10 February 2016– Finance Secretary Cesar V. Purisima has signed the Revised Implementing Rules and Regulations (IRR) to Republic Act No. (RA) 7656 or the Government Owned and Controlled Corporations (GOCC) Dividend Law, amending the Implementing Rules and Regulations last issued on 5 August 1998.

After years of GOCCs seeking clarifications and exemptions, the revised IRR establishes streamlined and clarified rules for remitting dividends. It also brings the Dividend Law up to date with new structures and standards involving GOCCs.

“Instituting good governance in our GOCCs has led to a reversal of the milking cow phenomenon. Whereas GOCCs used to milk state coffers, national government revenues are now being augmented by the government corporate sector, with remittances in 2015 amounting to P38.68 billion compared to P29 billion in 2010–bringing the total so far to P135.02 billion (from July 2010 to December 2015).”

“The revised IRR makes it simpler and easier to be a good GOCC. They should be encouraged to find that we are starting to expect more from them, owing to their good progress,” Purisima remarked.

Expanding on the government’s reforms in public finance and in the government corporate sector, the revised IRR included as part of its ‘Declaration of Policy” the impetus to “promote fiscal discipline among GOCCs,” and to “improve National Government cash management.”

The revised IRR simplifies the assessment of dividends through the use of the Corporate Income Tax Returns duly filed with the Bureau of Internal Revenue (BIR) or authorized agent banks as the basis for dividend computation. This emphasizes more transparent computations and the efficient administration of dividend assessments by removing book earnings that have no effect on cash balances.

Full payments of the minimum dividend are now mandated on or before 15 May of each year, or one (1) month after 15 April as the deadline of filing of Corporate Income Tax Returns to the BIR.

As part of the Department of Finance’s (DOF) thrust to improve revenue generation and fiscal discipline, the minimum dividend rate may be raised to more than the 50% in cases of excess cash or windfall of revenues, provided that the viability and purposes for which the GOCC has been established are not impaired. This will consolidate government funds and will prevent any excess or idle cash among GOCCs.

Under the revised IRR, GOCCs may avail of flexible clauses under specific instances, such as when GOCCs incorporated under the Corporation Code have minimum dividends exceeding its unrestricted retained earnings, and banks that are subjected to regulatory requirements (e.g. capital level and ratios imposed by the BSP). This encourages uniform application of dividends to GOCCs and enforces a transparent criteria for dividend adjustments.

The IRR also enumerates documentary requirements for dividend adjustments, alternative schedules of payments, or remittances other than cash, such as property or stocks for efficient processing of requests. It also clarifies the remittance mechanism for subsidiaries as well as the mechanism for booking dividend revenues for parent companies.

The revisions recognize the role of the Governance Commission for GOCCs (GCG) as the oversight body with the authority to approve performance contracts with GOCCs in compliance with Republic Act No. 10149, and to administer sanctions for non-compliance with this IRR.

Revisions to the IRR to RA 7656 were developed from the comments gathered from consultations with various stakeholders over the course of one year, including GOCCs, the GCG, the Bureau of the Treasury, the Bureau of Internal Revenue, and the Commission on Audit.

“Good performance rests on good laws and regulatory environments. We look forward to seeing GOCC performance further improve,” Purisima added.