BIR Releases Policies and Guidelines for the Conduct of Public Auction Sale of Distrained, Levied, and Acquired Assets

The Bureau of Internal Revenue (“BIR”) issued Revenue Memorandum Order (“RMO”) No. 29-2022 to give an updated policies and guidelines in the conduct of public auction sale for distrained personal properties, seized or levied real properties, and acquired personal and real assets.

Distrained and levied properties pertain to personal and real properties that have been seized by the BIR which will be sold through public auction to satisfy the tax liability of a delinquent taxpayer. Acquired assets, on the other hand are personal and real properties subject of auction proceedings that were declared purchased or forfeited in favor of the government pursuant to Sections 212 and 215 of the Tax Code, as amended.

1. Disposal of distrained and levied properties

   The disposal of distrained and levied properties shall be done by the following offices:

   1. Regional Collection Division- Arrears Management Section (“RCD-AMS”); 
   2. Large Taxpayers Collection Enforcement Division (“LTCED”);
   3. Large Taxpayers Division- Cebu/Davao; and 
   4. Accounts Receivables Monitoring Division-Collection Enforcement Monitoring Section (“ARMD-CEMS”)
   
   

   The office which seized, distrained, or levied the properties shall be the one to dispose the same, regardless of the geographical location of the property seized, provided the delinquent taxpayer-owner is within its jurisdiction.

   A Bids and Awards Committee (“BAC”) shall be created by the concerned Regional Office/Service for the purpose of the disposal of distrained or levied properties.

   The public auction sale shall be done on an “AS IS WHERE IS BASIS.” The disposal of real properties shall be on a title-by-title basis, while personal properties may be done by lot or on a per item basis, whichever is deemed most beneficial to the government and practicable by the BAC concerned.

   A prior notice of sale (“NOS”) containing the place, date, and time of sale, the owner and description of the property, amount of the minimum bid, and the authorized signatory, shall be posted in not less than two (2) public places in the municipality or city where the distraint is made or where the real property is located, provided that in real properties, publication once a week for three (3) consecutive weeks in a newspaper of general circulation is likewise required. One place for the posting of NOS shall be at the office of the city or municipality Mayor where the property is located.

   The auction sale shall be conducted on the date, time and place specified in the NOS, and shall be done through sealed bids to be witnessed by a representative of the Commission on Audit (“COA”). The COA representative shall be invited to attend and witness the auction sale, but the auction sale may proceed and still be valid should the COA representative fail to attend.

   Minimum Bid/Floor Price

   The Minimum Bid/Floor Price for personal properties is the appraised value determined by an appropriate independent appraiser contracted by the BIR or with respect to shares of stocks, the book value on the latest audited financial statements of the issuing company. The BIR may directly trade listed stocks only through a Philippine Stock Exchange (“PSE”) accredited or licensed stockbroker. On the other hand, the minimum bid/floor price for real properties is the latest Fair Market Value (“FMV”) as determined by the Commissioner based on the schedule of zonal values, or the FMV shown in the latest tax declaration issued by the provincial, city or municipal assessor. Only bids equal to or higher than the set floor price/minimum bid price shall be accepted by the concerned BAC.

   Bid bond

   A bid bond equivalent to 10% of the minimum bid price per item or lot shall be required from each bidder which shall accompany the Application for Bid, and which shall form part of the payment of the winning bidder. The bid bond of the winning bidder shall be issued an Official receipt, while the bid bonds from the losing bidders shall be returned immediately after the public auction. Posting a bid bond less than 10% of the minimum bid price automatically disqualifies the prospective bidder from participating in the scheduled auction.

   Single bidder

   Where only a single bidder participated, the bid price offered may be accepted, with the official declaration thereafter that the single bidder is the winning bidder, subject to the prescribed minimum bid price and the 10% bid bond thereon.

   A property may be excluded from the auction at any time on or before the day fixed for the sale when the delinquent taxpayer satisfies any of the following:

   1. Payment of liability per Sec. 215 of the National Internal Revenue Code (“NIRC”);
   2. Availment of remedies under Sec. 204 of the NIRC; 
   3. Availment of tax amnesty program; or 
   4. Court orders or injunction.
   
