Certain financial transactions are much too important such that professional help is needed to ensure their success. For these transactions, substantial amounts of money are usually involved so things must be done properly to protect the interests of everyone involved. This is where escrow services come in. Simply defined, escrow is an arrangement wherein an impartial or neutral third party called an escrow agent holds funds and/or documents on behalf of the principals or parties to the transaction.
With a trust license issued by the Bangko Sentral ng Pilipinas, China Bank’s Trust Group renders escrow services as one of its fiduciary services. As escrow agent, it will safekeep the funds and/or documents and then to disburse or release such only when all the conditions of the escrow arrangement have been fulfilled. Beyond mere custodianship—which requires the custodian bank to hold on to the funds and/or documents and then to release to the designated party upon demand, without any conditions attached—going into an escrow arrangement ensures one’s peace of mind. “Availing of escrow services is the logical choice to make if the parties desire that their contemplated transaction proceed smoothly and for them to feel more secure in spite of the complexities that may arise from the numerous documents and the different parties involved. This will be achieved because there is an impartial third party who will make sure that no assets or documents will exchange hands unless the conditions stated in the escrow agreement have been met satisfactorily,” said First Vice President and Trust Group Head, Rene J. Sarmiento. The Bank’s highly experienced trust officers can also offer advice on how the terms and conditions can be stated to ensure that the agreement does not unduly favor one party at the expense of the other.
China Bank’s Trust Group offers various types of escrow services or arrangements tailored to suit the client’s specific requirements. These are discussed in greater detail below:
Buy & Sell Escrow
Buying or selling assets such as real estate properties, machinery, bonds, stocks, and vehicles, to name a few, is something that cannot be left to chance. Whether one is buying or selling, most certainly, substantial sums of money will be involved. Also, more often than not, the counterparties do not know each other well enough for them to give their unconditional trust. There are also times when buy-and-sell transactions become complicated as numerous interested parties such as creditors, lawyers, heirs, guardians, trustees, attorneys-in-fact, and government agencies, become entangled in the process. China Bank - Trust Group offers escrow services to ensure that the transaction will push through with all the attendant problems and issues addressed and that the interests of each one involved are duly protected and satisfied.
An escrow offers convenience to both the buyer and seller because each can move forward independently and yet simultaneously in providing documents, funds, securities, deeds, receipts, among others, with the Trust Group as the impartial third party accepting all of these things. Based on clearly defined and detailed instructions from the parties concerned, the escrow agent will be able to take the necessary actions without further consultation with the parties. This not only saves time but also facilitates the smooth closing of the transaction. Typical instructions would include the method of payment for the property or asset; the time limit set to complete the documentation; the conditions for the release of the escrowed funds and interest earned, if any, the payment of pertinent out-of-pockets costs, fees and taxes, and more. Working in close collaboration with the parties, China Bank - Trust Group will take stock of the responsibilities and deliverables of each one involved and ensure their respective compliance within the mutually agreed time frame. This process could either be short or lengthy but, in the end, what matters is that the interests of the parties are served and the transaction is consummated with success.
Capital Gains Tax Escrow
When selling a property, the payment of the capital gains tax to the Bureau of Internal Revenue (BIR) is a must. China Bank – Trust Group offers the escrow service required by the BIR where you may initially put the money intended for capital gains tax with the chance to recover it in full upon compliance with certain BIR regulations.
Specifically under BIR Regulation No. 14-2000, an individual can be exempted from paying the 6% capital gains tax when selling one’s principal residence if he has plans to acquire or construct a new residence within eighteen (18) months from the sale of the property, has not availed of the capital gains tax exemption for the last ten (10) years, and has deposited the equivalent capital gains tax due with an authorized agent bank under an escrow arrangement.
China Bank will give advice on the steps and procedures as well as the requisite documents to be submitted to qualify for exemption. With China Bank’s help, one can enjoy huge savings by recovering the capital gains tax previously placed in escrow.
For single proprietorships or corporations planning to set up an employment agency, whether for land-based or sea-based overseas Filipino workers, or for those wishing to renew their license with the Philippine Overseas and Employment Administration (POEA), one of the major requirements is the establishment of an escrow account. Under the POEA’s guidelines, there is a need to deposit in escrow with a local bank the amount of P1,000,000.00 (for local recruiters) and $20,000.00 (for foreign recruiters) before a license to operate an employment agency can be granted. This requirement is to ensure that employment agencies have funds in escrow to answer for any and all valid and legal claims that may be awarded by the POEA to aggrieved workers.
China Bank offers the POEA-mandated escrow services that will enable these entities to comply with this crucial licensing requirement. Our trust officers are well-versed on the steps and procedures as well as the pertinent documents that must be submitted to qualify for accreditation. Moreover, the funds that will be put in escrow will stay invested so it can grow over the years to service whatever claims that might be lodged against the escrow fund.
For more details, please call Trust Group - Business Development and Portfolio Management Division at (632) 885-5878, 885-5867, 885-5862, 885-5858 or visit your nearest China Bank Branch