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By Olivia Erika Susa
Every so often, corporations undertake business restructuring with varying business objectives in mind. It could be to optimize or streamline business operations, to expand to other industries, or to form strategic alliances with other corporations. In most cases, these would involve the transfer or exchange of significant property or shares, the taxes related to which become a material consideration to the parties involved.
To this end, Section 40(C)(2) of the Tax Code provides relief to taxpayers undertaking mergers, consolidations, or transfers of property to controlled corporations in exchange for shares. Specifically, the Tax Code states that no gains or losses may be recognized on such exchanges, or what is commonly referred to as tax-free exchanges (TFE).
BusinessWorld
February 24, 2021 | 7:53 pm
(Second of two parts)
In last week’s article, I touched on the basic features and provisions of Republic Act No. 11523, also known as the Financial Institutions Strategic Transfer (FIST) Act. The FIST Act aims to buoy struggling economy by increasing liquidity in the financial system. The law will serve as a catalyst for more efficient and less costly transfers of non-performing assets (NPAs), from the custody of the financial institutions (FIs) to FIST corporations (FISTCs), and ultimately to end-users, by granting certain tax and fee privileges on such transactions.
Unquestionably, the concept and spirit of the law is going to be a boon for the ailing economy. Now, the ball is in the court of the regulators who need to draft implementing rules and regulations, to ensure that the vision of the law is fully actualized. These are the factors they need to be considered.