CM 404.1 - AUCTION SALE OF ACQUIRED/FORFEITED ASSETS (REAL AND PERSONAL PROPERTIES)

Notification of Sale

The Notice of Sale for Acquired/Forfeited Assets (NOSAFA), other than agricultural lands, shall be published once a week for two (2) consecutive weeks in a newspaper of general circulation in the Philippines. The notification of said sale must be made at least twenty (20) days prior to the date of the scheduled public auction.6

For sale of acquired personal assets, the Commissioner or his duly authorized representative shall cause the notification of the auction sale of the acquired assets thru posting thereof in not less than two (2) public places  in the municipality  or city where the acquired personal assets are physically stored/located. Such Notice of Sale shall be posted at least twenty (20) days prior to the scheduled date of auction.

In case of sale of acquired/forfeited shares of stocks that are listed in the Philippine Stock Exchange, the same shall be made thru a duly accredited stock broker or thru negotiated sale, whichever will generate the higher yield or net proceeds, or the option that is most advantageous to the government. For unlisted shares of stocks, the sale or disposition thereof may be effected thru negotiated sale with interested parties, provided that the best interest of the government is amply protected.

Determination of the Minimum Bid/Floor Price

The Minimum Bid/Floor Price for real properties pursuant to the provisions of Section 6(E) of the National Internal Revenue Code of 1997, as amended, shall be the highest among the following:

• The latest FMV as determined by the Commissioner based on the prevailing Department Order bearing on the published Schedules of Zonal Values of Real Properties;

• The FMV shown in the latest tax declaration issued by the provincial, city or municipal assessor;

• The purchase price offered/proposed by the former owner or any interested party by way of negotiated sale of the acquired real property; and

• The corresponding or proportionate amount of deficiency internal revenue taxes, including the delinquency penalties, which were given up by the government as a result of the forfeiture proceedings, including the costs of forfeiture and maintenance of the subject

However, the Commissioner or his duly authorized representative, thru the Technical Committee on Real Property Valuation (TCRPV) and under existing rules and regulations, may authorize the reduction of the minimum / floor price, after taking into consideration the current status/condition of property (i.e. the property is located in area that is always flooded, the property is occupied by resistant informal settlers/squatters, etc).

In case of acquired personal properties, the Minimum Bid/Floor Price shall be the FMV thereof, as determined by the Commissioner or his duly authorized representative, based on the official price canvass secured from at least three (3) disinterested parties such as dealers of second-hand goods, machineries, equipment, scrap items, and other personal properties. However, the Commissioner or his duly authorized representative, thru the recommendation of the concerned RDO and under existing rules and regulations, may authorize the reduction of the minimum/floor price of acquired personal properties, after taking into consideration the actual physical conditions of the assets to be sold/disposed.

With respect to acquired/forfeited shares of stocks, the Minimum Bid/Floor Price thereof shall be the following:

• For stocks listed in the Philippine Stock Exchange, the prevailing price per share of the stocks traded in the stock market; and

• For unlisted shares of stocks, the book value thereof based on the latest audited financial statements of the issuing company that are compliant with the fair value accounting under the Philippine Financial Reporting System (PFRS) prescribed by the Securities and Exchange Commission (SEC).

For all other acquired/forfeited assets, the Minimum Bid/Floor Price thereof shall be determined by considering the inherent peculiarities of the assets and adopting the most realistic/practicable valuation method therefor, provided that the same were made to the best interest of the government.

Conduct of Public Auction Sale

A Bids and Awards Committee-Acquired Assets (BAC-AA) shall be created in each and every Regional Office to administer and supervise the disposal of all acquired assets thru public auction.

Public auction sale of parcels of land shall be done parcel by parcel or title by title on an "AS IS WHERE IS BASIS".   For personal  properties,  the auction sale thereof may be done by lot or on a per item basis, whichever is deemed most beneficial to the government and practicable by the BAC-AA, in consultation with the COA.

For purposes of pre-qualification, all bidders shall be required to post a bid  bond, either in cash or manager's check, to the Finance Division of the RROs within three (3) days before the scheduled date of public auction, unless the BAC-AA allows otherwise, in meritorious circumstances. The amount of bond shall be equivalent to ten percent (10%) of floor price/minimum bid price. It shall form part of the payment of the winning bidder. The bid bonds of the losing bidders, however, shall be returned to them immediately after the auction sale, in accordance with the existing guidelines and policies on refunds of posted bid bonds.

In order to have a valid bidding process, there should be at least three (3) participating bidders for each and every property or property lot being auctioned.

The sale of acquired assets in a public auction shall be done through sealed bids to be witnessed by a representative of the COA.

