Emerging Markets Rates and Currencies Handbook

banks. Supporting documents required from the resident corporation are as per Appendix 1.3 (Minimum Documentary Requirements for the Sale of Foreign Exchange relating to foreign loans/borrowings, guarantees and other financing schemes/arrangements) of the FX Manual. A copy of the creditor’s billing statement will need to be submitted on or before settlement of the FX contract. - All foreign borrowings (offshore), including bonds/ notes, whether or not these are BSP- reported/approved/ registered shall be regularly reported to the BSP. - All foreign currency loans (whether in favor of residents or non-residents) extended by banks operating in the Philippines shall be reported by the creditor bank to the BSP using prescribed forms. For loans extended to non-residents, these cannot be serviced with FX resources of banks. - Banks may only extend peso financing to non- residents without prior BSP approval if specifically allowed under the Manual of Regulations for Banks (MORB). Peso financing to non-residents is subject to prior BSP approval, if it is for use in projects/programs/purposes that are : (i) not covered under those specifically allowed under the MORB; and (ii) legitimate and not contrary to laws, regulations, public order, public health, public safety or public policy. The creditor bank shall submit to the BSP its application for approval of the proposed peso financing program to non-residents. Additional Comments Balance sheet hedging allowed on selected items, Cash flow exposure hedges are permitted. Overdrafts are not allowed by local regulations. Citi Philippines 16/F Citi Plaza 34th Street Bonifacio Global City Taguig City 1634 Philippines Css.ph@citi.com FX Sales Contact: +632 8894 7881 Tax Summary – Philippines Philippines Country Tax Deductibility and Considerations Inter-Co Debt Bank Loans Offshore Local Borrowing Derivatives Equities Offshore W/H Tax • 20% WHT • Under certain tax treaties typically 10- 15%, with further reduction possible on country by country basis • 20% WHT • Under certain tax treaties typically 10-15%, with further reduction possible on country by country basis • Exempt, if interest is derived on a loan booked under the foreign currency deposit unit (FCDU) of a bank, where counterparty is a nonresident • 2% creditable WHT if borrower is designated as a “Top Withholding Agent” • 10% WHT if interest income is derived on a loan booked under the FCDU of a bank, where borrower is a resident • N/A • 25%WHT on dividends • Lower rate of 15% applies in certain circumstances • Under certain tax treaties typically 10 - 25%, with further reduction possible on country by country basis • Exempt for dividends received by a domestic or a resident foreign corporation Deductibility of interests • The Philippines has no formal thin capitalization laws or regulations • Allowable deduction for interest expense is reduced by an amount equal to 20% of interest income that is subject to final tax • N/A • N/A Deductibility • Only realized foreign exchange losses are allowable as deduction for income tax • N/A