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EastWest Bank gets second-highest grade from PhilRatings

EAST WEST Banking Corp. (EastWest Bank) received the second-highest grade from local debt watcher Philippine Rating Services Corp. (PhilRatings) on the back of its positive near-term growth prospects.

PhilRatings said in a statement dated July 13 that it granted EastWest Bank a “PRS Aa plus” (corp.) issuer rating, a notch below the highest grade possible, after the bank posted positive operating results last year despite the impact of the coronavirus pandemic and stringent lockdowns on the economy.

The rating reflects the Gotianun-led lender’s “strong” capacity to meet its financial obligations relative to other local companies, while the “plus” further affirms the assigned rating, PhilRatings said.

“A ‘stable outlook,’ on the other hand, indicates that the rating is likely to be maintained or to remain unchanged in the next 12 months,” it added.

EastWest Bank posted net earnings of P6.5 billion last year, higher by 4.8% versus its P6.2-billion profit in 2019 amid strong interest earnings and trading gains.

Its net interest income jumped by 23.5% to P26.5 billion in 2020 despite lower loans booked during the period. Its net interest margin grew to 8.1% amid lower rates and reduced funding costs, while securities trading gains jumped by 432% to P5.1 billion.

PhilRatings said EastWest Bank, which focuses on consumer lending, is capable of competing within its chosen market and has strong management to support its operations.

The credit rater said they also expect EastWest Bank to post “satisfactory” financial results over short term and maintain a manageable asset quality despite the challenges ahead.

The bank’s nonperforming loans (NPLs) rose by 68% year on year to P20.8 billion last year, which accounted for 8.7% of its total gross loan portfolio.

“EastWest Bank expects that diminution of asset quality will continue in 2021. NPL ratio is seen to improve in 2022, following the recovery of the domestic economy due to the availability of vaccines and the return to normalcy as the population adjusts to the ‘new normal,’” PhilRatings said.

“PhilRatings shall continuously monitor developments relating to EastWest Bank and may change the ratings at any time, should circumstances warrant a change,” it added.

EastWest Bank shares went down by three centavos or 0.31% to close at P9.75 each on Monday. — B.M. Laforga

Century Properties sets free staff vaccination

LISTED property developer Century Properties Group, Inc. (CPG) will be vaccinating its employees against the coronavirus disease 2019 (COVID-19) for free beginning this month.

“The CPG VacciNATION program affirms our company’s commitment to protect our people from COVID-19 and do our share towards achieving herd immunity for the country,” CPG President and Chief Executive Officer Marco R. Antonio said in a statement on Monday.

Mr. Antonio will lead the program along with CPG Human Resources Group Head Ritchelle T. Cordero, Vice-Chairman John Victor R. Antonio, and Managing Director Carlo R. Antonio.

Included in its vaccination program are company employees, “inorganic employees,” accredited sales agents, construction workers, and accredited third-party service personnel.

CPG said it procured 26,000 doses of vaccines developed by Moderna, Inc., Bharat Biotech International Ltd.’s Covaxin, AstraZeneca Plc, and Novavax, Inc.

The first 10,000 doses of the company’s vaccine orders are expected to arrive this month and in August.

Majority of the vaccines it procured will be administered in its private outpatient medical facility, Centuria Medical in Poblacion, Makati. The company said it is a vaccination center registered with the Health department and the city government of Makati City earlier this month.

“The CPG VacciNATION program is meant to give not just the CPG work force but also their families’ immediate protection from COVID-19, and to take their doses conveniently within the safe confines of Centuria Medical Makati,” CPG Vice-Chairman Mr. Antonio said.

It will allocate 10,000 jabs for its personnel, while the remaining doses will be for employee dependents and will form part of its donation to the national government.

The company started its vaccination program in April through an educational campaign with the participation of Centuria doctors, Maxicare Philippines, and internal resource speakers to address vaccine hesitancy.

While waiting for company-procured vaccine doses, CPG also encouraged its employees to register with their local government units to get vaccinated ahead if they are qualified under the government’s list of priority sectors.

