SFA SEMICON Philippines Corp. (SSP) said it has collected P11.44 million from the government as part of the seventh tranche of reimbursements of an incentive program that allows for discounted power rates.
The listed firm disclosed on Wednesday that it received the amount as part of a discounted electricity incentive as per Executive Order (EO) No. 856 alongside its lease agreement with Clark Development Corp.
The company’s manufacturing plant is located at the Clark Freeport Zone in Pampanga.
EO 856 is an expansion of EO 666, which states that the government must support the power infrastructure requirements of Clark Freeport Zone and support the investment of Texas Instruments in Clark.
“This amount is the seventh partial reimbursement of the Government through CDC of the power discounts for electricity utilized and fully paid by SSP since the commencement of its commercial operations in 2011,” the company said.
With this, the company’s cash and cash equivalents will be increased by around $226,000.
Incorporated in 2010, SSP’s businesses includes the operation of a plant for the manufacture, assembly, testing, and warehousing of semiconductor products. It supplies its products to South Korean electronics giant Samsung Electronics Co., Ltd.
In the first quarter of 2017, the company booked earnings of $836,000, dropping from the $4.2 million it posted in the same period a year ago. SSP attributed the decrease in net income to the increase in raw materials and other manufacturing costs that totaled $47.73 million.
Shares in SSP increased by six centavos or 1.95% to close at P3.13 each on Wednesday. — Arra B. Francia
Taxwise Or Otherwise
By Abigael Demdam
While queuing for more than an hour just to catch a ride home, I noticed commuters in front of me giggling while staring at their smartphones with earphones on. I subtly leaned in to find out what was stirring their interest. On the screen, I saw the familiar faces of Korean actors of a prime time soap opera. I realized that the benefit of foreign telenovelas among Filipinos is that it helps to keep them calm and entertained, especially city commuters who endure hours of standing in line.
With the robust expansion of foreign influences into mainstream media as seen in drama series, K-pop songs and matinee idols (i.e., boy bands), we also see the enhancement of foreign relations between the Philippines, South Korea and the global community at large.
On the economic side, the Philippine government has incessantly endeavored to introduce measures that will increase foreign investment such as providing various fiscal and non-fiscal incentives to foreign investors. One example of these incentives is that specifically provided to regional operating headquarters (ROHQs).
As defined, an ROHQ is a resident foreign business entity which is allowed to derive income in the Philippines by performing qualifying services to its affiliates, subsidiaries or branches in the Philippines, in the Asia-Pacific region and in other foreign markets. Its operations are limited in the sense that it is merely allowed to perform the qualifying services enumerated in the Omnibus Investments Code of 1987, and only for its affiliates. Violation of these rules may result in the revocation of the ROHQ’s license or registration, and effectively, its tax exemptions and incentives.
WHAT EXACTLY ARE THE INCENTIVES PROVIDED BY OUR GOVERNMENT TO THESE ROHQS?
Generally, resident foreign corporations are subject to the 30% corporate income tax. However, as provided in the Tax Code, an ROHQ is liable to income tax at the special rate of 10% based on its taxable income. In addition, an ROHQ is also exempted from the payment of all kinds of local taxes, fees, or charges imposed by the local government, except real property tax on land improvements and equipment. Likewise, it is entitled to a tax and duty-free importation of equipment and materials used for training and conferences.
Moreover, several incentives are also given to expatriate employees of an ROHQ. These include the grant of a multiple entry visa for the expatriate employee including his spouse and unmarried children below the age of 21, tax and duty-free importation of personal and household effects, and travel tax exemption. Most importantly, a preferential tax rate of 15% applies on the salaries, annuities, and all other compensation of expatriates occupying managerial and technical positions exclusively working for the ROHQ and earning a gross annual taxable compensation of at least P975,000. The same treatment applies to Filipinos employed and occupying the same position as those aliens employed by the ROHQ.
