This is a publication about developments in Philippine taxation. The contents usually include latest Republic Acts, Bureau of Internal Revenue issuances, Customs regulations, Court decisions, BSP circulars, SEC circulars, Department of Justice opinions and Executive Orders relevant to Tax practice.
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Market capitalisation of Global Top 100 companies at record $21 trillion: US further strengthens its position - PwC
- Growth more subdued than in 2018.
- US accounts for over half of companies in Global Top 100 and 63% of total market capitalisation.
- Companies from China and Europe in the ranking lose value.
- New additions in the Global Top 100 include companies from India and Saudi Arabia.
- The technology sector continues to dominate; Microsoft overtakes Apple as the world’s most valuable public company.
- Unicorns’ value grows 6% with nearly half of the top 100 based in the US
London, UK, 14 August 2019 - The market capitalisation of the world’s 100 largest public companies has increased by $1,040bn (5%) in 12 months, according to PwC’s Global Top 100 ranking, released today.
The rise is more subdued than the 15% increase reported in 2018, reflecting more challenging market conditions.
Growth in market capitalisation in the past year has been primarily driven by US companies, on the back of a robust economic environment. Both China (-4%) and Europe (-5%) registered a decrease in market capitalisation, reversing last year’s gains.
The technology sector continues to dominate, although the healthcare, consumer services and telecommunications sectors performed most strongly over the past year.
For the fifth year running, the US accounts for more than half (54) of the Global Top 100 by number of companies with growth of 9%, outpacing the overall. US companies represent 63% of the total market capitalisation, up from 61% last year.
Greater China is the second largest component of the Global Top 100 by market capitalisation, despite a 4% decline in the past 12 months following trade uncertainties and their impact on local market sentiment. This contrasts with the 57% increase in 2018, when three new companies entered the Global Top 100 and two rose to the top ten.
Geopolitical challenges including uncertainty on Brexit are likely to have impacted European based companies in the ranking in the past year. Three European based companies have left the Global Top 100 and overall European based companies in the ranking lost 5% in market capitalisation. Recent trends for companies from the Rest of the World are more positive, with market capitalisation increasing by 22%.
Overall, the best performing country in the ranking in relative terms was India. Despite only two companies in the Global Top 100, a strong domestic stock market performance and robust earnings increased their market capitalisation by $63bn or 37%.
Ross Hunter, Partner and IPO Centre Leader, PwC UK comments:
“While the US continues to be the powerhouse of the Global Top 100, we expect to see a growing
The technology sector continues to be the largest component of market capitalisation within the Global Top 100, ahead of the financials sector, with healthcare in third place. Growth in the healthcare, consumer services and telecommunications sectors of 15% outpaced technology’s growth (6%), which experienced volatility in late 2018. Financials was the weakest performing sector with a 3% decline in market capitalisation.
The global top ten continues to be dominated by the technology and e-commerce companies – Microsoft, Apple, Amazon, Alphabet – followed by Facebook in sixth position and Alibaba and Tencent as numbers seven and eight, respectively.
Microsoft was the strongest performer in terms of absolute increase in market capitalisation, gaining $202bn or 29% in value compared to 2018, which propelled it into the top spot. It’s followed by Apple, Amazon and Alphabet. This breakaway group is 40% ahead of the fifth ranked company, Berkshire Hathaway, which has a market capitalisation of $494bn.
In the private company domain, the value of the top 100 unicorns[1] grew by 6% to $815bn at 31 March 2019, consistent with their public company counterparts. Nearly half (48%) of the top 100 unicorns were from the US, also in line with what we see in the Global Top 100.
Notably, China contributes approximately 30% of unicorns in both number and value terms, which is a much higher proportion than for the Global Top 100. As a significant source of future IPOs or acquisitions by other companies, this suggests that we can anticipate more entries from China into the Global Top 100 in due course.
Ross Hunter, Partner and IPO Centre Leader, PwC UK:
“While the technology sector did not perform as strongly as in previous years, it continues to dominate the Global Top 100, with the top four US giants in a league of their own. Longer term, we anticipate the imbalance reducing, with China technology companies, in particular, challenging the current position. The prominence of companies from China amongst the unicorns may be evidence to support this.”
Ends.
Taxes, compliance matters, assessments, and refunds
EPIRA-based refund
When an ERC Certificate of Compliance is essential to a refund claim for input VAT
If a power generation company’s claim for refund of input VAT is based on the EPIRA law which treats sales of generated power by generation companies as VAT zero-rated, a COC issued by the ERC must be presented to support the claim.
However, if the claim for refund is based instead on Section 108(B)(3) of the Tax Code wherein services rendered to exempt persons such as the National Power Corporation are VAT zero-rated, said COC is not required.
(GR No. 230412, promulgated 27 March 2019)
Unclaimed expenses
When expenses are not subject to EWT
Advertising expenses that were not yet paid or payable but were recorded as expenses in the books are not subject to the expanded withholding tax if they were not claimed as deductible expenses in the income tax return. According to the CTA, this is based on Section 2.57.2 of RR No. 2-1998 which provides that where income is not yet paid or payable but has been recorded as an expense or asset, said income is subject to EWT if claimed as expense or amortized for tax purposes.
