b) Gains arising from the disposition of property,
real or personal, that corresponds to the portion of the proceeds of
the sale that it invested, within six (6) months from the date of
the gains were realized, in new issues of capital stock of banks,
non-bank financial intermediaries existing as of the date of
approval of this Decree, or a corporation organized primarily for
the purpose of owning equity in banks; Provided, (i) That
the disposition and the investment of the proceeds thereof are
registered with the Central Bank and the Bureau of Internal
Revenue; and (ii) that the shares of stock representing the
investment are not disposed of, transferred, assigned or
conveyed, except in cases of transmission on account of death,
within a period of five (5) years from the date of issue,
otherwise all the taxes due including interest on the gains
realized from the original transfer, sale or disposition of
the assets shall immediately become due and payable,
subject to the provision of Section 51 (d) of the National
Internal Revenue Code: Provided, further, That the final
schedular income tax under the National Internal Revenue Code
paid on gains from the disposition of real estate, that corresponds to
the proceeds of the sale that is invested, shall be refunded by
the Bureau of Internal Revenue within six (6) months from the
date of payment but subject to the same conditions as in
(i) and (ii) above.
(c) Gains realized from exchanges of property, real
or personal, for new issues of capital stock in banks or non-bank
financial intermediaries existing as of the date of approval of this
Decree, or a corporation organized primarily for the purpose of owning
equity in banks if as a result of such exchange, the paid-in
capital of such institution is increased: Provided, That the
shares of stocks are not disposed of, transferred, assigned or
conveyed, except in case of transmission on account of
death within a period of five (5) years from the date of
issue; Otherwise all the taxes due including interest on the
gains realized from the original sale or disposition of the
assets shall immediately become due and payable, subject to
the provisions of Section 51 (d) of the National Internal
Revenue Code. chanroblesvirtualawlibrary
For purposes of paragraphs (a), (b), and (c) above —chanroblesvirtualawlibrary
(i) Every original share of capital stock issued
shall be stamped on its face with the words "EXEMPT UNDER
PRESIDENTIAL DECREE NO. ________", and no bank, non-bank
financial intermediary or a corporation organized primarily for
the purpose of owning equity in banks shall cause the transfer of
ownership of the same in its stock and transfer of book
within five (5) years counted from the date of issue,
without evidence of tax payment inclusive of interest. Any
bank or corporate official who shall cause the transfer of
ownership of shares of stock in its stock and transfer book
contrary to the provisions of this Decree, shall be punished by a
fine of not less than Five Thousand Pesos and imprisonment of not
less than two (2) years.
(ii) A bank or a non-bank financial intermediary
resulting from a consolidation or merger effective after April 1, 1980
of an existing bank, a non-bank financial intermediary or a
corporation organized primarily for the purpose of owning equity in
banks shall also be considered as a bank, non-bank financial
intermediary or a corporation primarily organized for the purpose
of owning equity in banks as of the date of approval of this
Decree. chanroblesvirtualawlibrary
(iii) A corporation organized primarily for the
purpose of owning equity in banks must register and be authorized
by the Central Bank of the Philippines. chanroblesvirtualawlibrary
Section 2. For purposes of this Decree, the following
definitions of terms shall apply:cralaw:red
(a) The term "bank" means every banking institution
as defined in Section 2 of the General Banking Act, Republic Act
No. 337, as amended. A bank may either be a commercial bank, a thrift
bank, a rural bank or a specialized government bank. chanroblesvirtualawlibrary
(b) The term "non-bank financial intermediary" means
financial intermediary as defined in Section 2-D (c) of the
General Banking Act, Republic Act No. 377, as amended, authorized
by the Central Bank of the Philippines to perform quasi-banking
functions. chanroblesvirtualawlibrary
(c) The term "quasi-banking functions" means
borrowing funds, for the borrower's own account, through the
issuance, endorsement or acceptance of debt instruments of any
kind other than deposits, or through the issuance of
participations, certificates of assignments, or similar instrument
with recourse, trust certificates, or of repurchase
agreements, from twenty or more lenders at any one time, for
purposes of relending or purchasing of receivables and other
similar obligations: Provided, however, That commercial,
industrial, and other non-financial companies, which borrow funds
through any of these means for the limited purpose of
financing their own needs or the needs of their agents or
dealers, shall not be considered as performing quasi-banking
functions. chanroblesvirtualawlibrary
(d) The term "finance companies" refers to
corporations or partnerships other than a bank, or insurance
company, primarily organized for the purpose of extending credit
facilities to consumers and to industrial, commercial or
agricultural enterprises whether by granting direct loans or by
discounting or factoring commercial papers or accounts
receivables for profit, buying and selling contracts, leases,
chattel mortgages and other evidences of indebtedness arising out
of one or more of the steps in the distribution and sale of
commodities.
Section 3. The Ministry of Finance, upon the
recommendation of the Bureau of Internal Revenue and in consultation
with the Central Bank of the Philippines, shall promulgate
the implementing rules and regulations which shall include
appropriate provisions for an independent appraisal of the
property sold, transferred or exchanged under the provisions of
this Decree.
Section 4. This Decree shall take effect immediately.
Done in the City of Manila,
this 17th day of September, in the year of Our Lord, nineteen
hundred and eighty.
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