Given the huge tax savings and various non-pecuniary benefits profusely provided by the Philippine government, many foreign corporations opted to establish their ROHQs in the Philippines resulting in a boost to foreign investment. This further translated to a rise in job opportunities for highly skilled workers, enticement for highly desirable employees, and a reduction in the risk of brain drain, among others.
A significant change in the incentives provided to ROHQs is being proposed in the Tax Reform for Acceleration and Inclusion (TRAIN) Bill passed by the House on May 31. Section 7 of the TRAIN Bill amends Section 25 of the National Internal Revenue Code of 1997. Specifically, the Bill deletes the 15% preferential tax rate provided to ROHQ employees occupying managerial and technical positions.
WHAT DOES THE REMOVAL OF THIS PREFERENTIAL TAX RATE MEAN FOR ROHQ EMPLOYEES?
Evidently, the ROHQ employees’ taxable income will then be subject to the normal graduated income tax rates of 0% to 35% applicable to all employees, as proposed by the TRAIN Bill. Those previously enjoying the preferential income tax rate of 15%, given the gross annual income of at least P975,000, will most likely qualify for the 30% to 35% income tax rates. The effective tax rate would, of course, be lower than 30% to 35%, but it would definitely be more than the current 15% rate. Consequently, this would result in reduced take-home pay for such employees if there is no augmentation in their gross compensation.
It is also worth noting that the TRAIN Bill is just the first part of the Tax Reform Program of the Philippine government. The second package intends to review and amend the income taxes on corporations, among others. Thus, it is possible that the 10% special income tax rate provided to ROHQs may also be amended or totally removed.
Some may argue that these reforms will produce unfavorable outcomes for the Philippine economy. Nonetheless, we must always bear in mind that the power of taxation is solely vested in the legislature. It is only Congress, as delegates of the people, which has the inherent power not only to select the subjects of taxation but to grant incentives and exemptions. Given the power to grant, it also has the inherent power to take away. We just have to trust that this move is consistent with the goal of the Tax Reform Program of achieving “efficiency, equity and simplicity” in our tax system and eventually benefit the entire population in the near future.
The views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from the article.
Abigael Demdam is a senior consultant at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network. Readers may call +63 (2) 845-2728 or e-mail the author at abigael.demdam@ph.pwc.com for questions or feedback.
NEW YORK — Initial coin offerings (ICOs), a means of crowdfunding for blockchain-technology companies, have caught so much attention that even the cofounder of the ethereum network, where many of these digital coins are built, says it’s time for things to cool down in a big way.
“People say ICOs are great for ethereum because, look at the price, but it’s a ticking time-bomb,” Charles Hoskinson, who helped develop ethereum, said in an interview. “There’s an over-tokenization of things as companies are issuing tokens when the same tasks can be achieved with existing blockchains. People are blinded by fast and easy money.”
Firms have raised $1.3 billion this year in digital coin sales, surpassing venture capital funding of blockchain companies and up more than sixfold from the total raised last year, according to Autonomous Research. Ether, the digital currency linked to the ethereum blockchain, surged from around $8 after its ICO at the start of the year to just under $400 last month. It’s since dropped by about 50%.
Hoskinson, who runs technology research firm IOHK, is part of a growing chorus of blockchain watchers voicing concern about the rapid surge in cryptocurrency prices and digital coin crowdsales that have collected millions of dollars in minutes. Regulation is the biggest risk to the sector, as it’s likely that the US Securities and Exchange Commission, which has remained on the sidelines, will step in to say that digital coins are securities, he said.
Start-ups raising money through ICOs usually skip the safeguards required in traditional securities sales, like making sure they’re dealing with accredited investors and verifying the source of funds. That could lead to lawsuits in the future, as digital coin buyers can sue the issuer claiming they didn’t know the risks of buying those assets, Hoskinson said.
Hoskinson joined the ethereum founding team in late 2013 and left in June 2014 as he advocated for a for-profit entity while others in the team led by Vitalik Buterin wanted to keep it as not-for-profit. — Bloomberg
Here’s a quick glance at how PSEi stocks fared on Wednesday, July 19, 2017.
