BIR turns down investor community’s bid to rescind rule on disclosure of beneficial owners

The Bureau of Internal Revenue (BIR) today assured the investing community that it has nothing to fear from a rule requiring the identification of beneficial owners of taxable securities.

In a statement, Commissioner Kim Jacinto-Henares said only bank deposits and government securities are covered by the Bank Secrecy Law or Republic Act No. 1405.

Under Section 2 of RA 1405, deposits of whatever nature in banks in the Philippines and investments in government bonds are confidential in nature.

The same privilege however doesn’t hold for investments in shares of stock, corporate bonds, as well as purchases of foreign exchange and receivables.

“Investors have nothing to fear if they are tax compliant. Logic dictates that if you have a lot of money to invest, then you must have earned it and have paid the right taxes on your earning,” Henares said.

“Rest assured though that information in the hands of the BIR are confidential and cannot be disclosed without the approval of the President of the Philippines, under pain of imprisonment,” she added.

The BIR’s clarification comes on the heels of a statement issued by business groups, asking the bureau to rescind Revenue Regulation 1-2014, which requires disclosure of the identities of beneficial owners.

Signatories to the statement include the Philippine Stock Exchange, Philippine Chamber of Commerce and Industry, Bankers Association of the Philippines, Employers Confederation of the Philippines, Federation of Filipino-Chinese Chambers of Commerce & Industry Inc., Fund Managers Association of the Philippines, Investment Houses Association of the Philippines, Philippine Association of Securities Brokers and Dealers Inc. and Trust Officers Association of the Philippines.

The objecting groups, which represent both the buy and sell sides of investing, said affected parties weren’t consulted before the rule was imposed. They also scored the BIR’s lenience vis-a-vis foreign investors; a privilege that allegedly was not granted locals.

Furthermore, the business groups complained that compliance would be “virtually impossible” since securities issuers don’t have immediate access to the identities of the beneficial owners.

The groups also questioned the timing of the rule’s implementation, as it coincides with the payment of dividends, thus effectively taxing income stocks.

source:  AmCham