CPG said its efforts to protect and secure the health of its employees, service personnel, and customers amid the pandemic include investing in personal protective equipment and advanced disinfection equipment, and COVID-19 testing for employees every two weeks.

It also provided living quarters for its construction workers and frontliners during the height of the lockdowns. — Keren Concepcion G. Valmonte

Filipino consumers less optimistic in Q2 2021

Filipino consumers less optimistic in Q2 2021

How PSEi member stocks performed — July 19, 2021

Here’s a quick glance at how PSEi stocks fared on Monday, July 19, 2021.


Enabling flexibility and adaptability for companies and professionals

KMC opens in Podium West Tower

The concept of the ideal workplace has changed dramatically in the past few years. The tradition of working in tight-knit office spaces and having streamlined work hours are losing relevance among professionals today, especially in the wake of the COVID-19 pandemic.

In the NCR, vacancy rates have been recorded at 12-15% for commercial real estate, suggesting that people are moving away from traditional workspaces in favor of the alternatives.

Flexible working spaces, for instance, allows companies to more easily meet and collaborate with others in the same space, making it the ideal choice for freelancers or entrepreneurs who depend and thrive on building a network. Additionally, flexible lease terms and a scalable workspace that can grow or shrink to fit any need makes flexible office spaces very attractive for companies looking to ‘rightsize’.

In the Philippines, co-working spaces have been growing in popularity for a few years. The latest of which is the launch of KMC’s coworking space and private offices for rent at the Podium West Tower in Ortigas, Mandaluyong.

Flexible workspace solutions firm KMC Solutions has teamed up with Singapore-based and internationally renowned design agency Contrast Design to bring a different class of workspace to life in the new Podium West Tower located in the heart of the Ortigas CBD in Mandaluyong city.

Spanning the 26th and 27th floors of Podium West Tower, KMC’s new flexible workspace aims to provide the ease of walking into a fully furnished instant office, complete with all the office essentials one may need including scalable seating options suited to different sizes of business.

The new spaces are designed with adaptability in mind, seeking to provide the ideal working environment for companies of all types, for businesses who want shorter-term leases as well as those who may want to transition to larger or smaller teams in the future. The vast coworking space with flexible monthly terms, productive environment and the opportunity to be surrounded by like-minded individuals make it perfect for freelancers and entrepreneurs, while the flexible shorter terms leases are attractive for companies that don’t want to be locked into a lease long term.

“With businesses most likely transitioning to a hybrid work setup, flexible workspaces could easily fill this gap in providing the appropriate venues and environments for work — as well as making these ideal office environments easily accessible and convenient to get to,” Michael McCullough, CEO of KMC, said.

Michael McCullough, CEO of KMC Solutions

“Businesses will still want a space to come back to post-pandemic but will have to ‘rightsize’ or re-evaluate how much space they will actually need/can utilize. Flexible workspaces provide as the perfect solution for this, enabling businesses to flexibly scale up or down. Businesses then only end up paying for the space they need, making it more cost-effective,” Gian Reyes, KMC Vice President for Marketing, added.

Its strategic location within the Ortigas Business Hub also makes it attractive for companies who wish for an accessible office location. Lifestyle amenities such as parks, hotels, schools, and hospitals are well within reach.

Meanwhile, KMC Podium West Tower itself aims to provide a scenic and unique office space with the use of several green and natural elements like natural light in its design. The staff is comprised of highly trained admin and IT support onsite, ensuring KMC’s Never-Go-Down Network is available for all tenants at all times.

The building is pre-certified with the LEED Gold Mark by the US Green Building Council and awarded the provisional Green Mark Gold award by the Building and Construction Authority of Singapore, proving that it is an eco-friendly, energy-efficient, and sustainable development, which also currently sits atop a 5-storey luxury mall.

Michael McCullough, CEO of KMC Solutions, said, “With sustainability becoming a rising priority in building design and construction, KMC wanted to base its flexible workspaces at locations operating at a globally recognized standard. The KMC Podium West Tower successfully takes on the challenge towards innovative sustainability, having been pre-certified with the LEED Gold Mark by the US Green Building Council and awarded the Provisional Green Mark Gold by the Building and Construction Authority of Singapore. This makes our Podium office space sustainably-designed, eco-friendly, and energy-efficient, becoming the new gold standard for built environments.”

