Part 2 Taxes and Fees in Stock!

Purchase tax

Recently I bought 800 SCC shares. I purchased it at P212 per share. The total amount of the purchase is (800x212) P169,600. In addition, I need to pay P500.32 for fees and taxes. Total cash outlay is now P170,100.32 (P169,600+500.32).

FEE	COMPUTATION	AMOUNT
Purchase Price	(800 x P212) x .25%	P169,600.00
Commission	(800 x P212) x .25%	424.00
VAT	P424 x 12%	50.88
PSE Trans Fee	(800 x P212) x .005%	8.48
SCCP	(800 x P212) x .01%	16.96
Total Fees/Taxes		500.32
Total Purchase Price		P170,100.32

When you buy stocks .3% (500.32/169,600) of your money is wiped out and given to the stockbrokers and government right away. This .3% loss is absolute when buying stocks unless you bought stocks whose purchase price is below P8000.

Selling Tax

If the same 800 SC shares were sold at 212 share also, there is no gain or loss isn't it? Wrong. When you sell the stocks you bought, you are losing .8% (1348.32/169,600) of the selling price as fees and taxes. This .8% loss is absolute when selling stocks unless you sold stocks whose selling price is below P8000.

FEE	COMPUTATION	AMOUNT
Selling Price	(800 x P212) x .25%	P169,600.00
Commission	(800 x P5.20) x .25%	424.00
VAT	P424 x 12%	50.88
PSE Trans Fee	(800 x P5.20) x .005%	8.48
SCCP	(800 x P5.20) x .01%	16.96
Sales Tax	800 x P5.20 x .005	848.00
Total Fees/Taxes		1,348.32
Total Selling Price		P168,251.68

Total Taxes/Fees

In the illustration above, when you buy a stock, you lose .3% and when you sell a stock you lose .8%. So, .3% + .8%=1.1% fees and taxes. Thus, the total taxes and fees you are giving away when you buy a stock and sell it is 1.1% of your money. Thus, when you buy a stock, the percentage which you must get must be more than 1.1%. In the illustration above, I bough SCC shares at 212 and sold it 212 also. By doing that, I lost 1.1% of my money. What shall we do now in order to gain that 1.1%? We need to let the share price of the company to appreciate and let your share of the dividends from the Company you bought be credited in your portolfio.

The 1.1% Margin

Whenever you are selling a stock, you must have at least 1.1% increase in share price to break even. So whenever your stock increase by 1.1%, dont be excited yet because you are just break even. A lot of stocks prices are increasing dramatically in one day. So, this 1.1% margin shouldn't be a concern at all especially if you know the stocks who will appreciate in share price. My stocks over the last six months have grown more than 10%, enough to cover all the expenses and taxes.

What is SCCP Fee

SCCP means Securities Clearing Corporation of the Philippines. It is a private institution organized primarily as a clearance and settlement agency for depository eligible trades executed in the PSE. SCCP received its permanent license to operate on January 17, 2002. It is responsible for establishing the liabilities between trading participants of the Exchange; synchronizing the settlement of funds and the transfer of securities; guaranteeing the settlement of trades in the event of trading participant default and administering the appropriate risk management functions in order to ensure settlement. SCCP assumes the role of guarantor for trading participant transactions in the Exchange along with the maintenance and administration of a trade guaranty fund called the Clearing and Trade Guarantee Fund. The Philippine Stock Exchange has 51% holdings in the SCCP while the remaining 49% is held by Philippine commercial banks.