Any person, natural or juridical, may participate in the bidding, provided that, in cases of real properties, foreign nationals (corporate or otherwise) and those disqualified under existing laws, rules and regulations, including employees of the BIR, shall not be allowed to participate thereto.

Only bids equal to or higher than the set floor price/minimum bid price shall be accepted by the BAC-AA.

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

The winning bidder shall pay the full amount of his bid either in cash or manager's check to the Commissioner of Internal Revenue or the Bureau of Internal Revenue, through the Regional Administrative Division of the Regional Offices, or thru the Electronic Filing and Payment System (EFPS) within two (2) days after his receipt of the Notice of Award issued by the BAC-AA.

Failure or refusal of the winning bidder to pay the full amount of the bid within the prescribed period shall render the award void and the bidder's cash bond shall  be forfeited in favor of the government, unless the Commissioner allows an extension of time to the bidder within which to fully pay the bid price.

In case of default by the winning bidder, the second and the third highest bidders, after being duly notified, may increase their respective bids to the amount equal or higher than that of the highest bid; and whoever among them tenders the highest bid shall be awarded the auctioned property, in lieu of the defaulting bidder. The defaulting highest bidder shall be disqualified to further bid on the rest of the auctioned properties.

Awarding Guidelines

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

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

Fraudulent acquisition of the property;

Violation of the terms and conditions of the award;

Violation of the terms and conditions in the Certificate of Sale;

Violation of existing laws, rules, regulations, and ordinances;

Failure to pay the full amount of the bid; and

Other instances analogous to the above-mentioned grounds.

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

All the applicable taxes and expenses relative to the transfer of ownership  and issuance of the necessary certificate of title and/or tax declaration shall be borne by the winning bidder.

The winning bidder shall be responsible, at his own expense, for the ejection of squatters and/or occupants,  if any, on the auctioned  real property and in the hauling/transporting of the auctioned personal properties from the auction site to the intended place of destination.

Procedures in the Auction Sale of Absolutely Forfeited Assets

A. Preparations for the Auction Sale

The Revenue District Officer shall

1. Direct and supervise the conduct of ocular inspections of  acquired/forfeited assets which are to be disposed of immediately in order to obtain first-hand observations/information on their respective status, conditions,  marketability, their ability to attract prospective or potential buyers, or even susceptibility to erosion of market value due to changes in geographical conditions, advancement of technology, etc.;

2. Prepare a report on the results of ocular inspections conducted on acquired/ forfeited assets which are to be sold/disposed, detailing the current status/ conditions thereof, using the Analysis of Seized and Forfeited Properties Form and the Evaluation of Seizure and Forfeiture of Acquired Property Form;

3. Prepare lists of all acquired/forfeited properties to be sold based on the CISFA and submit the same to the BAC-AA, through the Regional Director;

4. Receive quotations from at least three (3) publishers and recommend the lowest price for the publication and advertisement of the scheduled auction sale, in accordance with existing procurement rules and regulations; 

5. Prepare a memorandum to the Regional Director, through the Regional Finance Division, requesting for the authority to advertise the sale and for funding purposes to cover the estimated expenses to be incurred in the conduct of auction sale;

6. Prepare a Notice of Sale of Acquired /Forfeited Assets (NOSAFA) (Annex 400-1.23) for the signature of the Regional The NOSAFA shall be accomplished in quadruplicate, and must contain the following information:

The floor price or minimum amount of bid;

The venue, date and time of public auction;

The location and description of property to be sold;

 The terms and manner of payment,, whether in cash or manager's check; and

 A statement that "THE GOVERNMENT RESERVES THE RIGHT TO REJECT OR CANCEL ANY OR ALL BIDS".

7. Forward the dockets of all the acquired/forfeited assets identified for auction sale together with the NOSAFA to the Regional Director, thru the Chief, Collection Division, for approval;

8. Prepare a request for funding for the expenses in the publication/advertisement of the NOSAFA and the conduct of public auction sale of acquired/forfeited assets, for the approval of the Regional Director;

9. Cause the publication of the approved NOSAFA in a newspaper of general circulation at least twenty (20) days prior to the actual date of public auction and install a Billboard Notice in the location of the acquired/forfeited asset subject of the sale, stating;

10. Post the copies of the NOSAFA at the entrance of the Provincial, City, and Municipal Buildings, Barangay Halls, Revenue District Office, and other public conspicuous places where the property is located;

11. Invite a COA representative to attend and witness the conduct of the auction sale;

12. Prepare the following auction sale documents/papers:

• Guidelines for Public Auction;
• Application to Bid Form;
• Abstract of Canvass Form; and
• Other papers/documents that are deemed necessary in the auction sale.