(CTA Case No. 9058, promulgated 22 August 2019)
Costs
Franchise fees are not direct costs deductible from gross income
A Subic Bay Freeport Enterprise (SBFE) engaged in the business of providing water and sewerage services in the Subic Special Economic and Free Port Zone is generally subject to the five percent (5%) tax on GIT, in lieu of all national and local taxes. The CTA ruled that franchise fees for payments made to the SBMA for the right, privilege, and authority to carry on the business of providing water and sewerage services in the Subic Special Economic and Free Port Zone are not direct costs deductible from gross income for purposes of computing the 5% GIT.
(CTA Case No. 9074, promulgated 14 August 2019)
Just enrichment
Prescriptive period for refund of advance excise tax payments on tobacco products
In compliance with tax regulations, a taxpayer paid in advance excise taxes from 2010 to 2012 on tobacco and cigarette products exported. In 2015, the taxpayer filed an administrative claim for refund of these excise taxes.
Since the advance excise tax payments were considered illegally paid and erroneous, the two-year prescriptive period was applied by the CTA. Accordingly, given that the payments were made from 2010 to 2012, the administrative and judicial claims for refund filed in 2015 and 2016, respectively, were already time-barred.
The six-year prescriptive period for cases of unjust enrichment being advocated by the taxpayer did not apply. The CTA explained that the six-year prescriptive period was applied in a previous case because the advance tax payments were made voluntarily, and were not required under the Tax Code or tax regulations.
(CTA EB No. 1893, promulgated 13 August 2019)
Late is void
Deadline for serving the LOA to the taxpayer
An LOA must be served or presented by the BIR within thirty (30) days from its issuance date. Otherwise, it becomes void unless revalidated. Accordingly, an LOA served eighty-four (84) days after its issuance date is already void, rendering the tax examiners named therein without authority to conduct the tax investigation. Consequently, the corresponding tax assessment is likewise void.
(CTA Case No. 9310, promulgated 5 August 2019)
Disability privilege
Sale of basic necessities and prime commodities to PWDs
The BIR amended its implementing rules and regulations for the “Magna Carta for Persons with Disability”. The amendments include the following:
- 1. Provision of definitions for and examples of “Basic Necessities” and “Prime Commodities”
- 2. All other purchases of goods and services sold by the establishments enumerated under Section 3 shall not be considered for the 20% discount privilege. However, every PWD shall enjoy a special 5% discount off the regular retail price, without VAT exemption, of Basic Necessities and Prime Commodities provided that:
- Total purchase should not exceed PHP1,300 per calendar week, without carry-over of unused amount;
- The Basic Necessities and Prime Commodities purchased should be commensurate to the PWD’s exclusive consumption and/or enjoyment within the calendar week; and
- The threshold amount of PHP1,300 should be spent on at least four (4) kinds of items listed as Basic Necessities and Prime Commodities.
- 3. The sales of Basic Necessities and Prime Commodities shall not be VAT-exempt.
(Revenue Regulations No. 9-2019, published 28 August 2019)
RPT discount
Reduction of RPT and condonation of interest in relation to 2018 RPT of IPPs
All RPT liabilities and special levies accruing to the Special Education Fund for 2018 assessed by local government units against IPPs with respect to property, machinery, and equipment actually and directly used in the production of electricity under a Build-Operate-Transfer scheme or similar contracts with GOCCs are reduced to an amount equivalent to the tax due if computed based on an assessment level of 15% of FMV depreciated at 2% per annum.
Any amounts previously paid by IPPs in excess of the reduced amount may be applied against future RPT assessments. Interest on any deficiency RPT are condoned.
(Executive Order No. 88, dated 13 August 2019)
Bank advice
Acceptance by AABs of BIR Form Nos. 0620 and 1621
All AABs are advised to accept BIR Form No. 0620 (Monthly Remittance of Taxes Withheld on the Amount Withdrawn from the Decedent’s Deposit Account), and BIR Form No. 1621 (Quarterly Remittance of Taxes Withheld on the Amount Withdrawn from the Decedent’s Deposit Account), and to follow the procedures in Bank Bulletin No. 2018-01 for updating of the BIR Form in the Forms Code under the Limited Bank Data Entry System or AABs Payment System.
(Bank Bulletin No. 2019-18, dated 17 July 2019)
Payment options
Availability of a new tax payment facility using the PESONet payment system
The new tax payment facility utilizing the PESONet payment system under the National Retail Payment System policy framework of the BSP is already available.
Taxpayers filing tax returns using eBIRForms, and mandatory eFPS taxpayers with accounts in any BSP-regulated Financial Institutions (BSFIs) participating in the PESONet payment system may pay their taxes online through the Land Bank of the Philippines Link.Biz Portal. The new payment facility will be available initially to depositors of the Rizal Commercial Banking Corporation and soon to depositors of BSFIs.
(Revenue Memorandum Circular No. 81-2019, issued 14 August 2019)
Privacy settings
Ensuring data privacy in enforcing tax compliance of insurance companies
The BIR and the Insurance Commission (IC) entered into a Memorandum of Collaboration (MOC) and a MOC Sub-Agreement to Ensure Safe and Efficient Data Sharing in Accordance with RA No. 10173, RA No. 10963 and EO No. 52 (MOC Sub-Agreement).
Under the MOC, the BIR and the IC agreed to coordinate their efforts to ensure the prompt assessment and collection of correct taxes from insurance companies and other IC-regulated entities.
For this purpose, they have entered into a MOC Sub-Agreement, which provides for the sharing of personal data and information of their members/taxpayers, and for limitations and controls on such sharing in compliance with the Data Privacy Act.[1]
(Revenue Memorandum Circular No. 77-2019, issued 6 August 2019)
[1] Republic Act No. 10173.
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