MANILA, Philippines - Locally listed firms should only be subject to the stock transaction tax of one-half of 1%, the Philippine Stock Exchange (PSE) said, disputing the position of the Bureau of Internal Revenue (BIR) that some of these companies should be levied higher tax charges if they do not meet minimum public-ownership requirements.
The PSE on Thursday published on its web site its initial comments to the BIR’s directive, which will charge stockholders of listed firms with a public float below 10% the usual 5% to 10% capital gains tax starting this year.
The PSE cited Section 127 (A) of the National Internal Revenue Code of 1997 stating that transactions involving shares of stock and traded through the PSE other than the sale by a dealer shall be subject to the tax rate of “one-half of 1%.”
“The exchange maintained that although the secretary of Finance has the authority to promulgate the necessary rules and regulations for the effective reinforcement of the Tax Code, such rule-making power should be confined to details for implementing the law as it has been enacted and it cannot be extended or expand the statutory requirements of the tax code,” PSE president Hans Sicat said in the memo.
The BIR, acting under the directive of Finance Secretary Cesar Purisima, said firms that do not meet the minimum public float should face additional tax charges.
The BIR said these firms are “technically no longer compliant with their public ownership status and thus, deemed no longer a publicly listed company for taxation purposes.”
The public float refers to the portion of a company’s outstanding shares held by the public and not by its directors, officers and controlling interest investors.
To qualify as a listed firm, the BIR said, at least 50% of the value of outstanding stock or at least 50% of total combined voting power of all stock classes should not be owned directly or indirectly by less than 20 individuals.
The tax regulator said this will provide liquidity to investors while safeguarding against price manipulation.
On November 30 last year, the PSE implemented a rule requiring listed companies to maintain a public float of at least 10%. Noncompliant firms were given a 12-month grace period, after which they will be charged with additional fees and eventual delisting from the exchange.
At present, there are about 40 out of 253 listed firms which are noncompliant with the minimum public float rule