Rules governing dividend remittances by state-owned firms have been revised in a bid to improve transparency and increase revenues, the Finance department said on Wednesday.
Finance Secretary Cesar Purisima approved amendments to Republic Act 7656 or the Dividend Law’s implementing rules and regulations (IRR), issued on August 5, 1998, to bring the law up to date with new structures and standards, the department said.
Among others, the new rules simplify the assessment of government-owned and controlled corporations (GOCCs) via the use of Corporate Income Tax Returns filed with the Bureau of Internal Revenue or authorized agent banks as the basis for dividend computation.
“This emphasizes more transparent computations and the efficient administration of dividend assessments by removing book earnings that have no effect on cash balances,” the Finance department said.
Full payment of the minimum dividend now have to be made on or before May 15 of each year, or one month after the April 15 tax filing deadline.
As part of a Finance department thrust to improve revenue generation and fiscal discipline, the minimum dividend rate can be raised to more than 50 percent in cases of excess cash or revenue windfalls, provided that the viability of and purposes for which the GOCC was established are not impaired.
“This will consolidate government funds and will prevent any excess or idle cash among GOCCs,” the department said.
GOCCs can avail of flexible clauses under specific instances, such as when the firms have minimum dividends exceeding unrestricted retained earnings and banks that are subjected to regulatory requirements such as capital level and ratios imposed by the central bank.
This will encourage uniform application of dividends and enforces transparent criteria for dividend adjustments, the department said.
The new IRR also enumerates documentary requirements for dividend adjustments, alternative schedules of payments, and remittances other than cash.
It also clarifies the remittance mechanism for subsidiaries as well as the mechanism for booking dividend revenues for parent companies.
“The revised IRR makes it simpler and easier to be a good GOCC. They should be encouraged to find that we are starting to expect more from them, owing to their good progress,” Purisima said.
GOCC remittances amounted to P38.68 billion last year, compared to P29 billion in 2010 and bringing the total so far to P135.02 billion from July 2010 to December 2015, the Finance department said.