BIR, DoF back PSE stock lending plan

03/24/2008

The Bureau of Internal Revenue (BIR) has issued a new revenue regulation to ease its rules on the registration and tax treatment of transactions under the securities lending and borrowing (SLB) program.

Philippine Stock Exchange (PSE) president Francis Lim said the decision of the Department of Finance to release the BIR’s Revenue Regulation 1-2008 clarifies a limitation in BIR RR 10-06.

The new BIR regulation also provided an improved procedure in registering with the BIR the Master Securities Lending Agreement, whether it is a bilateral or a multilateral MSLA.

SLB involves the lending or borrowing of securities listed in the PSE from an investor’s portfolio or investment account to support trading strategies of the borrower or for purposes specified under BIR RR 1-2008.

In both the earlier and new revenue regulations, the SLB transactions of PSE-listed securities, as well as the delivery and return of the securities or their equivalent, are not subject to certain taxes, such as the stock transaction tax or the capital gains tax and documentary stamp tax. The tax exemptions would apply, if a valid MSLA is executed by the parties and registered with and approved by the BIR.

BIR RR 10-06, however, was silent on the registration of a multilateral MSLA as the revenue regulation touched only on bilateral MSLA. As their terms denote, a bilateral MSLA is between an identified borrower and lender or lending agent, while a multilateral MSLA is among three or more parties who, in the future, may either be borrowers or lenders in their own right.

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