Investors Trading on the Singapore Exchange – Payment of Stock Transaction Tax

PAYMENT OF STOCK TRANSACTION TAX

Unless otherwise defined, all capitalised terms used herein shall bear the same meanings as in the introductory document issued by Emperador Inc. dated 20 June 2022 (the “Introductory Document”).

The trading of our shares (“Shares”) on the Singapore Exchange Securities Trading Limited (the “SGX-ST”) is subject to a stock transaction tax (“STT”) of 0.6% of the gross selling price or gross value in money of the Shares sold. The term gross selling price or gross value in money refers to the total amount of money or its equivalent which the purchaser pays the seller as consideration for the Shares. The STT is a final tax due on and payable by the seller of the shares, and the STT is required to be collected by and paid to the Philippine tax authorities by the selling stockbroker on behalf of the seller.

Failure by shareholders or Singapore brokers to pay or to remit STT payable to the BIR may result in a breach of law and/or contract. See “Risks and implications on the selling Singapore broker and selling shareholder arising from the failure to pay, collect and/or remit STT to the BIR” below and the Introductory Document for further details.

Collection and payment of STT on the sale of our Shares traded on the SGX-ST to the Philippines Bureau of Internal Revenue (“BIR”)

The STT payable by the selling shareholder of our Shares traded on the SGX-ST will be collected and withheld by his Singapore broker on his behalf at the date of settlement of the trade, being the second Market Day following the transaction date.

Singapore brokers may remit the collected STT to the BIR via BDO Securities Corporation, which has been appointed by us on a non-exclusive basis as the receiving and remitting agent (the “Receiving Agent”) for the STT payable on the sale of our Shares traded on the SGX-ST. Pursuant to the contractual arrangements to be entered into between the Receiving Agent and the Singapore brokers that choose to remit the collected STT to the BIR via the Receiving Agent, such Singapore brokers will remit the total amount of STT collected and withheld by each of them in respect of our Shares traded on the SGX-ST onwards to a nominated Singapore bank account maintained by the Receiving Agent (the “Received STT Amount”).

The Receiving Agent will remit the Received STT Amount received from Singapore brokers to a Philippines bank account maintained by the Receiving Agent with BDO Unibank, Inc. in the Philippines. The Receiving Agent will, if necessary, convert the Received STT Amount into the Philippine Pesos equivalent valued at the date of receipt of funds, and remit the Received STT Amount to the BIR’s authorised agent bank and file the corresponding STT report in the form prescribed by the BIR by no later than the fourth Philippines business day following the date of receipt by the Receiving Agent of the Received STT Amount from the Singapore brokers.

Under Section 10(a) of the BIR Revenue Regulations 6-2008, the selling stock broker who effected the sale has the duty to collect the tax from the seller upon issuance of the confirmation of sale, issue the corresponding official receipt thereof and remit the same to the BIR within five banking days from the date of collection thereof and to submit a weekly report to PSE a true and complete return, which shall contain a declaration, that is made under the penalties of perjury, of all the transactions effected through the selling stockbroker during the preceding week and of taxes collected by him and turned over to the BIR. Pursuant to clarifications received from the BIR, as substituted compliance with the provisions of Section 10(a) of the BIR Revenue Regulations 6-2008, the Receiving Agent as well as Singapore brokers who do not utilise the services of the Receiving Agent are required to submit the aforementioned weekly report in respect of our Shares traded on the SGX-ST to our Company’s Corporate Secretary (instead of to the PSE). The Company’s Corporate Secretary shall in turn keep and compile the submissions of the Receiving Agent and the Singapore brokers who do not utilise the services of the Receiving Agent, file a reconciliation statement of the trades of the Singapore brokers with the reports received from either the Receiving Agent or directly from Singapore brokers who do not utilise the services of the Receiving Agent, and file and transmit to the BIR a consolidated return of all transactions by the Receiving Agent and the Singapore brokers who do not utilise the services of the Receiving Agent in respect of our Shares traded on the SGX-ST on a monthly basis.

The Company will, on a monthly basis, announce on SGXNET a list of all Singapore brokers who are utilising the services of the Receiving Agent. The announcement will also include clear notice of the responsibilities and liabilities of Singapore brokers who choose not to utilise the services of the Receiving Agent when trading our Shares on the SGX-ST. The list of all Singapore brokers which have been onboarded by the Receiving Agent can also be found here.

For avoidance of doubt, it is not necessary for Singapore brokers to remit the STT to the BIR via the Receiving Agent, and they may remit the STT to the BIR via other avenues, such as through their Philippines affiliated brokers. For Singapore brokers that choose to remit the STT to the BIR via the Receiving Agent, in addition to the STT payable, the Receiving Agent intends to charge a 0.03% processing fee of the gross selling price or gross value in money of the shares of stock sold for its services provided in respect of, among others, foreign exchange, remittance, processing and BIR reporting (the “Receiving Agent Fee”). The Singapore broker may either absorb the Receiving Agent Fee or pass the costs on to the selling shareholder.

For avoidance of doubt, the Receiving Agent Fee will not be charged to selling shareholders that trade through Singapore brokers that remit the collected STT to the BIR via other avenues, such as through their Philippines affiliated brokers, although separate charges for such remittance services may apply (if any).

