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Our audit approach will allow our client's accounting personnel to make the maximum contribution to the audit effort without compromising their ongoing responsibilities
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At P&A Grant Thornton, we provide annual and short period financial statement audit services that go beyond the normal expectations of our clients. We believe strongly that our best work comes from combining outstanding technical expertise, knowledge and ability with exceptional client-focused service.
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Review engagement
A review involves limited investigation with a narrower scope than an audit, and is undertaken for the purpose of providing limited assurance that the management’s representations are in accordance with identified financial reporting standards. Our professionals recognize that in order to conduct a quality financial statement review, it is important to look beyond the accounting entries to the underlying activities and operations that give rise to them.
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Other Related Services
We make it a point to keep our clients abreast of the developments and updates relating to the growing complexities in the accounting world. We offer seminars and trainings on audit- and tax-related matters, such as updates on Accounting Standards, new pronouncements and Bureau of Internal Revenue (BIR) issuances, as well as other developments that affect our clients’ businesses.
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Tax advisory
With our knowledge of tax laws and audit procedures, we help safeguard the substantive and procedural rights of taxpayers and prevent unwarranted assessments.
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Tax compliance
We aim to minimize the impact of taxation, enabling you to maximize your potential savings and to expand your business.
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Corporate services
For clients that want to do business in the Philippines, we assist in determining the appropriate and tax-efficient operating business or investment vehicle and structure to address the objectives of the investor, as well as related incorporation issues.
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Tax education and advocacy
Our advocacy work focuses on clarifying the interpretation of laws and regulations, suggesting measures to increasingly ease tax compliance, and protecting taxpayer’s rights.
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Business risk services
Our business risk services cover a wide range of solutions that assist you in identifying, addressing and monitoring risks in your business. Such solutions include external quality assessments of your Internal Audit activities' conformance with standards as well as evaluating its readiness for such an external assessment.
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Business consulting services
Our business consulting services are aimed at addressing concerns in your operations, processes and systems. Using our extensive knowledge of various industries, we can take a close look at your business processes as we create solutions that can help you mitigate risks to meet your objectives, promote efficiency, and beef up controls.
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Transaction services
Transaction advisory includes all of our services specifically directed at assisting in investment, mergers and acquisitions, and financing transactions between and among businesses, lenders and governments. Such services include, among others, due diligence reviews, project feasibility studies, financial modelling, model audits and valuation.
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Forensic advisory
Our forensic advisory services include assessing your vulnerability to fraud and identifying fraud risk factors, and recommending practical solutions to eliminate the gaps. We also provide investigative services to detect and quantify fraud and corruption and to trace assets and data that may have been lost in a fraud event.
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Cyber advisory
Our focus is to help you identify and manage the cyber risks you might be facing within your organization. Our team can provide detailed, actionable insight that incorporates industry best practices and standards to strengthen your cybersecurity position and help you make informed decisions.
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ProActive Hotline
Providing support in preventing and detecting fraud by creating a safe and secure whistleblowing system to promote integrity and honesty in the organisation.
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Accounting services
At P&A Grant Thornton, we handle accounting services for several companies from a wide range of industries. Our approach is highly flexible. You may opt to outsource all your accounting functions, or pass on to us choice activities.
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Staff augmentation services
We offer Staff Augmentation services where our staff, under the direction and supervision of the company’s officers, perform accounting and accounting-related work.
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Payroll Processing
Payroll processing services are provided by P&A Grant Thornton Outsourcing Inc. More and more companies are beginning to realize the benefits of outsourcing their noncore activities, and the first to be outsourced is usually the payroll function. Payroll is easy to carve out from the rest of the business since it is usually independent of the other activities or functions within the Accounting Department.
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Like a basketball import, a bargain is not always a good thing
29 Aug 2017Basketball-crazy Filipinos watched the Philippine Gilas team fall short during the recently-concluded 2017 FIBA Asia Championships in Lebanon. The all-Filipino line up fought with their “puso” or heart but still, their honed skills were not enough to land them a podium finish. Many sports analysts agreed that the presence of an import like Andray Blatche would have made a difference.
Similar to our international basketball campaign, “imports” also play a critical role in our nation’s economic advancement.
