PSE mulls suspending trading of companies below 10% public float by Jan. 2013

MANILA, Philippines – The Philippine Stock Exchange plans to suspend trading on shares of companies failing to meet the 10 percent minimum public float by Jan. 2, 2013 – during which the Bureau of Internal Revenue is likewise free to slap capital gains taxes in case of any transaction done outside the bourse.

In a press briefing Monday, PSE president Hans Sicat said that during the latest discussions with the BIR, the local bourse had signaled that by tightening its own “curing period” and suspending companies with inadequate public float after a year, the BIR would have the ability to impose the 5- to 10-percent capital gains tax on trades of non-compliant companies.

As of around end-November this year, there are around 41 publicly listed companies with deficiency in public ownership, Sicat estimated.

This potential suspension is a “tougher” proposition than even delisting, Sicat said, given that public companies would still have to pay listing fees while they are suspended.  At the same time, any transaction on this non-compliant company’s shares of stocks will no longer enjoy the preferential tax rate of ½ of 1 percent on stock trades of publicly listed companies.

“It kind of fits the definition of the BIR without confusion,” Sicat said.

The BIR had wanted to slap the capital gains taxes on trades of companies falling below the minimum requirement at the start of this year. The PSE was among those that argued against the immediate imposition of the tax, noting that the preferential stock transaction tax would require only two things under existing laws – that the trade was done on the exchange and the issuer was a publicly listed company.