Business entities
which meet the basic guidelines, track record requirements, capital structure
and operational history set by the Philippines Stock Exchange (“PSE”) shall
qualify to be listed and sell their stocks to the general public to improve
their financing activities. A publicly-listed company (“public company”)
is one that has held an initial public offering and whose shares are traded in
the stock exchange or in the over-the-counter market. Such companies are
subject to stringent regulations, one being the rule on minimum public
ownership (“MPO”).
The rule on
minimum public ownership requires public companies, at all times, to maintain a
percentage of its listed securities in the public float. A float refers
to the number of outstanding shares of stocks in the hands of public
investors. Public companies shall maintain a MPO of at least 10 percent
of issued and outstanding shares, exclusive of any treasury shares held, or the
MPO as required by the Securities and Exchange Commission (“SEC”) or PSE,
whichever is higher.
Revenue
Regulations (“RR”) No. 16-2012 of the Bureau of Internal Revenue (“BIR”)
prescribes the tax treatment of sales, barter, exchanges or other dispositions
of shares of stocks of public companies that meet or do not meet the MPO level
required of listed securities.
On account of an
increase in the turnover rate of stock ownership for the years 2011 and 2012, a
grace period is granted to public companies to comply with the MPO.
Non-compliant public companies as of Dec. 31, 2011 and those whose public
ownership levels subsequently fall below the above-mentioned MPO level at any
time prior to Dec. 31, 2012, may be allowed up to Dec. 31, 2012 to meet the
required float.
Non-compliant
companies shall be imposed a stock transactions tax at the rate of one-half of
one percent of the gross selling price or gross value of money of the shares of
stock sold [Section 127 (A), Tax Code as amended] for every stock transaction
up to Dec. 31, 2012. Conversely, every stock transaction of non-compliant
companies after Dec. 31, 2012 shall be imposed a final tax at either five
percent or 10 percent on the net capital gains [Sections 24(C), 25(B),
27(D)(2), 28(A)(7)(c) and 28(B)(5)(c), Tax Code as amended].
In addition to
the final tax imposed on net capital gains after the lapse of the grace period,
documentary stamp tax (“DST”) [Section 175, Tax Code as amended] is imposed on
every transaction upon the execution of the deed transferring ownership or rights,
or upon delivery, assignment or indorsement of such shares in favor of another.
In case of
non-payment of the taxes prescribed, no sale, exchange, transfer or similar
transactions intended to convey ownership of or title of any share of stock
shall be registered in the books of the corporation unless the receipts of
payment of the taxes and the Certificate Authorizing Registration (CAR) and/or
Tax Clearance Certificate (TCL) under pertinent Revenue Regulations and
issuances are filed with, and recorded by the stock transfer agent or secretary
of the corporation. Further, no transfer of shares of stock shall be
recorded unless DST thereon has been duly paid for (Section 200, Tax Code as
amended).
The taxes imposed
under RR No. 16-2012 shall not apply to the following:
- a. Dealers in securities, as defined under Section 22 (U) of the Tax Code, provided that, they shall be subject to Value-Added Tax (VAT) on the basis of their gross receipts and Income Tax from their sale or exchange of securities;
- b. Investors in shares of stocks in a mutual fund company, as defined in Section 22 (B) of the Tax Code, in connection with the gains realized by said investor upon redemption of said shares of stock in a mutual fund company pursuant to Section 32(B)(7)(h) of the Tax Code; and
- c. All other persons, whether natural or juridical, who are specifically exempt from national internal revenue taxes under existing investment incentives and other special laws.
Any person who
causes the transfer of ownership or title of any share of stock without having
been furnished with the receipts of the payment of the taxes due and
corresponding CAR/TCL may be subject to penalties prescribed under the Tax
Code. The same provisions shall apply to any responsible director,
corporate officer, partner or employee who fails to submit the reports required
under this regulation.
Genesis L.
Sampaga is a supervisor from the Tax Group of Manabat Sanagustin & Co.
(MS&Co.), the Philippine member firm of KPMG International.
This article is
for general information purposes only and should not be considered as
professional advice to a specific issue or entity.
The views and
opinions expressed herein are those of the author and do not necessarily represent
the views and opinions of KPMG International or MS&Co. For comments or
inquiries, please email manila@kpmg.com or rgmanabat@kpmg.com.
* * *
Addendum to 08 January 2013 Top of Mind by
Jamie Andrea Mar Y. Arlos
The BIR has
started the year right by releasing its recent Revenue Memorandum Circular
(“RMC”) No. 2-2013 issued to clarify certain provisions of RR No. 12-2012 on
the deductibility of depreciation expenses as it relates to purchase of
vehicles and other expenses related thereto, and the input tax allowed
therefore.
Mind-boggling
question as to the effectivity of said RR No. 12-2012 has now been spelled out
by the RMC. Explicitly stated in the RMC that the RR applies
prospectively, meaning is effective on the date it was published, that is last
Oct. 17, 2012. Thus, it applies to land vehicles purchased upon its
effectivity. Prior to Oct. 17, 2012, land vehicles purchased where the
purchased amount exceeded the threshold of P2,400,000, the RR does not
apply. As a general rule, revenue regulations are not retroactive, except
if it is curative in nature and if it expressly states its retroactive
application.
In addition to
the effectivity of the RR, the RMC likewise clarifies that any loss that will
be incurred as a result of a sale of non-depreciable vehicles (defined as
passenger vehicles of all type, whether by land, water or air) shall NOT be
allowed as deduction from gross income.
Lastly and for
income tax purposes, all expenses related to the non-depreciable vehicles such
as but not limited to repairs and maintenance, oil and lubricants, gasoline,
spare parts, tires and accessories, premium paid insurance covering said
vehicles and registration fees shall NOT be allowed as deduction in its
entirety. For VAT purposes, all input taxes corresponding to the disallowed
expenses for income tax purposes are likewise NOT allowed.
A continuous update
on the taxpayers is the best way to avoid any disallowance by the BIR
considering its zeal to collect taxes and strictly implement all tax laws.
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