Most importantly, the KMC team has worked with private contractors, certified in ensuring cleanliness and sanitation at medical-grade standards, to ensure the health and safety of its tenants. State of the art sanitary and cleaning equipment is used on disinfecting the rooms and spaces, with procedures such as UV-Light treatment and decontamination misting in place to create an office environment where tenants can get their work done with peace of mind.

KMC Solutions is an ISO-Certified provider of flexible workspace solutions and staff leasing services in the Philippines. The company boasts of the country’s largest network of serviced offices and coworking space, with facilities across Metro Manila, Cebu, Clark, and Iloilo. Headquartered in Bonifacio Global City (BGC).

 

 

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DPWH plans widening works for 31 bridges in Samar, Leyte

PHILSTAR

THE DEPARTMENT of Public Works and Highways (DPWH) said Monday it is undertaking 31 bridge widening projects in Region VIII worth P1.1 billion.

In a statement, Public Works Secretary Mark A. Villar said the funds are provided for in the 2021 General Appropriations Act. The works are 17 bridge-widening projects in Leyte province, seven in Southern Leyte, three in Samar province, two in Northern Samar, and two in Biliran.

All are targeted for completion within the year, Mr. Villar added.

He said that other than constructing additional lanes, retrofitting activities will also be performed on bridges in accordance with the latest DPWH design standards. 

“Through this undertaking, our structures will be more resilient in the event of strong earthquakes,” Mr. Villar said.

The 31 bridges are: Abo-abo Bridge along Lemon-Leyte-Biliran Road; Canomantag Bridge along Bagahupi-Babatngon-Sta. Cruz-Barugo-Carigara Road; Bagahupi Bridge along Leyte-Samar Inter-Provincial Road; Sabang Bridge along Villaba-Palompon Road; Bogasong Bridge along Daang Maharlika, Libagon, Southern Leyte; and Himanglos Bridge along Bagahupi-Babatngon-Sta. Cruz-Barugo-Carigara Road; Pangasugan Bridge along Ormoc-Baybay-Southern Leyte Boundary Road; Cagnonoc Bridge along Ormoc-Baybay-Southern Leyte Boundary Road; Busali Bridge and Moog Bridge along Biliran Circumferential Road; Apale Bridge, Calunangan Bridge, Guinobatan Bridge, and Libas Bridge along Palompon-Isabel-Merida-Ormoc Road; Tabog Bridge, Bagalongon Bridge, Lourdes Bridge, Cawayan Bridges 1 and 2, Dakit Bridge, Mayuga Bridge, San Joaquin Bridge, Canaya Bridge, Bito Bridge, Tuburan Bridge, Peña Bridge, Manok-Manok Bridge, Caglanipao Bridge, Bayog Bridge, Caaguit-itan Bridge, and Ibarra Bridge along Daang Maharlika.

Also on Monday, the department announced the implementation of its P82.97-million revetment structure project in Maddela, Quirino.

“The construction of San Pedro River Wall will improve the Cagayan River channel and safeguard lives and agricultural properties of the people of Quirino Province,” Mr. Villar said.

The revetment wall is equipped with 15-meter based gabion wires, grouted riprap provisions on steel sheet piles. Builders undertook the reinforcement of grubbing, excavation, clearing and embankment works, and installed concrete hexapods for additional support from vortices. — Arjay L. Balinbin

No separate treatment for fishing in disputed waters, WTO urged

“HARMFUL” fishing subsidies should be banned everywhere, with no carve-outs for special cases like fishing in disputed waters, food advocacy group Tugon Kabuhayan said.

Tugon Kabuhayan said at a virtual briefing Monday that the World Trade Organization (WTO) should continue hearing cases of harmful subsidies whether fishing operations occur in disputed waters or not.

“Harmful subsidies should be prohibited in all waters, disputed or not. Otherwise, all a country needs to do is to create a ‘dispute’ to get out of the coverage of the prohibition,” it said.

