THE Bureau of Internal Revenue (BIR) has finally issued Revenue Memorandum Circular (RMC) 19-2022, the much-awaited clarification and guidance on tax-free exchanges of properties under Section 40(C)(2) of the National Internal Revenue Code of 1997 (Tax Code) as amended by Republic Act 11534 or the "Corporate Recovery and Tax Incentives for Enterprises" (Create) law.

The Create law expressly amended Section 40(C)(2) to state that a prior BIR confirmation or tax ruling is not required to avail of tax-free exemption under the said section. This new provision embodies the Supreme Court decision in Commissioner of Internal Revenue v. Co (G.R. 241424, Feb. 26, 2020), which states that there is nothing in Section 40(C)(2) that requires a taxpayer to first secure a prior confirmatory ruling before the transaction can be considered a tax-free exchange. The BIR should not impose additional requirements not provided by law, which would negate the availment of the tax exemption.

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