THE bill dubbed Create More (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy) will directly affect the property and power sectors in different ways, according to the Maybank Investments Securities Group.
On September 10, the Congressional bicameral conference committee approved the bill, which is now set for signing by President Ferdinand Marcos Jr.
In its analysis, Maybank said property owners could be impacted in the near term since a clause in the bill says the total workforce of large, registered business enterprises (RBEs) will be allowed to have a work-from-home setup for up to 50 percent of their workforce, without losing their incentives.
“As a result, there may be less need for the BPO (business process outsourcing) sector to increase office space in the near term, further delaying recovery of office spaces after the POGO (Philippine offshore gaming operator) ban,” Maybank said.
This means more vacancies in office spaces, but Maybank noted that top property developers Ayala Land Inc. (ALI) and SM Prime Holdings Inc. (SMPH) make only a small portion of their earnings and net asset value (NAV) from office rentals.
Create More seeks to lower taxes on domestic and foreign companies to 20-25 percent.
The bill stipulates that RBEs with a capital stock of over P20 billion will be granted value-added tax (VAT) zero-rating on local purchases made, and VAT exemption on imports and duty exemptions on imports of capital equipment, raw materials, spare parts and accessories.
Export-oriented RBEs are likewise entitled to VAT zero-rating on essential services such as janitorial, security, financial consultancy, marketing and human resources.
Power cost incentives
To address high power costs, the bill says RBEs may get a full 100-percent additional deduction on power expenses in a taxable year, up from 50 percent under the Tax Code.
“If the bill attracts more manufacturing and data centers to the Philippines, this should be positive for the power sector as it would require more generation capacity,” Maybank said, adding it could also benefit telcos such as Converge Information and Communications Technology Solutions Inc. (CNVRG), PLDT Inc. (TEL), and Globe Telecom Inc. (GLO).
CNVRG intends to spend P6 to P7 billion annually to upgrade its data center capacity, while PLDT’s unit Vitro Inc., a subsidiary of ePLDT, is due to start operations of its 50-megawatt data facility in Sta. Rosa, Laguna.
Last week, Globe tapped First Gen Corp. to provide renewable energy to power its key network facility and data center under Globe’s subsidiary ST Telemedia Global Data Centres (STT GDC) Philippines.
Maybank pointed out the higher power generation requirements from the bill, which House Ways and Means Committee chairman Joey Salceda said could reduce power cost by around P3/kWh, which is estimated to be around 30-40 percent of average cost.
“Overall, these measures could help revive interest to expand the manufacturing industry in the Philippines,” Maybank concluded, saying there could be more interest from Manila Electric Co. (MER), Aboitiz Power Corp. (AP), and ACEN Corp. (ACEN).
On Friday, ALI shares were down 45 centavos to P35.00 each, SMPH’s were unchanged at P31.10 apiece, while CNVRG lost 8 centavos to P16.88 per share, TEL’s rose P2 to P1,462 each, while GLO climbed P8.00 to close at P2,210 apiece.
Meanwhile, shares of MER grew P1 to P410.00 each, AP’s rose 20 centavos to P36.65 per share, while ACEN lost 5 centavos to close at P5.15 apiece.
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