Asis G. Perez, Tugon Kabuhayan convener, said the Philippines will continue to suffer if the WTO decides against the position of the Philippines and not address the harmful subsidies given by China to its commercial fishing fleet.

“The Philippines will continue to suffer since our marine resources will be exploited through heavily-subsidized operations, and our local fishers will face stiff competition,” Mr. Perez said.

On July 15, Agriculture Secretary William D. Dar and Trade Secretary Ramon M. Lopez headed the Philippine delegation during the ministerial meeting of the WTO trade negotiations committee on the fisheries subsidies agreement.

During the meeting, Mr. Dar urged WTO members to reconsider the language of the current draft text of the agreement which provides that “if a prohibited subsidy occurs in disputed waters, it will not be addressed by a WTO panel as this will provide a loophole for countries involved in maritime disputes to be exempted from the disciplines.” 

Mr. Dar called on other agriculture and trade ministers to ramp up negotiations to create new disciplines to remove subsidies that contribute to illegal, unreported, and unregulated fishing, overfished stocks, overcapacity, and overfishing.

“Issues of territorial claims or delimitation of maritime boundaries or zones are of the highest concern for the Philippines, but nothing must prohibit a duly constituted panel from hearing a case,” Mr. Dar said.

Citing the Food and Agriculture Organization, Tugon Kabuhayan said fisheries subsidies tend to creating incentives for mismanaging fisheries.

“We believe that the prohibition against harmful subsidies will result in better management of the dwindling fish stocks which some fishing operations are able to exploit, even if such exploitation is no longer economically viable, simply because of these harmful and in reality, wrongful subsidies,” Tugon Kabuhayan said.

Chinese fishing vessels have been sighted in Julian Felipe Reef, with the government estimating them to be 60 meters in length with a capacity of about 240,000 kilograms of fish.

In May, Tugon Kabuhayan estimated that the Philippines has lost at least P3.5 billion worth of marine catch due to the presence and fishing activities of the Chinese.

“These vessels are committing illegal, unreported, and unregulated fishing in our waters and they are able to do it despite it being not economically viable because these Chinese fishing vessels are recipients of massive Chinese government subsidies,” Tugon Kabuhayan said.

“Based on our fishing industry experience, the daily cost to maintain and operate a vessel this size is around P500,000 daily or around $10,000. This means that these vessels should be able to catch around 10 metric tons of tuna or around 12-14 tons of round scad (galunggong) just to break even,” it added. — Revin Mikhael D. Ochave

Patent training offered for agri researchers

IRRI.ORG

THE INTELLECTUAL property office said it will conduct patent training for state universities and research institutes working on farm and fishery commodities.

The 17 state universities and colleges and research and development institutions are working on projects prioritized by the Department of Science and Technology’s (DoST) agriculture research council. The schools or institutes are working on commodities like mango, rice, swine, bamboo, dairy cattle, and rubber.

The Intellectual Property Office of the Philippines (IPOPHL) partnered with DoST to encourage the use of the patent process for agriculture research.

“The use of patent information to gain insight on the advancement of technologies concerning particular fields of interest has been part of IPOPHL’s mission of making IP useful for the masses in concrete and tangible aspects made possible through technology and knowledge transfer. This patent mining project is one example of making IP work in the real world,” IPOPHL Director General Rowel S. Barba said in a statement Monday.

Since July 5, IPOPHL has been working with schools from Cavite, Bohol, Isabela, and parts of Mindanao. Each was selected based on the abundance of the commodities in their regions and their research specializations.

“The IPOPHL’s collaboration with (DoST’s agriculture council) is in the hopes of bringing awareness on patent information as an important resource for developing research projects or funding strategies in various technological clusters even in agriculture,” Mr. Barba said.

“Understanding the patent landscape also helps in identifying collaborators and partners, exploring jumping-off points for R&D activities, supporting a data-informed approach in decision-making and reducing the likelihood of wasting efforts and resources on crowded technological space.”