According to the Philippine Statistics Authority (PSA), the total foreign investments approved for the first quarter of 2017 by at least seven investment promotion agencies amounted to P22.9 billion. The PSA further stated that the Netherlands is providing the most field goals, so to speak, with 27.2% of the total foreign investment commitments.
These foreign investments come in various forms, one of which is by way of equity acquisition in a Philippine company. Pursuant to Republic Act No. 7042, also known as the “Foreign Investments Act of 1991,” foreigners can invest up to 100% in the equity of a domestic enterprise, provided that the enterprise is not in the investment negative list.
Some investors find equity acquisition a convenient way to invest. Joining an already strong team roster is always a better idea than building a squad from scratch. An existing company with goodwill already attached to it is a foreign investor’s dream team.
However, in joining a dream team, a foreign investor should still watch out for some tax considerations. One of the main considerations in buying shares of stock in a company is the tax issues attached to the transaction. In case of a straight sale, the possible tax implications are the Capital Gains Tax, Documentary Stamp Tax, and Donor’s Tax.
Consideration for the transfer of the share is an important factor to determine the possible tax implications. Among these tax implications is that the possibility of introducing donor’s tax into the transaction might confuse the foreign investors. In case the consideration or selling price is less than the fair market value of the shares sold, the difference will be treated as a donation and will be subjected to 30% donor’s tax even if the seller never intended to make a donation.
This imposition of donor’s tax is based on Section 100 of the Tax Code which states that “where property is transferred for less than an adequate and full consideration in money or money’s worth, then the amount by which the fair market value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.”
The legislative intent behind this provision is merely to discourage the parties from manipulating the selling price to save on income taxes. Based on prior Bureau of Internal Revenue (BIR) rulings, it was recognized that the deemed gift provision is not absolute and could admit exceptions. One of which is when the sale was entered into as an ordinary commercial transaction for legitimate business purposes between unrelated parties and more importantly, the evil which was sought to be avoided by the law does not exist in the given set of facts (BIR Ruling [DA-(DT-065) 715-09]).
The BIR in another ruling said that for as long as the transaction is conducted at arm’s length such that a bona fide business arrangement was done in the ordinary course of business, a sale for less than an adequate consideration is not subject to donor’s tax (BIR Ruling [DA-652-06]). Further, the BIR ruled that when there is no intention to donate and the transaction was undertaken for a legitimate or bona fide business purpose, the transaction is not subject to donor’s tax (BIR Ruling DA-398-95).
However, the mere absence of donative intent is not sufficient to exempt the sale of the stock from the donor’s tax. The Supreme Court ruled in the case of The Philippine American Life and General Insurance Company, vs. The Secretary of Finance and CIR, that “the absence of donative intent does not exempt the sales of stock transaction from donor’s tax since Sec. 100 of the National Internal Revenue Code categorically states that the amount by which the fair market value of the property exceeded the value of the consideration shall be deemed a gift.”
Significantly, the tax implications do not simply end by paying the taxes due on the transaction. Whenever a transfer of shares is made, securing a Certificate Authorizing Registration (CAR) from the BIR is necessary (RMC No. 37-2012). The CAR is in the nature of a tax clearance certificate, indicating that the tax liability for the transaction has been properly paid. CAR is an indispensable requirement before any transfer of ownership of shares of stock not traded in the stock exchange can be effected.
Under existing rules, CAR may be processed within five days from submission of complete documents. However, such fast track processing has not been consistently put into practice. Taxpayers are aware that it normally takes time for the BIR to release the CAR.
Considering the foregoing, purchasing shares of stock as a mode of foreign investment might look less tedious compared to the other means for which a foreigner may invest in the Philippines. However, as in the game of basketball, we Filipinos play the game here differently. These imports in the field of economic investment must thoroughly consider the nature of how things are done “Filipino-style.”
Resembling sports, proper coaching may reveal helpful strategies for winning. Other means like establishing a new corporation, setting up a branch or representative office, or joint venture arrangements can be more beneficial than acquiring direct equity in an existing domestic company.
A study of the surrounding circumstances should first be thoroughly conducted before a foreign investor should enter into such transaction. It is always advised that a foreign investor should first conduct due diligence before stepping into the court. As basketball legend Larry Bird puts it, “first, master the fundamentals.”
Rizza Mariz P. Mañalac is an associate with the Tax Advisory and Compliance division of P&A Grant Thornton.
As published in The Manila Times, dated 29 August 2017