13. Provide administrative support to the Regional BAC-AA.   

The Regional Collection Division shall:

1. Prepare the request for authority to publish/advertise the NOSAFA within its jurisdiction and for the allocation of necessary funds therefor;

2. Cause the publication of NOSAFA nationwide in leading newspapers of general circulation, and coordinate the posting of the NOSAFA in the BIR website through the Tax Information and Education Division (TIED) and the Corporate Communication Division (CCD), National Office, respectively; and

3. Coordinate with the COA, realty appraisers and brokers, tri-media and other external agencies/entities before the actual conduct of the public auction to ensure that all bids and awards processes undertaken are in accordance with the existing rules and regulations, and that the active participation of all stakeholders in the bidding process is

The Corporate Communication Division (CCD)/Taxpayer Information and Education Division (TIED) shall:

1. Coordinate the tri-media exposure on the sale of acquired/forfeited real assets.

The Regional Finance Division shall:

1. Receive the approved request for allocation of necessary funds for the expenses to be incurred in the publication/ advertisement of the NOSAFA and in the conduct of public auction sale of acquired/forfeited assets; and

2. Allocate and release to the concerned RDOs the funds intended for the payment of expenses to be incurred in the publication/ advertisement of the NOSAFA and in the conduct of public auction sale of acquired/forfeited

The CED shall:

1. Monitor the immediate disposal by the RDOs of all acquired/forfeited assets; and

2. Coordinate with the concerned RDs/RDOs the conduct  of the ocular inspection of acquired assets which are to be disposed of in order to obtain first-hand observations on the current status, conditions, and/or marketability of the acquired/forfeited properties;

The Regional Director shall:

1. Constitute the members of the inspection group to conduct actual inspection of acquired/forfeited real assets for sale/disposal in the Revenue District Office, if the need arises;

2. Approve the allocation of necessary funds for the publication of the NOSAFA. The fund shall be provided by Regional Finance Division and shall be made available at least thirty (30) days prior to the actual date of public auction sale pursuant to Section 216 of the Tax Code of 1997, as amended; and

3. Constitute the BAC-AA to undertake the auction sale of acquired/forfeited assets. The BAC-AA shall be composed of the following:

B.    Conduct of the Auction Sale

The Bids and Awards Committee-Acquired Assets shall:

1. Receive from the RDO, through the Regional Director, the list of acquired/ forfeited properties to be sold at public auction;

2. Coordinate with realty appraisers and brokers, tri-media, and other external agencies/entities before the actual conduct of public auction in order to ensure that the bids and awards processes are undertaken in accordance with the existing rules and regulations, and that the participation of the stakeholders in the bidding process is maximized;

3. Determine the floor prices of the properties for auction sale;

4. Register in the Bid Registry (Annex 400-1. 24) all prospective bidders upon submission of duly signed Bidders Acknowledgement and Undertakings and upon presentation of the Acknowledgement Receipt issued by the Regional Finance Division representing the 10% pre-qualification bid bond posted, the bidders' Community Tax Certificate (CTC) and their respective Tax Identification Numbers (TINs);

5. Provide the prospective bidders with the Guidelines on the Public Auction Sale and the Application for Bid (Annex 400-1.25);

6. Receive from the prospective bidders the Applications for Bid m sealed envelopes;

7. Initiate an open public bidding in the presence of a COA representative, as witness, on a parcel by parcel or title by title on an "As Is Where Is Basis" with the following steps and/or guidelines:

• Read the Notice of Sale and the Guidelines for Auction Sale aloud for everyone to present to hear;

• Announce the minimum BID prescribed by the government;

• Call the roll of the qualified bidders;

• Record the names and address of bidders present, as well as the names and address of the witnesses to the bidding process;

• Distribute the Guidelines for Auction Sale; and

• Gather all the bid forms and indicate their quoted prices in the Abstract of Canvass (Annex 400-1.26); and

8. Open all the sealed envelopes containing the Applications for Bid in the presence of all bidders;

9. Evaluate all Applications for Bid. Only bids that are equal to or higher than the set floor price/minimum bid price shall be considered;

10. Deliberate and resolve "tie-bids" and/or "cancelled bids";

11. Post the quoted prices/bids in the Abstract of Canvass;

12. Announce the winning bidder of the auctioned property. In case of tie-bids, a new sealed bidding shall immediately be conducted until the tie-bid is broken;

13. Prepare and submit to the approving authority the necessary documents to effect the transfer of properties to the winning bidders;

14. Forward to the Commissioner, thru the ACIR-CS/Chief-CED, all the pertinent documents relative to the sale together with the Report of Acquired/Forfeited Assets Sold Through Public Auction for Confirmation and Approval (Annex 400- 27), within five (5) working days from the date of the public auction sale, for evaluation and approval;