   

   With the settlement of the tax liability, either through full payment and/or approved settlement application, the BIR shall return the distrained personal property to the delinquent taxpayer and/or effect the lifting of the Notice of Tax Lien (“NTL”) or Notice of Levy (“NOL”) on the levied real properties with the concerned Registry of Deeds and/or Assessors Office.

   Payment of Bid Amount 

   The payment of the winning bidder for distrained properties shall be in cash or in manager’s check payable to the Commissioner for amounts less than or equal to the Outstanding Tax Liability (“OTL”). If there be excess, the same shall by paid by winning bidder to the delinquent taxpayer. However, if the delinquent taxpayer is not willing to accept the excess, the case shall be referred to the Legal Division/Legal Group for consignment to the proper court. The delinquent taxpayer shall be notified of this action.

   For levied properties, the winning bidder shall deposit the payment in an escrow account to be opened in an Authorized Government Depository Bank (“AGDB”) within the jurisdiction of the Office which conducted the sale or has jurisdiction over the delinquent taxpayer. The amount to be deposited therein shall be the amount to be credited to the tax liability. The excess of the proceeds, if any, shall be returned to the delinquent taxpayer. If the delinquent taxpayer refuses to accept the same, the case shall be referred to the Legal Division/Legal Group for consignment to the proper court. The delinquent taxpayer shall be notified of this action. 

   The escrow amount shall not be released for payment of the tax liabilities until after the lapse of the one-year redemption period. Should there be no redemption, a Notice of Release of Escrow Deposit shall be issued by the winning bidder to the bank for the release of the escrow amount to the BIR before the issuance of a Deed of Conveyance to the winning bidder.

   Certificate of Sale

   Upon the payment of the bid amount or after depositing the same in an escrow account, as the case may be, a Certificate of Sale of Personal/Real Property or a Bill of Sale if the properties sold are stocks or other securities, shall be issued by the BIR. The sale of personal property shall be absolute and not subject to redemption, while the sale of a real property is subject to a one-year redemption period. In case of non-redemption, a Deed of Conveyance shall be issued to the winning bidder.

   Failure of Bidding

   In case of failure of bidding, the property will be purchased or forfeited in the name of the National Government. A declaration of forfeiture shall be issued and filed with the Registry of Deeds or Assessors’ Office having jurisdiction over the property.

   Redemption of Levied Properties Sold at Public Auction

   During the redemption period, the delinquent taxpayer shall not be deprived of the possession of the said property and shall be entitled to the rents and other income therefrom until the expiration of the redemption period. In case of redemption, the payment shall be in cash or manager’s check. A Notice of Release of Escrow Deposit shall be issued by the BIR Office concerned to the bank and the escrow deposited shall be released to the winning bidder.

   If the property is sold at a price less than the OTL, the redemption amount shall include: the OTL, delinquency increments, cost of seizure, maintenance and preservation of the levied property, cost of publication, and all other expenses incurred prior to the auction sale. The 15% interest and escrow fee shall be refunded to the winning bidder.

   If the property is declared forfeited for failure of bidding where the value of which can cover the OTL including the delinquency penalties, the property may be redeemed by paying the OTL, penalties and interest thereon computed from the date of delinquency to the date the property was sold in a public auction, the maintenance and preservation of the levied property, and the expenses of sale, within one (1) year from the date of declaration of forfeiture was registered with the Registry of Deeds/Assessor’s Office who has jurisdiction over the property. Where the value of the property cannot cover the OTL, penalties and interest, the computation for the interest shall be up to the date of redemption.

   The remedy by distraint and levy may be repeated, if necessary, until the full amount of the tax due and the penalties incident thereto have been paid by the delinquent taxpayer.

2. Public auction of acquired assets

   Disposal of acquired properties within Revenue Region (“RR”) No. 4 to 9B shall be done by Forfeited Asset Management Unit (“FAMU”). For other RRs, their respective Regional Collection Division shall be responsible for the disposal of acquired properties within their jurisdiction.

   A Bids and Awards Committee-Acquired Assets (“BAC-AA”) shall be created both in the Regional Offices (Non-Mega Regions) and in the National Office (Mega Regions), to administer and supervise the disposal of all acquired assets thru public auction.

