4 editorial Moving Forward with Europe

6 CHaMBer@WorK Meeting with Central Bank

Governor Tetangco

ECCP Energy Committee Meeting with DOE USec. Layug

Meeting with the Department of National Defense

Meeting with Energy Sec. Almendras

Meeting with IMF’s Dennis Botman

Meeting with DFA Sec. del Rosario

Meeting with Chief Justice Corona

10 eVeNtS Integrity Run Highlights Need for

Ethical Behavior

ECCP 11th Annual Golf Challenge

NCR and Convergys Emerge as ECCP-Cebu Football Cup Champions

16 retireMeNt & HealtHCare Retirement & Healthcare Coalition Action

Plan

19 FeatUre Europe matters – a lot

28 SpeCial FeatUre Why Smart employees Underperform 7

Hazards to Avoid

30 GreeN BUSiNeSS What’s On with the SMART Cebu Project

Eco-design Consultancy Commence

6 1019

34 ForeiGN iNVeStMeNt Will “corporate layering” for

nationalized areas of investments be a thing of the past?

36 tax CorNer Post-tax filing preparation reminders

The handling of Philippine Companies in Germany in regard to VAT

39 MeMBerS’ CorNer Bosch in the Philippines A proud

heritage spanning 80 years

Liquigaz: Improving Air Quality, Improving Lives

Marriott Hotel Manila awarded Hotel of the Year

44 iMpreSSUM

BUSINESS REVIEW2 June 2011

Contents

Business ReviewJune 2011 Volume XXVII No. 5

www.eccp.com

Europe Matters – a lot

BUSINESS REVIEW 7June 2011

Chamber@Work

Meeting with the Department of National Defense

The ArangkadaTeam met with the management of the Department of National Defense (DND) last May 13. The DND briefed us on security challenges, the state of insurgency, key accomplishments,

the Philippine Defense Transformation and the AFP’s internal peace and security plan. We discussed security issues of certain investor groups (i.e. wind farms, mining, agriculture, etc.) and agreed to meet from time to time in order to assure investors. We also addressed the issue of corruption and offered closer cooperation between the DND, AFP and the Integrity Initiative.

On May 16, the Integrity Initiative Team met with Secretary Almendras. Coming from the private sector and being in government now, he fully understands the challenges and

opportunities in creating change. He fully supports our endeavor to get government to agree that government departments, agencies and GOCCs only deal with companies that have signed the Integrity Pledge. He also supports that government biddings have to be transparent and that bidders must sign an integrity pact.

May 25 - We dis-cussed the rec-ommendations

laid down in Arangkada – The Philippine Business Perspective. Dennis Bot-man explained that the major activities of the IMF in the Philippines are di-rected towards the macro economic targets and the reform of the tax adminis-tration. Since the beginning of the year, an IMF expert is working with the BIR, fund-ed under the Millennium Challenge Cooperation. We discussed major tax con-cerns, including common carriers tax, excise tax, the tax credit certificate system, and the advantages of a potential ‘blue lane’, the expansion of the large taxpayers group, the rate of withholding tax, the review of the VAT rate. Other issues discussed were the anti-trust legislation, the rationalization of fiscal incentives and the taxation of natural resources.

Meeting with Energy Sec. Almendras

Meeting with IMF’s Dennis Botman

BUSINESS REVIEW 19June 2011

Feature

Seeing no further than the end of their noses can’t be said of Filipino businessmen now pressing the government to expand business relations with Europe, the world’s wealthiest market that has quietly evolved into

the Philippines’ most important business partner in the 21st century.

A growing call among Filipino businessmen for trade talks with Europe seems to be driving home the point that Europe matters to the Philippines in a big way. This welcome focus comes five years after the European Union (EU), the 27 nation common market that is essentially today’s Europe, became the Philippines’ largest export destination, displacing the USA.

Europe is unquestionably vital to the Philippines.

It’s this country’s largest export market (over 20 percent of total exports); its largest foreign investor; its third largest trading partner and its fifth largest import source. As world leader in the sustainable or “green” movement, Europe has both the experience and technologies such as “smart grids” that can assist the Philippines do more with what it has while protecting the environment.

