Section 1. The banking industry is hereby declared as indispensable to the growth of national economy and, the provisions of the National Internal Revenue Code to the contrary notwithstanding, gain realized from the following sales or exchanges of property for a period of five years from the date of approval of this Decree shall not be subject to tax:
(a) Gains arising from merger or consolidation whereby: (i) a bank, a non-bank financial intermediary or a finance company exchanges property solely for stock in another bank, a non-bank financial intermediary or a corporation organized primarily for the purpose of owning equity in banks and (ii) a shareholder exchanges stock in a bank, a non-bank financial intermediary or a finance company solely for the stocks of another bank, a non-bank financial intermediary or a corporation organized primarily for the purpose of owning equity in banks: Provided, That the shares of stocks which are subject of the exchange are not disposed of, transferred, assigned or conveyed, except in cases of transmission on account of death, within a period of five (5) years from the date of issue; otherwise all the taxes due including interest on the gains realized from the original transfer, sale or disposition of the assets shall immediately become due and payable, subject to the provisions of Section 51 (d) of the National Internal Revenue Code.
(b) Gains arising from the disposition of property, real or personal, that corresponds to the portion of the proceeds of the sale that it invested, within six (6) months from the date of the gains were realized, in new issues of capital stock of banks, non-bank financial intermediaries existing as of the date of approval of this Decree, or a corporation organized primarily for the purpose of owning equity in banks; Provided, (i) That the disposition and the investment of the proceeds thereof are registered with the Central Bank and the Bureau of Internal Revenue; and (ii) that the shares of stock representing the investment are not disposed of, transferred, assigned or conveyed, except in cases of transmission on account of death, within a period of five (5) years from the date of issue, otherwise all the taxes due including interest on the gains realized from the original transfer, sale or disposition of the assets shall immediately become due and payable, subject to the provision of Section 51 (d) of the National Internal Revenue Code: Provided, further, That the final schedular income tax under the National Internal Revenue Code paid on gains from the disposition of real estate, that corresponds to the proceeds of the sale that is invested, shall be refunded by the Bureau of Internal Revenue within six (6) months from the date of payment but subject to the same conditions as in (i) and (ii) above.
(c) Gains realized from exchanges of property, real or personal, for new issues of capital stock in banks or non-bank financial intermediaries existing as of the date of approval of this Decree, or a corporation organized primarily for the purpose of owning equity in banks if as a result of such exchange, the paid-in capital of such institution is increased: Provided, That the shares of stocks are not disposed of, transferred, assigned or conveyed, except in case of transmission on account of death within a period of five (5) years from the date of issue; Otherwise all the taxes due including interest on the gains realized from the original sale or disposition of the assets shall immediately become due and payable, subject to the provisions of Section 51 (d) of the National Internal Revenue Code.
For purposes of paragraphs (a), (b), and (c) above
i. Every original share of capital stock issued shall be stamped on its face with the words "EXEMPT UNDER PRESIDENTIAL DECREE NO. ________", and no bank, non-bank financial intermediary or a corporation organized primarily for the purpose of owning equity in banks shall cause the transfer of ownership of the same in its stock and transfer of book within five (5) years counted from the date of issue, without evidence of tax payment inclusive of interest. Any bank or corporate official who shall cause the transfer of ownership of shares of stock in its stock and transfer book contrary to the provisions of this Decree, shall be punished by a fine of not less than Five Thousand Pesos and imprisonment of not less than two (2) years.
ii. A bank or a non-bank financial intermediary resulting from a consolidation or merger effective after April 1, 1980 of an existing bank, a non-bank financial intermediary or a corporation organized primarily for the purpose of owning equity in banks shall also be considered as a bank, non-bank financial intermediary or a corporation primarily organized for the purpose of owning equity in banks as of the date of approval of this Decree.
iii. A corporation organized primarily for the purpose of owning equity in banks must register and be authorized by the Central Bank of the Philippines.