IPOPHL and DoST previously worked together on identifying global patent data on grants and pending applications that would help make Philippine agriculture more competitive. — Jenina P. Ibañez

DTI launches youth entrepreneurship program in Bangsamoro

THE DEPARTMENT of Trade and Industry (DTI) said Monday that it launched a youth entrepreneurship training program in the Bangsamoro Autonomous Region in Muslim Mindanao.

Trade Secretary Ramon M. Lopez at the virtual launch said the program will offer training for business pitching, self-employment, and trade fair participation.

“The program will encourage and embolden the participation of MSME (micro-, small-, and medium-sized enterprise) enablers in supporting youth entrepreneurship development and promotion in the region,” he said.

The national Youth Entrepreneurship Program (YEP) targets entrepreneurs aged 18 to 30 from youth organizations and indigenous groups. The program is also for people with disabilities, students, and young people that are neither employed nor in school.

Already rolled out in other regions, the program has assisted over 14,500 young entrepreneurs this year as of mid-July, Mr. Lopez said.

The program is backed by the United States Agency for International Development Opportunity 2.0 program for out-of-school youth. The training program, designed before the pandemic, was delayed and moved online last year, the Education Development Center said in August 2020.

“Through this partnership, the entrepreneurship activities of Opportunity 2.0 are integrated into the YEP implementation,” Mr. Lopez said.

He added that the participants can join current DTI entrepreneurship programs.

“Please join our startup economy and be linked to our startup ecosystem from our acceleration programs, mentors, co-working spaces, startup networking events, competitions, and possible venture funding.” — Jenina P. Ibañez

DAR allows digital filing of land conversion applications  

AGRARIAN REFORM Secretary John R. Castriciones said in a statement Monday that DAR (Department of Agrarian Reform) Administrative Order No. 3, Series of 2021 now allows filers of applications for land conversion the option to file electronically.

Previously, all such applications and supporting documents had to be personally filed by the applicant.

Mr. Castriciones said alternative modes of application have been adopted in order to ensure continuous delivery of government services during the pandemic.

“The application for conversion must be duly verified by the landowner or the landowner’s authorized representative and should contain certifications attesting that all supporting documents were issued by the proper agencies,” Mr. Castriciones said.

“If the applicant chooses to file his application online, the applicant must furnish DAR with a soft or electronic copy of the application with the corresponding annexes through the Land Use Cases Division-Bureau of Agrarian Legal Assistance (LUCD-BALA) in case the land applied for conversion is more than five hectares, or to the concerned regional office if the land applied for conversion is five hectares and below,” he added.

According to Mr. Castriciones, the electronic copy of the application and its annexes will only be accepted in a portable document format (PDF), while the time and date of receipt of the electronic application as indicated in the timestamp of the e-mail will be considered as the date and time of filing of the application.

He added that the e-filing should be sent to the official e-mail address of the LUCD-BALA or the regional office concerned, for it to be considered as officially filed.

Mr. Castriciones said the landowner or authorized representative must file an application bond to guarantee against premature conversion of the agricultural land.

He said that if a conversion order is approved, the landowner must communicate within three days of receipt with the Register of Deeds regarding the land’s location for proper annotation on the certificate of title.

“In cases of non-acceptance of an incomplete application, the Land Use Conversion Division or the Regional Land Use Committee Secretariat will issue a written statement or certificate and an e-mail response or electronic notice (with time-stamp duly recorded), specifically stating the deficiencies or reasons for the non-acceptance and return of the application within five working days from the filing of the application for conversion which shall form part of the records of the application,” Mr. Castriciones said.

“Payment of filing fee, inspection cost, and the posting of bond (cash), related to electronic filing of application or appeal, in case of denial of the concerned regional director, will be collected through online banking and deposited to the Bureau of Treasury accounts to be provided by the DAR central office or concerned regional office which shall include an online assessment on the amount to be deposited and the specific account where the amount shall be deposited,” he added. — Revin Mikhael D. Ochave

VAT on sale of services to PEZA RBEs

The imposition of 12% Value-Added Tax (VAT) on local purchases of PEZA-registered enterprises continues to attract debate and draw concerns. The Bureau of Internal Revenue (BIR) issued Revenue Regulations (RR) No. 9-2021 stating that certain sales which were previously considered zero-rated for VAT are now subject to 12% VAT. This RR implements the provisions of Republic Act (RA) No. 10963 or the Tax Reform and Acceleration and Inclusion (TRAIN) Act.

