After the withholding tax was slashed last year, the Bangko Sentral ng Pilipinas bought gold mined from the Cordillera Region in January, about five years after it made its last purchase.
Finance Secretary Carlos G. Dominguez III told reporters Thursday that an initial P1.5-million worth of gold was sold to the Bangko Sentral ng Pilipinas’ office in Baguio City last month.
Citing a report from the Bureau of Internal Revenue’s regional office also in Baguio, Dominguez said there were “almost zero sales” of gold to the BSP since 2012.
The BIR expects “much more” sales to the BSP moving forward, Dominguez said.
“This is a direct result of the reduction of the creditable withholding tax (CWT) from 5 percent to 1 percent in late 2017,” according to Dominguez.
“The advantages to the seller are lower transportation costs and accurate assays; the advantage to the BSP is the use of pesos to buy gold which is used as our international reserve,” Dominguez noted.
Also, “the advantage to the government is the collection of 1-percent withholding tax versus zero in the past,” he added.
In November last year, Dominguez and Internal Revenue Commissioner Caesar R. Dulay issued Revenue Regulations No. 7-2017, which reduced BSP’s obligation as withholding agent of the CWT.
The regulations nonetheless kept at 2 percent the excise tax slapped on gold sales.
“Income payments on purchases of minerals, mineral products, and quarry resources, such as but not limited to silver, gold, marble, granite, sand, boulders and other materials/products, are subject to withholding at the rate of 5 percent. However, the BSP is required to withhold 1 percent of gross payments made and remit the same to the government,” the BIR had explained.
“All buyers of metallic minerals are constituted as agents for the collection of 2-percent excise tax on metallic minerals and the 5-percent CWT thereon. However, the BSP, as constituted agent, shall only collect the 1-percent CWT on its purchase of metallic minerals and 2-percent excise tax due thereon,” according to the BIR.
“To be able to claim the costs of metallic minerals, the seller/possessor must be able to show proof of withholding and remittance of the 5-percent withholding tax on the said product, 1 percent in the case of said minerals sold to BSP, otherwise all claimed costs and expenses associated therewith shall be disallowed,” the BIR had said.
Dominguez had said that “with this new tax rate and the possible reduction both in the assay fee and in the processing of gold payments in the Security Plant Complex, small-scale gold miners have committed to sell back their gold produce to the BSP.”
“The new CWT rate will help gold miners in the cities of Davao, Zamboanga, Naga and Baguio to get a fair market price for their goldproduce instead of being shortchanged when they sell to the black market,” according to Dominguez.
The Finance chief had said that the new rules will “allow the BSP to build its gross international reserves without having to spend dollars as it would be able to buy gold directly using local currency.”
“Unlike using pesos to buy foreign exchange to buy gold, which will affect the peso-dollar rate, this flexibility will not have a direct impact on the movement of the peso against the dollar,” he had pointed out.
Under Republic Act No. 7076 or the People’s Small-Scale Mining Act of 1991, the BSP was mandated to buy gold from small miners, which it refines to make them acceptable in global bullion markets.
The BSP has five gold-buying stations in Baguio, Davao City, Naga City, Quezon City as well as Zamboanga City.