The Receiving Agent Fee may be subject to adjustment depending on the commercial arrangements entered into between the Receiving Agent and the Singapore broker. Investors are advised to consult with their respective Singapore brokers in respect of the STT payable to the BIR as well as additional fees and charges (if any) that may apply. Investors are further advised that the salient terms of the contractual arrangements that will be entered into between themselves and the Singapore broker may differ depending on the terms and conditions of each Singapore broker. Where there is any change to these contractual arrangements, it is envisaged that such changes will be made known to the investors in accordance with the relevant Singapore brokers’ internal policies and processes, and investors should consult their respective Singapore brokers accordingly.

In the event that a Singapore broker has arranged to remit the collected STT to the BIR via the Receiving Agent and such arrangement is terminated by either the Singapore broker or the Receiving Agent, or in the event that the Receiving Agent no longer acts as the receiving and remitting agent for any reason, the Singapore broker will need to provide alternative modes of STT payment to comply with the applicable regulations (including ensuring that they have in place the necessary procedures and controls in the collection, withholding, remittance and reporting of the STT for the sale of our Shares on the SGX-ST in order to continue offering services to facilitate the trading of our Shares on the SGX-ST). Until such Singapore broker is able to provide an alternative payment method, selling shareholders trading through such Singapore broker may be unable to trade our Shares on the SGX-ST.

The below illustrates the STT funds flow where the services of the Receiving Agent are utilised by the Singapore brokers:

Risks and implications on the selling Singapore broker and selling shareholder arising from the failure to pay, collect and/or remit STT to the BIR

In the event that a selling shareholder does not pay or a Singapore broker collects and withholds the STT collected from the selling shareholder but fails to remit such STT amounts onwards to the BIR or the Receiving Agent, or the Singapore broker fails to provide the requisite STT reports, this may result in a breach of law on the part of the selling shareholder or (as the case may be) the Singapore broker which may attract interest charges, fines and civil and/or criminal liability. Pursuant to Sections 248 and 249 of the National Internal Revenue Code (“NIRC”) (Republic Act No. 8424 as amended by Republic Act No. 10963), any amount of STT not paid when due is subject to a surcharge of 25% and interest at the rate of 12% per annum until fully paid. Pursuant to Section 255 of the NIRC, if a taxpayer wilfully fails to pay the tax, the taxpayer may, upon conviction, be punished by a fine of not less than ₱10,000 and suffer imprisonment of not less than 1 year but not more than 10 years. In addition, pursuant to Section 255 of the NIRC, the failure by the selling stockbroker to collect and/or remit the STT to the BIR may attract a range of penalties, including, among others, a penalty equal to the total amount of STT not remitted, a fine of not less than ₱10,000 and imprisonment of not less than one year but not more than 10 years.

In addition, there may be uncertainty surrounding how the Philippine tax authorities or other regulators will regulate or enforce the collection of STT on Singapore brokers and selling shareholders. There are limited precedents of PSE-listed companies with a secondary listing on a foreign exchange (including the SGX-ST) and accordingly it is difficult to predict all relevant risks, including uncertainty surrounding how the Philippine tax authorities or other regulators will enforce its tax laws on foreign (including Singapore) brokers and selling shareholders. Consequently, there could be unforeseen adverse consequences to our Company and foreign (including Singapore) brokers and selling shareholders, which may result in a material adverse effect on our business, financial condition and results of operations. There is no assurance that the interpretation and application of the relevant taxation laws by the Philippine tax authorities will not have an adverse impact on our Company, our shareholders, Singapore brokers or our secondary listing on the SGX-ST.

The selling shareholders or (as the case may be) the Singapore broker may also be in breach of the contractual arrangements entered into in connection with the sale of the relevant Shares, or in connection with the collection and remittance of STT to the BIR, for which the party in breach could become liable to remedy and/or for damages.

Prospective purchasers and holders of our Shares on the SGX-ST are advised to consult their own advisers concerning the tax, legal and other consequences of their purchasing, holding, disposing of or dealing in our Shares and to consult with their respective Singapore brokers in respect of the payment of STT and additional fees and charges (if any) that may apply in respect of the payment of STT to the BIR.

Please refer to the Introductory Document for further details regarding, among others (a) the collection and payment of STT on the sale of our Shares traded on the SGX-ST to the BIR and (b) the risks and implications on the selling Singapore broker and selling shareholder arising from the failure to pay, collect and/or remit STT to the BIR. In particular, investors should note the following risks:

• stock transaction tax is payable by selling shareholders. See “Risk Factors – Risks relating to an Investment in our Shares – Stock transaction tax is payable by selling shareholders and required to be collected by selling stockbrokers. Failure by shareholders or Singapore brokers to pay or to remit stock transaction tax payable to the BIR may result in a breach of law and/or contract.” of the Introductory Document; and
• there may be uncertainty surrounding how the Philippine tax authorities or other regulators will regulate or enforce the collection of stock transaction tax on Singapore brokers and selling shareholders. See “Risk Factors – Risks relating to the Philippines and Other Jurisdictions – There are uncertainties regarding the interpretation and enforcement of laws, rules and regulations in some jurisdictions in which we do business.” of the Introductory Document.

The information in the Introductory Document is provided strictly for information only and should be read as of its date. The information is not and does not constitute or form part of, and is not made in connection with, any offer, invitation or recommendation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of any entity.