Stockbrokers revert to payment of 10% VAT

Stockbrokers have reverted back to the payment of the 10-percent value-added tax (VAT) on their brokering services, replacing the seven-percent gross receipts tax (GRT) charged since April 2001.

In a memorandum to brokers, Philippine Stock Exchange general counsel Zayber Protacio said the shift took effect last Jan. 1, 2003, in line with the provision under Republic Act 9010.

RA 9010, one of the first pieces of legislation passed by the Arroyo administration, reset the period of GRT payment from Jan. 1, 2001 to Dec. 31, 2002, which means the shift back to the VAT will be made effective on Jan. 1, 2003.

This superseded RA 8761, which had extended the imposition of the VAT on services rendered by banks, non-bank financial intermediaries, finance companies, other finance intermediaries to Jan. 1, 2001. The ruling included stockbrokers who are required to pay the seven-percent GRT instead.

Prior to the passage of RA 8761 in mid-2000, stockbrokers had already been paying the VAT and were only instructed to pay the GRT retroactive to January 2000.

Protacio, however, said that stock brokers with gross annual sales of less than P550,000 will remain exempt from VAT and subject to the GRT, as stipulated in the National Internal Revenue Code.

When the GRT was imposed on April 2, 2001, there were protests mainly from foreign brokers, basically on the basis on the sudden inclusion of brokers in RA 8761 and the confusion on its effective date of implementation, the basis of computation, the mode of payment and the stockbrokers’ ability to pass on the GRT to clients.

Protacio clarified that foreign-denominated transactions of stockbrokers will remain subject to the VAT and that the provision on zero-rating will not apply on service fees charged by stockbrokers to foreign clients paying in acceptable foreign currencies.

He said the application of zero-rating or VAT-exempt transactions has been limited to sales of services, which are destined for consumption outside the Philippines, in accordance with cross-border doctrine, e.g. payment for project studies, information services, engineering and architectural design and other similar services sold to foreign clients.

The 10-percent VAT is imposed on top of the brokers’ commission for buying and selling trades, currently set at a minimum of 0.25 percent and a maximum of 1.5 percent of transaction costs.