   The manner of conducting the public auction is the same as the manner used in public auction of distrained and levied properties. It shall be done on an “AS IS WHERE IS BASIS,” title-by-title or by lot or on a per item basis, as the case may be.

   There shall also be a NOS which contains, in addition to the same details required in the public auction of distrained and levied properties, a statement that “THE GOVERNMENT RESERVES THE RIGHT TO REJECT OR CANCEL ANY OR ALL BIDS.” The auction shall then be conducted on the date, time, and place specified in the NOS.

   A COA representative shall also be invited to attend and witness the auction sale. However, if the COA representative fails to attend, the auction sale may proceed and shall be considered valid. The sale of acquired assets in a public auction shall be done through sealed bids to be witnessed by a representative of the COA.

   The required bid bond is computed and used in the same manner as that in the public auction of distrained and levied properties.

   Minimum Bid/Floor Price

   The minimum bid/floor prices shall be the highest among the following:

   1. The latest FMV as determined by the Commissioner based on the prevailing zonal values;
   2. The FMV shown in the latest tax declaration issued by the provincial, city or municipal assessor;
   3. Assess value as determined by an independent appraiser contracted by the BIR; provided that an independent appraiser may only be contracted by the BIR when the FMV as determined under paragraph (a) is already beyond three years and is due for updating. Provided further, that for properties with improvement thereon, an independent appraiser shall be contracted by the BIR for the determination of the FMV thereof, notwithstanding the existence of an updated zonal value; or
   4. With respect to shares of stocks, the minimum bid/floor price shall be the book value based on the latest audited financial statements of the issuing company. Provided that the BIR may directly trade listed stocks only through a PSE accredited/licensed stockbroker.
   
   

   Single bidder

   In case only a single bidder participated in the public auction of acquired assets, the bid price may be accepted, with the official declaration thereafter that the single bidder is the winning bidder on the acquired assets, subject to the prescribed minimum bid price and the 10% bid bond thereon.

   Winning bidder

   The registered bidder who submits the highest bid shall be declared as the winning bidder and shall be awarded the auctioned property. In cases of tie-bids, a new sealed bidding shall be immediately conducted until such time that the same is broken.

   The full amount of the bid shall be paid within two (2) working days from receipt of the Notice of Award. The failure or refusal to pay the full amount of the bid within the prescribed period, unless the Commissioner allows an extension, shall render the winning bidder in default and the award void. The bidder’s bond shall be forfeited in favor of the government.

   In case of default, the next highest bidder, after being duly notified, may increase his or her bid to an amount equal to or higher than that of the defaulting winning bidder and shall be awarded the auctioned property.

   The previous owner or current occupant of the property or his or her duly authorized representative may increase his or her bid in an amount more than the offer of the declared highest bidder, before the BAC-AA Chairman bangs the gavel for the declaration of the winning bidder, provided he or she participated in the actual bidding and inserted in the bid envelope a proof of occupancy in the address of the subject property.

   Prior Clearance or Confirmation by the Commissioner

   All awards made by the BAC-AA shall be subject to prior clearance or confirmation by the Commissioner, as reflected in the Report of Acquired-Assets Sold through Public Auction for Confirmation or Approval.

   Any of the following instances shall constitute sufficient ground for the cancellation of the awards and/or contracts:

   1. Fraudulent acquisition of the property;
   2. Violation of the terms and conditions of the award;
   3. Violation of the terms and conditions in the Deed of Absolute Sale;
   4. Violation of existing laws, rules, regulations, and ordinances;
   5. Failure to pay the bid amount in full within two (2) days from receipt of Notice of Award; and
   6. Other instances analogous to the above-mentioned grounds.
   
   

   Acquired real assets repossessed through cancellation of award or sale shall be re-disposed of in accordance with the same policies and procedures.

   All the applicable taxes and expenses relative to the transfer of ownership, from Republic of the Philippines to the winning bidder, as well as the issuance of the necessary certificate of title and/or tax declaration shall be borne by the winning bidder. The winning bidder shall also be responsible for the ejection of informal settlers and/or occupants, if any, on the auctioned real property and in transporting the auctioned personal properties from the auction site to the intended place of destination.