15. Issue a Notice of Award (Annex 400-1.28) to the winning bidder signed by the Chairman, BAC-AA, upon receipt of the Confirmation of Acquired/Forfeited Assets Sold through Public Auction Sale for Issuance of Notice of Award and Deed of Absolute Sale (Annex 400-1.29) duly signed by the Commissioner;

16. Prepare a Deed of Absolute Sale (Annex 400-1.30), for the signature of the Regional Director, upon confirmation by the Regional Administrative Division of the full payment of the bid price by the winning bidder;

17. Cancel the award, in case of failure or refusal of the winning bidder to pay the full amount of bid within the prescribed period, and forfeit the bid bond in favor of the government, unless the BAC-AA allows an extension of time for the bidder within which to fully pay the bid price;

18. Notify the defaulting bidder of the cancellation of bids and/or forfeiture of posted bid bond with concomitant notification to the second and third highest bidder that they may increase their bids to the amount equivalent or higher than that of the defaulting bidder; and

19. Prepare and submit to the Regional Director the Report/Minutes on the Conduct of Public Auction of Acquired/Forfeited Assets (Annex 400-1.31) within two (2) working days from the date of

The Regional Director shall:

1. Review and recommend  approval of the BAC-AA,s Report of Acquired/ Forfeited Assets Sold Through Public Auction;

2. Review and sign the Deed of Absolute Sale in favor of the winning bidder after the sale has been confirmed by CIR; and

3. Review and sign the Cancellation of Awards, if necessary, as a consequence of any of the grounds/circumstances earlier stated.

The CED shall:

1. Receive from the BAC-AA's Report of Acquired/Forfeited Assets Sold Through Public Auction for Confirmation and Approval;

2. Review and evaluate the BAC-AA's Report of Acquired /Forfeited Assets Sold Through Public Auction for Confirmation and Approval to determine propriety of the Confirmation of Sale to be issued by the Commissioner;

3. Prepare and submit to the Commissioner, thru the ACIR-CS and the DCIRs-OG and LIG, the Confirmation of Acquired/Forfeited Assets Sold Through Public Auction Sale for Issuance of Notice of Award and Deed of Absolute Sale; and

4. Forward to the concerned Regional BAC-AA the approved Confirmation of Acquired /Forfeited Assets Sold Through Public Auction Sale for Issuance of Notice of Award and Deed of Absolute

The ACIR-Collection Service, Deputy Commissioners-Operations Group and Legal Inspection Group shall:

1. Review and evaluate the recommendations and other documents confirming and approving the sale of acquired/forfeited assets; and

2. Forward to the Commissioner the recommendation relevant to the confirmation and approval of the sale of acquired/forfeited assets, for final review and

The Commissioner of Internal Revenue shall:

1. Approve/confirm the sale of acquired/forfeited assets through public auction undertaken by the Regional BAC-AAs.

The Regional Administrative Division shall:

1. Receive cash and/or Manager's Check and issue the corresponding Official Receipt (Accountable Form No. 51) for pre-qualification bonds deposited by prospective bidder;

2. Receive from the winning bidder the full amount of the bid either in cash or manager's check and issue the corresponding official receipt therefor;

3. Remit to the Bureau of Treasury (BTr), through Authorized Government Depository Banks (AGDB), the deposit and payment made by the winning bidder, including the forfeited deposits of defaulting bidder(s);

4. Keep/Maintain records on the conduct of the sale, copies of the awarded titles and other related documents pertinent to the sale; and

5. Prepare and submit to the concerned RDO not later than five (5) days from the date of auction sale a report, copy furnished the Regional Collection  Division, the copies of all pertinent documents evidencing the collections of the proceeds from auction sales of acquired assets and remittance thereof to the BTr, thru the  For this purpose,  the proceeds from sale of acquired/forfeited assets shall form part of the collections of the RDO having physical jurisdiction over the location of the assets/properties sold. The remittance of the bid bonds received and the full payment of the bid price by the winning bidder shall be deposited with the AGDB not later than the following working day.

The Regional Collection Division shall:

1. Verify with the records of the Regional Finance Division if the full payment of the bid price has been made by the winning bidder; and

2. Receive the copies of all pertinent documents evidencing the collections of the proceeds from auction sales of acquired assets and remittance  thereof  (Refer to CM 404.2- Recording the Sale /Disposition of Acquired Assets and Updating the Inventory).

The Regional Finance Division shall:

1. Return the bid bonds of the losing bidders immediately after the Notice of Award has been released to the winning bidder, in accordance with the existing rules and policies prescribed under the Modified Disbursement System.