DoF cool to extending estate tax amnesty

September 24, 2020 | 12:32 am [ bworldonline.com ]

PHILIPPINE STAR

THE Finance department wants to first see the results of the ongoing estate tax amnesty, which will end on May 31 next year, before Congress passes a measure extending it by another two years.

“In general, what we would have preferred for the amnesty law… is to play it out first. Rather than having the deadline… still next year and then you already extend it,” Finance Undersecretary Antonette C. Tionko told senators on Wednesday.

“I think the timing is more the issue. It’s just prolonging it, but we would have collected it already.”

Ms. Tionko was speaking before the Senate Finance Committee, led by Senator Juan Edgardo M. Angara, which was tackling the Department of Finance’s (DoF) proposed P16.01 billion for 2021.

Mr. Angara asked the DoF if it supported the measure extending the estate tax amnesty up to 2023 from its current 2021 deadline, which was already passed on third reading by the House of Representatives. No counterpart measure has so far been filed in the Senate.

Finance Undersecretary and Chief Economist Gil S. Beltran said in a phone message the department will “check first what is the outcome so far before any decision to extend.”

NEW SOURCES OF REVENUES

In the same hearing, Finance Secretary Carlos G. Dominguez III said the department will begin drafting proposals for additional revenue sources around 2021-2022.

“I think some time late 2021, early 2022, we will start looking at additional revenues to pay for the heavy indebtedness that we are incurring this year,” Mr. Dominguez said during the hearing.

Mr. Dominguez said, as of Sept. 20, the government has secured $9.9-billion financing through loans and grants from development partners and markets to fund its coronavirus response.

“In the next few months, we will be concentrating on improving tax administration and passing the remaining tax packages,” he told reporters over a phone message.

This includes the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill, which will immediately cut the corporate income tax to 25% from the current 30%. This will further be reduced by one percentage point annually beginning 2023 until 2027.

The measure, which forms part of the government’s economic stimulus package, will generate P40-billion foregone revenues in 2020 and P650 billion in the next five years.

“The proposal to reduce the tax is really a part of our stimulus program to stimulate the economy. And really, this is trusting the private sector to make the right decisions with that money, to retain employees, re-invest in their companies,” Mr. Dominguez said in the hearing.

“We believe the economy will be stimulated and the additional investments will generate more taxes in the long run, and make us more attractive to foreign investments.” — Charmaine A.

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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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