The EU is the Philippines’ only major trading partner that has had a consistently negative balance of trade with the Philippines over the past few years, which is both heartening and surprising.

In 2009, Philippine exports to the EU came to $8.4 billion as against imports of $3.7 billion for a positive trade balance of $4.7 billion. Last year, Philippine exports to the EU last year amounted to $7.9 billion, a 40 percent jump over 2009. Imports from the EU came to $5.4 billion.

Manufactured products comprise most of the Philippines’ exports to the EU, but its share has fallen from over 90 percent earlier this decade to around 85 percent in recent years. This drop is largely explained by a cut in exports of electrical and electronic products (including semiconductors), from almost 80 percent to nearly 60 percent in recent years.

Trade in services has been modest but is growing. Exports and imports are almost equal, both breaking the $1.4 billion level in recent years. Exports in 2008 consisted mainly of transport (40 percent), travel services (23 percent) and other business services including BPO (23 percent) and communications (five percent).

Ambassador and Head of Delegation of the European Union in the Philippines Guy Ledoux said he is enthusiastic about the growing importance of EU-Philippines economic relations, noting that the EU, as the world’s largest market and the world’s largest source of FDI, played its role in supporting the Philippines economic recovery.

Europe matters – a lotBy Art Villasanta

BUSINESS REVIEW38 June 2011

Tax Corner

German tax law again and again poses an obstacle to the economic relations

between Germany and the Philip-pines, which the companies have to overcome. This applies in partic-ular to VAT. The handling of cross-border transactions is frequently characterised by uncertainty, as it is easy to get lost in the jungle of German and European regula-tions. Below we will attempt to shed some light on that.

The tax rates - The VAT rate in Ger-many amounts to 19%. For some goods and services, such as books, magazines and food, a reduced tax rate of 7% applies. That puts Germany still below the European average. In a few EU countries, tax rates of up to 25% are levied.

The registration procedure - Philippine companies seeking to supply or purchase goods or services within Germany have to be registered with the German authorities. They are then given a so-called “Umsatzsteueridentifika-tionsnummer” or UStID (VAT ID). The ID forms part of the European system for settling the VAT. The competent authority for issuing the VAT ID is the “Bundeszentral-amt für Steuern“ (Federal Central Tax Office) based in Saarlouis. Since, however, prior to filing an application, it is necessary to regis-ter with the Berlin Neukölln Inland Revenue, which is responsible for all value-added tax purposes re-

garding Philippine companies, it is also recommended that the ap-plication for a VAT ID to be issued be filed with that authority. The In-land Revenue office passes on the application to the Federal Central Tax Office. In this way, unnecessary written communications with mul-tiple authorities are avoided.

Import turnover tax as a transi-tory item - If a Philippine company purchases goods from Germany, these export transactions are tax-free in Germany.

Items supplied by the Philippines to Germany, on the other hand, are subject to the German import turnover tax. The party liable to pay the tax in these cases is the importer, which usually already has to pay the tax upon importing the goods. However, reimburse-

ment of the VAT paid may then be requested by means of the so-called input tax deduction, if the recipient of the goods supplied is an entrepreneur, since, according to German law, ultimately only the end user has to bear the tax.

Corresponding applications are to be filed with the Federal Central Tax Office no later than within six months of expiry of the calendar year. An application may only be filed if the amount of the refund is at least € 500 (during the fiscal year, min. € 1,000). In addition, the applicant must prove that he or she is an entrepreneur. For this purpose, the Federal Central Tax Office requires an official confirma-tion by the Philippine authorities.

B2B or B2C? - It becomes more complicated if it is not goods that are supplied, but something else, e.g. a service. The tax liability then depends upon where the service was performed. Accordingly, a service which was performed in Germany is taxed in Germany and a service which was performed in the Philippines is taxed in the Phil-ippines.

In principle, the following ap-plies: Should the recipient of the service be a company (a so-called "B2B" or "business-to-business" transaction), the recipient's Head Office is deemed the place where the service is performed. Should, however, a service be provided to

a consumer (a so-called "B2C" or "business-to-consumer" transac-tion), the service provider's Head Office is deemed the place where the service is performed. There are, however, yet other special German and European regulations which may be applied, which are to be observed in individual cases.

