Bayanihan 2: The path to recovery

THERE is no denying the coronavirus disease 2019 ( Covid-19) is a health crisis that is affecting everyone around the globe. While shelter-in-place measures and lockdowns help control the spread of the virus, these have had a drastic impact on businesses, effectively halting the growth of economies.

Governments around the world enabled various stimulus packages to mitigate the impact of the crisis. With the Philippines experiencing the sharpest drop in gross domestic product in the second quarter of 2020, Congress, through the Recover as One Act (Bayanihan Act 2), has recognized the severe disruption brought about by Covid-2019 pandemic to livelihoods and all other productive activities. THE RATIFIED BICAMERAL COMMITTEE approved version of Bayanihan Act 2 aims to provide Covid-2019 response and recovery interventions and mechanisms to accelerate the recovery and bolster the resiliency of the Philippine economy.

A number of measures included in the Bayanihan Act 2 seeks to provide relief to individuals and businesses. To support online classes, for example, the proposed bill aims to provide import duties and tax exemptions, including donor’s tax, on personal computers, laptops, tablets or similar equipment appropriate for use in schools, donated for distribution to public schools regardless of level, including the country’s state universities and colleges and vocational institutions under the Technical Education and Skills Development Authority.

Businesses suffering operational LOSSES MAY BENEFIT FROM THE PROPOSAL to allow them to carry over their net operating loss sustained in taxable years 2020 and 2021 as a deduction from gross income FOR THE NEXT FIVE CONSECUTIVE YEARS immediately following the year of such loss — as opposed to the three years granted under the Tax

Code of 1997, as amended.

Exclusion from gross income and exemption from taxation are also proposed for retirement benefits received by officials and employees of private firms, whether individual or corporate, from June 5, 2020 until Dec. 31, 2020. However, in case of any reemployment of such official or employee in the same firm within the succeeding 12-month period, the retirement benefits received will be considered proof of non-retirement and such benefits shall be subjected to individual income taxation.

In addition to the imposition of tax, any person who willfully evades or defeats the imposable tax shall be criminally liable and penalized under Section 255 of the Tax Code of 1997, as amended.

The sale of shares of stock in closely held corporations sold or exchanged through initial public offerings (IPOs) will be accorded tax exemption as Section 127(B) of the Tax Code of 1997, as amended, is repealed in Bayanihan Act 2.

Another Covid-2019 response and recovery intervention proposed is the moving of statutory deadlines and timelines for the filing and submission of any document, the payment of taxes, fees and other charges required by law, and the grant of any benefit in order to ease the burden on individuals under community quarantine.

Bayanihan Act 2 also seeks to implement a one- time 60- day grace period to be granted for the payment of all existing, current and outstanding loans falling due, or any part thereof, on or before Dec. 31, 2020, including, but not limited to, salary, personal, housing, commercial and motor vehicle loans, amortizations, financial lease payments and premium payments, as well as credit card payments, without incurring interest on interests, penalties, fees, or other charges and thereby extending the maturity of the said loans. These loans may be settled on staggered basis without interest on interests, penalties and other charges until Dec. 31, 2020 or as may be agreed upon by the parties.

For banks and other non-bank financial institutions that agree to further loan term extensions or restructuring, it shall be entitled to regulatory relief, as may be determined by the Bangko Sentral ng Pilipinas, which may include, but is not limited to: staggered booking of allowances for credit losses; exemption from loan-loss provisioning; exemption from the limits on real estate loans, when applicable; exemption from related party transaction restrictions; and (non-inclusion in the bank or NBFI’s reporting on non-performing loans. Additionally, the loan term extensions or restructuring shall be exempt from documentary stamp taxes.

The Bicameral Conference Committee report of the proposed Bayanihan Act 2 was ratified by the Senate on Aug. 20, 2020 and by the House of Representatives on Aug. 24, 2020, and is currently awaiting President Rodrigo Duterte’s approval and signature to be passed into law. Bayanihan Act 2 may likewise lapse into law if the President does not sign it within 30 days from receipt of the Bicameral Conference Committee report of the proposed law.

While we welcome the relief granted in Bayanihan Act 2, we hope that it will prove to be an effective measure in reversing the economic impact of Covid-2019 on our country.

The author is a senior manager with the Tax and Corporate Services &Co ., a member of the De lo it te Asia Pacific Network. De lo it te Asia PacificLtd. is a company limited by guarantee and a member firm of De lo it te Touch eT oh mats u Ltd. Members of Deloitte Asia Pacific Ltd. and their related entities, each of which are separate and independent legal entities, provide services from more than 100 cities across the region, including Auckland, Bangkok, Beijing, Hanoi, Ho Chi Minh City, Hong Kong, Jakarta, Kuala Lumpur, Manila, Melbourne, Osaka, Seoul, Shanghai, Singapore, Sydney, Taipei, TokyoandYangon.