In compliance with the RR, the Philippine Economic Zone Authority (PEZA) recently issued a memorandum directing the imposition of 12% VAT on its transactions with registered business enterprises (RBEs).   

Prior to the passage of the TRAIN Law, sales to PEZA-registered entities were zero-rated as clarified under Revenue Memorandum Circular (RMC) No. 74-99. Under RMC No. 74-99, all sales of goods, properties, and services made by a VAT-registered supplier from the customs territory to any registered enterprise operating in the ecozone are subject to VAT at 0%, regardless of the latter’s type or class of PEZA registration (e.g., ITH or 5% GIT).

However, with the enactment of the TRAIN Law and the supposed fulfillment of conditions outlined under this law, the sale of goods to certain exporters is now subject to 12% VAT. This is explicitly provided in RR 9-2021 which stated that those considered export sales under EO 226 and other special laws are no longer subject to 0% VAT but to the 12% VAT.

On the other hand, the sale of services made by VAT-registered suppliers, from the customs territory to PEZA-RBEs continue to enjoy VAT zero-rating since Section 108 (B)(3) of the Tax Code, as amended, was not deleted under the TRAIN Law. The section provides that services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subject the supply of such services to the 0% rate. Thus, sales of services to PEZA-RBEs are still zero-rated for VAT even under the TRAIN Law and RR 9-2021. This was affirmed by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.) Inc., (G.R. No.150154) where it was held that all sales of services to PEZA-registered enterprises made by VAT-registered suppliers from customs territory shall be treated effectively subject to the 0% VAT, pursuant to Section 108 (B)(3), in relation to the provision of R.A. No. 7916 and the Cross Border Doctrine of the VAT system. Thus, sale of service to PEZA-RBEs is still zero-rated for VAT even under the TRAIN Law and RR 9-2021.

However, with the introduction of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law, VAT zero-rating of sale to RBEs, in general, is now be subject to conditions. Under the CREATE Law, the VAT zero-rating on local purchases by RBEs has been limited to apply only to goods and services directly and exclusively used in the registered project or activity. The Implementing Rules and Regulations (IRR) defined “direct and exclusive use” as raw materials, inventories, supplies, equipment, goods, services, and other expenditures necessary for the registered project or activity, without which the registered project or activity cannot be carried out.  Therefore, if the sale of services by the VAT-registered supplier to the RBE is not directly and exclusively used in its registered project or activity, the local supplier may pass on the 12% VAT to the RBE.

The question now is whether the condition of “direct and exclusive use” will also apply to PEZA-RBEs. Is it possible that the condition will only apply to RBEs which are not located within an ecozone? The change in the rules introduced by CREATE is generating confusion among locators and their suppliers alike. If the condition applies indiscriminately to all RBEs including PEZA RBEs, it will seem that the concept of “separate customs territory” of the PEZA economic zone has been abandoned or disregarded.

In the 2016 case of Coral Bay Nickel Corporation vs. Commissioner of Internal Revenue, (G.R. No. 190506) the Supreme Court (SC) held that PEZA-registered enterprises are VAT-exempt entities, not because of Section 24 of Republic Act No. 7916, as amended, which imposes the 5% preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes, but rather, because of Section 8 of the same statute which establishes that ecozones are foreign territory.

Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the ecozone as a separate customs territory. The provision thereby establishes that an ecozone is a foreign territory separate and distinct from the customs territory. Accordingly, the sales made by suppliers from a customs territory to a purchaser located within an ecozone will be considered exports and thus, exempt from VAT.

The Philippine VAT System is premised on the Cross Border Doctrine and Destination Principle. Thus, RMC 74-99 reiterated that “no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority.” Therefore, imports are subject to VAT and exports are free from VAT. If the supplier of services is a VAT-registered taxpayer, sale of services to a PEZA-registered enterprise shall be subject to VAT at 0%.

