Vol. XXII, No. 23 [ BusinessWorld Online ]
Wednesday, August 27, 2008 | MANILA, PHILIPPINES
LISTED HORSERACING operator Philippine Racing Club, Inc. (PRCI) has shelved its property-for-shares deal with a subsidiary due to a government decision to tax the transaction.
PRCI President and Chief Executive Officer Solomon Cua said the company had cancelled the deal with JTH Davies Holdings, Inc. since the Bureau of Internal Revenue will impose value-added tax worth P498 million.
He noted that at PRCI’s annual stockholders’ meeting in July, the owners had only given the go signal for the sale of the lot if it would be tax-free. The parties signed a deed of transfer last month.
Mr. Cua said the company had asked its auditor, SGV & Co., to seek clarification from the BIR why the transaction should be subjected to value-added tax when it involves a share swap.
Had the deal been signed, PRCI would have increased its stake in JTH Davies to 91.25% in exchange for its 22.5-hectare Sta. Ana Race Track in Makati City, estimated at P12 billion.
Earlier this year, PRCI minority shareholders managed to get a Makati regional trial court to stop the property-for-shares deal, saying PRCI would be trading a P12-billion property for the shares of a P25-million company.
The BIR earlier issued two rulings exempting the deal from taxes, but reversed itself after Finance Secretary Margarito B. Teves ordered a review of the transaction, which involved a substantial amount.
The BIR said the transaction must be subject to value-added tax since the property is a commercial asset as shown by previous filings. It is not a capital asset as declared by PRCI, it said.
In an interview, Mr. Cua said the firm still intended to continue the development of its Sta. Ana property, but the board will have to discuss how it will do so.
Under the swap agreement, JTH Davies, which distributes agri-chemical and construction supplies and develops midincome housing projects, would develop the property for mixed-use projects.
Mr. Cua said the firm has finished its new 71-hectare race track in General Trias, Cavite, and expects to move there by October. — Don Gil K. Carreon
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