Simplification through the "re-verse charge" procedure - Should services be performed in Germany by Philippine companies, in so far as it is a company the German re-cipient must notify the VAT to the German authorities, may, however, simultaneously claim it as input tax (the so-called "reverse charge procedure"). In that way, both the Philippine service providers and the German tax authorities save a great deal of effort and expense.

If in doubt, obtain information in advance -The foregoing tips natu-rally only provide a rough over-view of the fiscal circumstances in Germany. In case of doubt, it is advisable to clarify whether VAT requires to be paid in Germany prior to providing the supplies or services. At a tax rate of 19%, the planned profit margin can other-wise quickly be used up.

Information on taxation in Germa-ny can be obtained from the Ger-man tax authorities or specialised firms of lawyers and tax accoun-tants. Information requests can also be coursed through ECCP.

The handling of Philippine Companies in Germany in regard to VATBy Peter Neuberger, MerzArnoldWuepper, Rechtsanwalt, Tax & Consulting Senior

BUSINESS REVIEW 39June 2011

Member’s Corner

ACACIA HOTELS MANILA 5400 East Asia Drive cor. Commerce Avenue Filinvest Corporate City, Alabang Muntinlupa City Tel. No. : 842-3711Fax. No. : 403-8847Email : anne.devera@acaciahotelmanila.comPrimary Contact : Ramon E. Martinez General ManagerServices : Hotel Service, Food and Beverage

ACE HARDWARE PHILIPPINES SM Corp. Office BuildingB JW Diokno Blvd. MOA Complex Pasay City Tel. No. : 552-7217Fax. No. : 552-7212Email : www.acehardware.comPrimary Contact : Johnny O. CobankiatServices : Retail Sale APHROCHEM INTERNATIONAL TRADING No. 44 Tupoz St. Pasig City Tel. No. : 861-5736Fax. No. : 642-2001Primary Contact : Nathalie Choy Business Development DirectorServices : MD Sterilizing and Disinfecting Solutions,

ZAPP, Alcogel ; Retail and General Merchandise

DE VERE & PARTNERS PHILIPPINES LTD. Suite 1006, 88 Corporate CenterSedenu Street, CBD Salcedo Village Makati City Tel. No. : 846-2545Fax. No. : 552-2837Email : paul.thompson@devere-group.comWebsite : www.devere-group.comPrimary Contact : Paul Thompson ManagerServices : Independent Financial and tax saving advice

FILINVEST PREMIERE SALES GROUP Rizal Drive cor 29th St. Bonifcio Global City Taguig , Metro ManilaTel. No. : 856-7321Primary Contact : Alvin A. Bobadilla VP - Sales and MarketingServices : Real Estate

JAMILA AND COMPANY SECURITY SERVICES 81 JCI Corp. Center, Lantana St. Cubao Quezon City Tel. No. : 411-9000; 722-9516Fax. No. : 414-9798Email : info@jci.com.phWebsite : www.jci.com.phPrimary Contact : Sergio S. Jamila PresidentServices : Security Services Provider

JOBSDB PHILIPPINES INC. Suite 905-907 Taipan Place, Emerald Avenue, Ortigas Center Pasig City Tel. No. : 914-8000/ 637-3333Fax. No. : 914-8001Primary Contact : Ms. Jayjay Viray Managing DirectorServices : Online Job Portal

JS PHILIPPINES GLOBAL CORPORATION Unit 3 #88, Amang Rodriguez Jr. Avenue, Santolan Pasig City Tel. No. : 681-8228; 682-2881Email : jscpg@plftdsl.netWebsite : www.jspgc.comPrimary Contact : Jordan S. Pascual President/ CEOServices : Import/Export/Distribution

KSEARCH ASIA CONSULTING INC. 22/F Corporate Center Building139 Valero St., Salcedo Village Makati City Tel. No. : 817-0322; 894-1350; 810-0821Fax. No. : 893-6259Email : jobs@ksearchasia.comWebsite : www.ksearchasia.comPrimary Contact : Manuel R. Guillermo President and Managing DirectorServices : Executive Search Services