It is worthwhile to note that Section 8 of RA 7916 which provides that ecozones shall be operated and managed as a separate customs territory has not been repealed. In fact, the CREATE Law defined special economic zones or ecozones as selected areas, operated and managed as separate customs territories.

Furthermore, assuming that the local supplier may now pass on the VAT to a PEZA-RBE, how will the PEZA-RBE recover the VAT imposed by a local supplier? Section 112 of the Tax Code, as amended, provides that only creditable input VAT attributable to zero-rated or effectively zero-rated sale transactions may be refunded.

If the PEZA-RBE is currently under an Income Tax Holiday (ITH) regime, the remedy is to claim a VAT refund as actual export sales are considered zero-rated. However, if the PEZA-registered entity is no longer under an ITH regime but enjoying the 5% tax in in lieu of all taxes, its export sales are VAT-exempt considering that the RBE is no longer VAT-registered.

In Section 9.236-2(6) of RR 16-05, as amended by RR 04-2007, PEZA and other ecozone-registered enterprises enjoying the preferential tax rate of 5% in lieu of all taxes are required to register as Non-VAT persons. In VAT Ruling No. 003-10, it was held that since a PEZA entity is subject to the 5% special tax regime, its gross receipts are not entitled to 0% VAT. Thus, PEZA-RBEs under 5% GIT may no longer be able to refund any unutilized input VAT passed on by their local suppliers. The input VAT will now form part of the cost of goods and services of the PEZA-RBEs. This will certainly affect the pricing of the manufactured goods and services of PEZA-RBEs which will ultimately impact its competitiveness in the world market. Also, to address the cost inequity, PEZA-RBEs may be forced to look for suppliers from abroad instead of sourcing from local suppliers because of the VAT differential, thus, creating a domino effect on the value chain and impacting a multitude of stakeholders.

Therefore, the proper determination of what are considered locally purchased goods and services that are directly and exclusively used in the registered project or activity of the RBE becomes very crucial. The question is whether this limitation applies to all local suppliers regardless of the location of the RBE. If so, does this mean that we are abandoning the concept of separate customs territory for ecozones?

While the IRR of the CREATE law provides this definition of “direct and exclusive use,” the taxpayers are still waiting for clearer and detailed guidelines that will help them implement the new VAT rules.

It is hoped that the subsequent issuances from the BIR will finally resolve all the issues and concerns surrounding the shift from 0% to 12% VAT and will bring to life the clear intent and purpose of the law. After all, the goal behind providing VAT reforms is to make the VAT system fairer and more efficient to encourage investment, job creation, and poverty reduction.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

 

Paraluman Andres-Neagoe is a director of Tax Advisory & Compliance division of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

pagrantthornton@ph.gt.com

Peso down vs dollar on worries over Delta variant

BW FILE PHOTO
THE PESO weakened against the dollar on Monday as investors were concerned over the Delta variant of the coronavirus. — BW FILE PHOTO

THE PESO weakened versus the greenback on Monday due to concerns over the Delta variant of the coronavirus disease 2019 (COVID-19) and following losses at the local stock market.

The local unit closed at P50.34 against the dollar, shedding 10.5 centavos from its P50.235 finish on Friday, data from the Bankers Association of the Philippines showed.

The peso started trading at P50.42 versus the dollar on Monday. Its weakest showing was at P50.50, while its intraday best was at P50.30 against the greenback.

Dollars exchanged slipped to $810.99 million on Monday from $841.6 million on Friday.

The peso weakened after the stock market posted losses, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

Stocks started the week in the red as concerns over the Delta variant dampened market sentiment.

The Philippine Stock Exchange index lost 106.63 points or 1.59% to close at 6,587.2 on Monday, while the broader all shares index declined by 53.39 points or 1.29% to 4,084.55. 

A trader said the peso’s weakness likewise reflected concerns over the spread of the Delta variant, which caused safe-haven demand for the dollar.

Local financial markets are closed on Tuesday, July 20, in observance of Eid’l Adha.

For Wednesday, Mr. Ricafort gave a forecast range of P50.20 to P50.40 per dollar, while the trader expects the peso to move around the P50.25 to P50.45 band. — LWTN