BIR sets unlisted shares’ fair market value

August 19, 2020 | 12:06 am

The Bureau of Internal Revenue head office in Quezon City — BW FILE PHOTO

By Beatrice M. Laforga, Reporter

THE Bureau of Internal Revenue (BIR) has revised the rules on the imposition of tax on the sale, barter or other disposition of shares of stocks that are not listed in the local bourse to clarify how the fair market value (FMV) of shares will be determined.

BIR Commissioner Caesar R. Dulay issued on Monday Revenue Regulations (RR) No. 20-2020 amending RR No. 6-2013’s provisions on taxes imposed on the disposition of shares of stocks that are not publicly listed.

The new rules state that for the common shares of stock, the book value will now be based on the latest financial statements as the prima facie fair market value of the shares.

“This is a welcome development (long overdue). Prior to the RR, in determining the FMV of the shares, there is a requirement to use the adjusted net asset (ANA) method where all assets and liabilities are adjusted to FMVs,” said Maria Lourdes P. Lim, the tax managing partner of Isla Lipana & Co., PwC Philippines, in a mobile phone message on Tuesday.

The new rules also determined the preferred shares of stock to have the liquidation value, which is equal to the redemption price of the shares as of the nearest transaction date, as the fair market value.

“In case there are both common and preferred shares, the book value per common share is computed by deducting the liquidation value of the preferred shares from the total equity of the corporation and dividing the result by the number of outstanding common shares,” the document read.

The BIR also said that the book value of the common shares or the liquidation of the preferred shares do not need to include the appraisal surplus from any property of the corporation that was not reflected in the financial statement.

“The latest audited financial statements shall be sufficient in determining the fair market value of the shares of stock,” it said.

The move is “more reasonable since it does not result in an overstatement of the FMV,” said Romeo H. Duran, president of Tax Management Association of the Philippines, Inc., in a text message.

Ms. Lim said before the RR 20-2020 was issued, the fair market value of the shares was usually higher, particularly for companies owning real properties as the “ANA method results in the upward adjustment of the value since the incremental increase in property is taken into consideration in determining the value of the shares.”

“For capital gains tax purposes, if the consideration for the sale of shares is lower than FMV, the difference is generally subject to donor’s tax unless it can be established that the transfer is made in the ordinary course of business, bona fide and [at] arm’s length,” she added.

The issuance will take effect 15 days after its publication in a newspaper.

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House panel extends estate tax amnesty by two years

August 18, 2020 | 12:34 am [ bworldonline.com ]

By Charmaine A. Tadalan, Reporter

THE House Ways and Means Committee approved on Monday a measure extending the estate tax amnesty program by another two years, in light of the ongoing coronavirus pandemic.

House Bill (HB) No. 7068 extends the effectivity of the estate tax amnesty to four years from the original two years under Republic Act (RA) No. 11213 or the Tax Amnesty Act of 2019.

RA 11213, which took effect on May 31, 2019, gave a one-time opportunity for taxpayers to settle unpaid estate taxes as of Dec. 31, 2017. It gave interested parties until May 31, 2021 to avail of the estate tax amnesty.

If passed into law, taxpayers can avail of the estate tax amnesty through 2023.

“The amendment to RA 11213 will enable those who want to take advantage of this program ample time to recoup their resources and get back on their feet so they can still apply and pay their estate tax dues. This will also provide economic relief for many Filipinos at this time of crisis,” HB 7068 stated.

The Bureau of Internal Revenue (BIR) Assistant Commissioner Elenita B. Quimosing said the agency has collected some P1.3 billion from estate tax amnesty as of June, still far from the Finance department’s P6-billion target.

She said P3.403 billion was collected from the tax amnesty on delinquencies, falling short of the P21-billion target. The agency has collected a total of P4.765 billion so far from the two tax amnesty programs.

Baguio Rep. Mark O. Go moved for the approval of the extension of the estate tax amnesty to allow the BIR to meet its target.

“The conditions we have right now are reasons probably that we need to extend the availment of the estate tax,” Mr. Go said.

There is no counterpart measure filed in the Senate, but Senate President Vicente C. Sotto III said he is in favor of the extension of the estate tax amnesty.

Asked if he supports the measure, Mr. Sotto said in a phone message “yes, of course.”

In the same hearing, the House panel also tackled proposals to grant a general tax amnesty, which had been part of the original tax amnesty package until it was vetoed for lack of safeguards against tax evasion.

President Rodrigo R. Duterte vetoed the general tax amnesty for the absence of provisions lifting the bank secrecy for fraud cases and the automatic exchange of information, among others.

The substitute bill granted a general tax amnesty for one year on all unpaid taxes based on the 2018 statement of total assets, which may be availed either with a 3% or 20% rate.

“Kung 3% ka (If you avail the 3%), you will be subject to the examination of the BIR for a period of one year from the payment of the tax amnesty, pero kung (but if you go for the) 20% rate ang gagamitin mo, you will not be subject to the said examination,” House Ways and Means vice- chairperson and AAMBIS-OWA Rep.  Sharon S. Garin said.

Finance Assistant Secretary Dakila Elteen M. Napao said the general tax amnesty will allow individuals and companies with unpaid taxes but no pending cases, to have a “clean slate.”

“The amnesty will serve as a sort of a cleaning tool for the BIR on taxpayers,” he said.

Mr. Go, however, questioned the basis for the 20% rate, saying this may burden companies. He recommended to use the income as a basis, instead of the total assets.

“What is the basis of 20%? What we’re saying is the total asset of the company, medyo mabigat ’yun for them. Kung ang issue is the 2018 income nila, ’yun dapat ang basis, ’yung 2018 (that might be too heavy for them. If the issue is the 2018 income, that should be the basis),” he said.

Nueva Ecija Rep. Estrellita B. Suansing, presiding chairperson, asked the Finance department to come up with its calculation for other possible rates for deliberation in the next hearing.

The measure granting a general tax amnesty forms part of the administration’s comprehensive tax reform program. It was noted that collections from the measure will be used as additional funding for the coronavirus pandemic.

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