Filsyn Corp. said it will take legal steps to assail the Bureau of Internal Revenue tax assessment requiring the listed garments company to pay P280.4 million in alleged tax deficiency.
Filsyn said it will protest the tax deficiency assessment, its interests, surcharges and penalties by the 25 October deadline.
Sought by the BIR from Filsyn are P178.4 million in final withholding tax, P86.0 million in final withholding value added tax, P15.9 million lin documentary stamp tax and P134,000 in penalties. The tax assessment arose from a debt-to-equity swap entered into by Filsyn with the Malaysia Garment Manufacturers (Pte) Ltd.
As part of a strategy to wipe out its deficit, Filsyn restructured its capital accounts and converted its liabilities into equity. This was achieved by increasing its authorized capital stock to P647.3 million from P120 million.
As part of the equity restructuring, Malaysia Garment subscribed to 33.4 million preferred shares of Filsyn in exchange for the conversion of the listed company’s outstanding loan, including interests, of P1.42 billion to equity as payment for the subscription.
The excess amount was recorded as additional paid in capital to wipe out Filsyn’s accumulated deficit.
The BIR viewed the debt-to-equity conversion as constructive receipt of income on the part of Malaysia Garment and therefore subject to final withholding tax.
Filsyn insists the equity restructuring and deed of assignment are separate events and not subject to income tax, VAT, and DST.
