Transfer regulations for bonds, securities okayed


THE Securities and Exchange Commission (SEC) has approved the guidelines that would allow the transfer of bonds and securities from tax-exempt persons to foreign entities and individuals, subject to higher tax rates even outside the interest payment dates, but will subject the former to the same tax treatment as that of its taxable transferees.

The approved rules were submitted by the Philippine Dealing and Exchange Inc. (PDEX) to the SEC and would govern the trading and settlement for holder-transferees, subject to 25 percent or 30 percent final withholding tax (FWT) for listed corporate securities except bank-issued instruments.

The said guidelines refer to holder-transferees which are non-resident aliens not engaged in trade or business in the Philippines (NRNETB), and non-resident foreign corporations [NRFC] which are subject to 25 percent and 30 percent final withholding tax on interest income, respectively.

Under the said rules, tax-exempt persons shall not be allowed to transfer their bonds and securities to NRANETB and/or to NRFC, except on interest payment dates that fall on a business day.

However, should a tax-exempt person decide to transfer his or her securities to an NRANETB or to an NRFC on non-interest payment dates, the tax-exempt entity will not be entitled to the tax incentives, and would be subject to withholding tax of 25 percent or 30 percent, as the case may be.

Hence, if the transfer is made to an NRENETB, the tax-exempt person would be liable for 25 percent final withholding tax, while 30 percent final withholding tax would be imposed on a tax-exempt person if the transfer is made to an NRFC.

This rule is similar to the existing PDEX Guidelines on the transfers from tax-exempt persons to resident citizens, resident aliens, non-resident alien engaged in trade or business, domestic corporations and resident foreign corporations, which are all subject to 20 percent FWT.


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