Bill extending SPV law signed

President Arroyo signed into law yesterday a measure extending for another two years tax waivers on the sale of bad assets racked up by banks during the Asian crisis.

In simple ceremonies held at the Philippine Stock Exchange (PSE) in Makati City, Mrs. Arroyo signed Republic Act No. 9343, extending the deadline of registration of Special Purpose Vehicles (SPVs) by financial institutions that would allow them to get rid of non-performing assets.

Under the law, the transfer of a bank’s bad assets to an SPV, and from an SPV to a third party after the assets have been rehabilitated, are exempt from stamp duty, capital gains tax, withholding taxes and value-added tax or gross receipts tax.

An SPV is a firm created by a company to fulfill narrow or temporary objectives, primarily to isolate financial risk and whose operations are limited to the acquisition and financing of specific assets.

The new law extends the deadline for the establishment of an SPV from Sept. 19, 2004 to 18 months from effectivity. In addition, the amendatory law resets the deadline for the availment of tax benefits from April 2005 to two years from the effectivity of the new law.

"The benefits provided in the original law were limited in scope and duration and as a result, a number of financial institutions, debtors and investors are unable to avail themselves of the tax incentives and privileges," Malacañang said in a statement.

Lawmakers said that up to P200 billion worth of banks’ non-performing loans (NPL) could be covered by the new law, which will further bring down the percentage of the industry’s total NPL ratio.

The sector’s NPL ratio was 8.43 percent at the end of January, and has been in single digits since last June. The 1997-98 Asian financial crisis turned many loans sour and it has taken years to clear the bad debt overhang.

Among those present at the signing ceremony were Sen. Ralph Recto, principal author of the amendatory measure; and congressmen authors Negros Occidental Rep. Jose Carlos Lacson, Camarines Sur Rep. Luis Villafuerte and Manila Rep. Jaime Lopez.

Officials led by PSE chairman Jose Vitug, Trade Secretary Peter Favila, Securities and Exchange Commission (SEC) chairwoman Fe Barin, PSE president Francisco Ed Lim, Megaworld Corp. president Andrew Tan and vice president Cirio Manlangit, witnessed the President signing the new law.

After the brief signing rites, the President formally rang the bell of the PSE to start trading of new shares offered by the Megaworld Corp. to the international investment community.

Realty firm Megaworld had just concluded its international offering of shares from which it was able to raise $115 million.

The firm allocated 80 percent of the proceeds of its international share offer for its office development program for the business process outsourcing (BPO) sector.