Philippines Bankers Hoping For Tax Break Extension

by Mary Swire, Tax-News.com, Hong Kong

21 April 2005

According to reports, a tax break designed to help banks in the Philippines to offload bad debt accrued in the wake of the Asian financial crisis is to be extended, much to the relief of the country's commercial banking sector.

The banks are keen to see a continuation of the law, introduced under under a Special Purpose Vehicle law in 2003, so that they can attract buyers and offload the remaining loans while at the same time improve their capital adequacy.

Jaime Lopez, chair of the House of Representatives' Committee on Banks and Financial Intermediaries, told Reuters that the bill extending the life of the Special Purpose Vehicle Act is likely to pass through Congress unhindered.

Under the SPV law, which expired last week, buyers of banks' assets were exempted from payment of certain transaction-related and withholding taxes. It also reduced by 50% certain transfer and land registration fees, but was only applied to the first 90 billion pesos (US$1.7 billion) sold.

Central bank data shows that the non-performing loans ratios of the 42 commercial banks in the Philippines stood at about 12.5% in January, down from a peak of 18% at the time of the Asian financial crisis in the late 1990s.

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