M2.0 COMMUNICATIONS 94 Scout Castor Brgy. Laging Handa Quezon City Tel. No. : 332-1031; 376-6643Fax. No. : 332-1031 loc 108Email : stella.capinpuyan@m2comms.comWebsite : www.m2comms.comPrimary Contact : Magtangol A. Roque Managing DirectorServices : Advertising

NOKIA (PHILIPPINES), INC. 20/F & 40/F Philamlife Tower8767 Paseo de Roxas 1227 Makati City, Metro Manila Tel. No. : 754-1500: 754-1600: 754-1777Fax. No. : 754-1576Website : www.nokia.comPrimary Contact : Benoit Michael Marie Nalin General ManagerServices : Importer, Sales & Marketing, System & Service

Integration & Training Services

UNISON COMPUTER SYSTEMS 120 E. Rodriguez Jr. Ave. cor Ortigas Ave. Brgy. Bagong Ugong Pasig City Tel. No. : 620-2988Fax. No. : 638-2885Email : info@unison.com.phWebsite : www.unison.com.phPrimary Contact : Willy O. Sy PresidentServices : authorized and certified HP and Dell PC

service center

NeW MeMBerS

BUSINESS REVIEW 41June 2011

Member’s Corner

Liquigaz Philippines Corporation, a wholly-owned subsidiary of SHV Gas of the Netherlands, was established in 1995. SHV Gas is the world leader in the distribution of Liquefied Petroleum Gas (LPG) and oper-

ates in 27 countries. SHV Gas is a subsidiary of SHV Holdings N.V., a privately owned Dutch company with more than 100 years of trading experience.

In 2005, the Philippine government promised measures to promote the use of cleaner fuels. Liquigaz saw this as an opportunity to launch LPG as a fuel for cars. There was no alternative fuel in the Philippines at the time. The main taxi companies were quick to show interest in switching from gaso-line to LPG. Currently, Liquigaz has a market share of about 50%, supplying through its own filling and allied stations.

With the introduction of Autogas in the market, Liquigaz is launching other LPG Innovations that will address the government’s goal to provide cleaner alternative fuels in the market. First, Liquigaz is conducting a study about the usage of LPG in diesel-running vehicle higher than 200HP. Initially, this technology shall attract provincial bus and truck hauling companies with high fuel consumption because of its fuel savings and environmental ben-efits. Also, Liquigaz is promoting the conversion of diesel boilers to LPG. With the same economical and environmental benefits it provides, LPG is the best alternative energy source available in the market.

Due to less emission of Nitro Oxide (NOx) and Particulate Matter (PM10) – harmful gases that have damaging effects on human health – the likelihood of impaired perception and thinking, drowsiness, slow reflexes, uncon-sciousness and even death are reduced. With cleaner air, people become

less susceptible to viral infections, respiratory diseases and dysfunctions such as lung cancer and asthma. Environmentally, LPG has had positive effects in improving air quality and, ultimately minimizing human health damage.

Being the fastest growing LPG player in the country, Liquigaz is continually innovating LPG applications to ensure that the company is being sustain-able in doing its business and serving its society. There are more LPG inno-vations in the pipeline that will surely help companies to achieve produc-tion efficiency and aid the government in improving air quality.

Sources: www.liquigaz.com, www.autogas.com.ph, www.whylpg.com

Liquigaz: Improving Air Quality, Improving Lives

published by European Chamber of Commerce of the Philippines (ECCP)

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eCCp Board of directorsHubert d’Aboville - PresidentErik Moeller Nielsen - Vice PresidentMichael Raeuber - Vice PresidentCyril Rocke - TreasurerEdgar Chua - DirectorRichard Eldridge - DirectorNeil Elias - DirectorRico Gonzales - DirectorPeter Labrie - DirectorGuenter Matschuck - DirectorJohn Miller - DirectorBernard Poplimont - DirectorJose Luis Romero-Salas - DirectorBernhard Krueger-Sprengel - DirectorRichard Strollo - Director

SubmissionsArticles and other materials of interest to the general membership are actively solicited and may be sent to the Chamber All materials submitted for publication become the Chamber’s property and are subject to editorial review and revisions.

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Business Review www.eccp.com

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reasons why you should join the ECCP14

BUSINESS REVIEW44 June 2011

Impressum