A month before stepping down, Henares runs after property buyers, sellers

MANILA, Philippines — Property buyers and sellers could be subjected to a tax probe under a new order from the Bureau of Internal Revenue (BIR) which wants to gauge their financial capacity to keep and acquire real estate.

Issued less than a month before the new administration takes over, Revenue Memorandum Order 24-2016 is said "to ensure the tax compliance of the parties" involved in property sale and transfer.

"Parties to the said transactions may be subjected to an audit or investigation to determine their capacity to hold and/or acquire properties," the order dated June 7 stated.

"In all cases (however), verify...that the parties (seller/assignor/transferor and buyer/assignee/transferee) regularly files returns and report income sufficient to establish financial capacity," it added.

The order covers transactions involving the payment of capital gains tax on both property and non-traded stocks, donor's tax, estate tax, expanded withholding tax, and those covered by tax-free arrangements under the law.

Outgoing BIR commissioner Kim Henares has not replied to request for comment as of this post. Estela Sales, deputy commissioner for legal affairs, declined to comment.

Disapproval

Benedict Tugonon, president of tax industry group Tax Management Association of the Philippines (TMAP), said the new order is "unjust and unfair" to taxpayers.

"Commissioner Henares should refrain from issuing issuances now at this point in time, as a courtesy to the new administration," Tugonon said in a phone interview.

"We will strongly recommend to the next administration to include (this) among the issuances that should be withdrawn or canceled," he added.

According to the order, application for a certificate authorizing registration and tax clearance for property sale and transfer may be evaluated for "possible" audit.

'Presumes taxpayers committed fraud'

If a buyer is found to not have the financial capacity to acquire the said property, a letter of authority may be issued by the concerned BIR revenue district office where the application was filed.

A letter of authority is issued to taxpayers being investigated or audited. While such issuance may not stop the actual sale, Tugonon said it gives taxmen too much discretion.

"This presumes taxpayers committed fraud. We all enjoy the legal presumption of good faith. Fraud cannot be justified by mere speculation," he said.

"BIR examiners (are) given wide latitude of discretion as to what constitute necessary documents to be submitted to determine capacity to acquire," the TMAP official added.

Specifically, Tugonon said it will be "inconvenient" for those without not required to file income tax returns (ITR) to prove financial capacity.

Under the memorandum, an affidavit will be required from the likes of minimum wage earners and even overseas Filipino workers stating their annual income, source of income and why they are buying the property.

"The (order) also covers estate tax. How can the BIR investigate the financial capacity of the deceased  when the owner is already dead?" Tugonon said. 

Henares, named as one of the most influential tax practitioners by a magazine last year, is stepping out of the BIR carrying controversial tax issuances that saw her drawing the ire of taxpayers.

For instance, she tried, but failed, in 2013 to require taxpayers to report on their ITR earnings charged with final taxes supposedly in a bid to better track tax evaders.

She also initially required doctors and lawyers to disclose their rates and manner of billings as part of its run after self-employed individuals said to be among the top tax non-compliant. 

The Supreme Court invalidated the BIR order in 2014.