Tax Notes: Government Securities Repurchase Program

THE Bureau of Internal Revenue issued Revenue Memorandum Circular (RMC) No. 95-2017 last Nov. 10.

RMC No. 95-2017 provides guidelines on the proper tax treatment of the Government Securities Repurchase Program (GS Repo Program) governed by the Global Master Repurchase Agreement (GMRA), a program intended to contribute to building a deeper and more liquid bond market to further promote capital market development in the Philippines.

Section 6 of RMC No. 95-2017 states that securities repurchase transactions (Repo) under the GS Repo Program, as contemplated under Section 199(h) of the 1997 Tax Code, as amended, is exempt from documentary stamp tax.

Meanwhile, the Repo rate, which is computed as the difference between the original price and the repurchase price, and other interest income, including interest accruing from the “cash margin,” is subject to 20 percent final withholding tax, as well as the applicable gross receipts tax.

Any gain or loss and any other realized gain arising from the subsequent sale of Repo securities within the Repo period will be subject to 30 percent corporate income tax.

The circular takes effect immediately. (Source: P&A Grant Thornton)
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