Adopting a Local Government Tax Rate on Holding Companies

October 11, 2006 TAGUIG CITY ORDINANCE NO. 047-06 AN ORDINANCE ADOPTING A LOCAL GOVERNMENT TAX RATE ON HOLDING COMPANIES Sponsored by: Coun. Aurelio Paulo R. Bartolome Coun. Arnel M. Cerafica Coun. Henry M. Dueas, Jr. Coun. Allan Paul C. Cruz Coun. Ricardo J. Jordan Coun. Elpidio M. Javier Coun. Marisse Balina-Eron Coun. Glen N. San Pedro Coun. Baltazar T. Mariategue Coun. Delio J. Santos Liga Pres. Conrado C. Aquino, Sr. SK Fed. Pres. Jeffrey B. Morales WHEREAS, the efficient implementation of the ongoing development plans of the City of Taguig as well as the current crusade to attract new investors and entice present investors to expand their present operations in the area necessitates the need to classify and re-classify previously existing taxable groups to property reflect their actual nature and operations; WHEREAS, the actual nature of a Holding Company which merely holds passive investments in shares of stock and interests in other companies and entities and not engaged in banking activities or financial operations or real estate activities cannot be unequivocally classified under any of the present types of taxable business entity subject to local government tax under the present Revenue Code of the City of Taguig and is in dire need to be addressed; WHEREAS, there is likewise a desire to establish the City of Taguig to be a Holding Company Hub of the Philippines by providing a tax treatment on holding companies truly reflective of their actual nature of operations NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUNIANG PANLUNGSOD NG TAGUIG IN SESSION ASSEMBLED PURSUANT TO R.A. 7160 AND OTHER PERTINENT LAWS THE FOREGOING LOCAL GOVERNMENT TAX ON HOLDING COMPANIES: SECTION 1. Title. This Ordinance shall be known as "An Ordinance adopting a Fixed Local Government Tax Rate on Holding Companies. SECTION 2. Declaration of Policy. It is hereby declared as a policy of the City Government to establish the City of Taguig as a Holding Company Hub of the Philippines and to address the need to properly define a holding company and tax the same according to the actual nature of its operations. SECTION 3. Scope. This ordinance shall be imposed on all holding companies, as defined hereunder, with regard to administrative, appraisal, assessment, levy and collection. SECTION 4. Definition of Terms. When used in this Ordinance: (a) "Holding Company" is a corporation, partnership or juridical entity that limits its business to the ownership of stocks and interests in other companies as passive investments and derives dividend income therefrom. A holding company is one which is organized specifically to hold the stocks and interests in other companies as passive investments and derives dividend income therefrom, but excludes holding companies which are owners or operators of banks and other financial institutions such as banks, offshore banks, non-bank financial intermediaries, lending investors, finance and investment companies, insurance brokers, investment houses, pawnshops, money shops, insurance companies, stock markets, stockbrokers and dealers in securities and foreign exchange including pre-need companies. (b) "Shares of Stock" represents the equity ownership or equity interest by a shareholder or partner or investor in a corporation or partnership or any other juridical entity or association; (c) "Dividend Income" is distribution of earnings to shareholders or partners or investors that may be in the form of cash, stock or property. SECTION 5. Imposition of Business Tax on Dividend Income. There is hereby imposed a rate of 5% of 1% on the dividend income received by Holding Companies as defined above from their investments in shares of stock or interests in other companies. Nonetheless, said amount of dividend income derived by a holding company as a result of a declaration of dividends shall be taxed only once, and subsequent declaration of the same dividend income to its parent holding company or parent holding companies also within the jurisdiction of City of Taguig shall not be further taxed accordingly. SECTION 6. Imposition of Business Tax on other Activities. There is hereby imposed a business tax on the gross sales/receipts of holding companies as defined above on its other activities at the same taxable rate imposed on such activities as enumerated in the Taguig Revenue Code, except dividend income. SECTION 7. Separability Clause. Any provision of this Ordinance that shall later on be rendered null and void by a competent court shall not affect the remaining provisions of this Ordinance that are valid and constitutional. SECTION 8. Ancillary Application of the Taguig Revenue Code. All other provision or provisions of Ordinance No. 24-93, otherwise known as the Taguig Revenue Code, not inconsistent with this Ordinance, shall act in an ancillary manner to the subject of this Ordinance. SECTION 9. Repealing Clause. Any provision of existing Ordinances inconsistent with the provisions of this ordinance relating to the subject of this ordinance is hereby repealed accordingly. SECTION 10. Effectivity. This Ordinance shall take effect immediately after its publication as required by the provisions of R.A. 7160 otherwise known as the Local Government Code of 1991; Enacted this 11th day of October 2006 at the City Government of Taguig. Attested by: (SGD.) HON. GEORGE A. ELIAS City Vice Mayor and Presiding Officer Certified by: (SGD.) ATTY. DANIEL B. VALDEZ SP Council Secretary Approved by: (SGD.) HON. SIGFRIDO R. TIGA City Mayor