RMC No. 95-2017: Provides guidelines on the tax treatment of the Government Securities Repurchase Transactions governed by the Global Master Repurchase Agreement

Key points

1. The GS Repo Program. The Program creates an Interdealer Government Bond Repo Market with counterparties initially including Government Eligible Securities Dealers (GSEDs). Eligible securities are Philippine Peso-denominated Treasury Bills and Treasury Bonds issued by the Bureau of the Treasury (BTr), and repos follow the GMRA terms and BAP and MART operating guidelines.
2. Repo features. A written confirmation states the securities, buyer and seller, purchase date and price, repurchase date (unless terminable on demand), repurchase price and Repo rate. Title passes free from liens and claims, and the buyer may sell the securities or use them in another Repo and need only return equivalent securities.
3. Documents required. Each GSED enters into a GMRA with its counterparty and executes an undertaking to follow it. Before any GS Repo transaction, the BTr requires GSEDs to submit signed GMRAs and undertakings, stamped as received by the BTr Scripless Securities Registry Division, to the BIR Law and Legislative Division.
4. Tax treatment. Repo transactions under Section 199 (h) of the 1997 Tax Code, as amended, are exempt from Documentary Stamp Tax. The Repo rate and other interest income, including from the cash margin, are subject to 20% Final Withholding Tax and Gross Receipts Tax. Mark to Market gain or loss and other realized gain from a later sale of Repo Securities within the Repo period are subject to Thirty Percent (30%) Corporate Income Tax.
5. Annual report. Within thirty (30) days after the close of the taxable year, participating GSEDs file a soft copy annual report on all Repo transactions, including later sales, with the Large Taxpayers Service through the Regular Large Taxpayers Audit Division 2.

Who is affected

• Government Eligible Securities Dealers (GSEDs) in the GS Repo Program

Deadlines and effectivity

• Annual report: within thirty (30) days after the close of the taxable year
• Documents submitted before entering into any GS Repo transaction