EM 522

MINING, ENVIRONMENTAL LAWS,

CONTRACTS AND ETHICS

DEFINITION OF TERMS:

a) Excise Tax – A tax imposed on goods manufactured or produced in the Philippines for
domestic sale or consumption or any other disposition. It is also imposed on things that are
imported.

b) Value-Added Tax – It is a form of sales tax. It is a tax on consumption levied on the sale of
goods and services and on the imports of goods into the Philippines. It is an indirect tax, which
can be passed on to the buyer.

c) Capital Gain Tax - A tax imposed on the gains presumed to have been realized by the seller
from the sale, exchange, or other disposition of capital assets located in the Philippines,
including pacto de retro (It means sale with stipulation for repurchase. It is a principal
contract. In sale with. pacto de retro the title is conveyed; in mortgage not.) sales and other
forms of conditional sale.

d) Donor’s Tax - A tax on a donation or gift, and is imposed on the gratuitous transfer of
property between two or more persons who are living at the time of the transfer. It shall apply
whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether
the property is real or personal, tangible or intangible.

e) Easement – The right to use the real property of another for a specific purpose.

f) Just Compensation - Section 17 of Republic Act No. 6657 has defined the parameters for the
determination of the just compensation, viz:

Section 17. Determination of Just Compensation. – In determining just compensation, the

cost of acquisition of the land, the current value of like properties, its nature, actual use and
income, the sworn valuation by the owner, the tax declarations, and the assessment made by
government assessors shall be considered. The social and economic benefits contributed by the
farmers and the farm workers and by the Government to the property as well as the
nonpayment of taxes or loans secured from any government financing institution on the said
land shall be considered as additional factors to determine its valuation.

The Congress has thereby required that any determination of just compensation should
consider the following factors, namely:

a) the cost of the acquisition of the land;

b) the current value of like properties;
c) the nature, actual use and income of the land;
d) the sworn valuation by the owner;
e) the tax declarations;
f) the assessment made by government assessors;
g) the social and economic benefits contributed to the property by the farmers and
farmworkers and by the Government; and
h) the fact of the non-payment of any taxes or loans secured from any government
financing institution on the land.

h) Authorized capital - The amount of capital with which a company is registered with the
registrar of companies (body responsible for registration of companies). It is the maximum
amount of capital which a company can raise through shares i.e. shared capital can be
maximum up to the authorized capital and not beyond. Due to this reason companies are
registered with such authorized capital which is well above their current needs of financing so
 that if more is needed in future then it is easily possible. Authorized capital is also called
Registered capital or Nominal capital.

1) Subscribed capital - The amount of capital (out of authorized capital) for which company
has received applications from the general public who are interested in buying shares. If
this term is too technical to be understood then subscription is simply an application in
which investors expresses his interest to buy shares in the company. Usually only that
much shares are subscribed which company intends to issue later. But sometimes, if
company is in good shape then more and more people will be interested in buying shares
and in this case over-subscription will be the result. But if company’s financial position is
not sound or due to other factors it may be possible that subscriptions are received for
lesser then intended shares in which case there will be under-subscription.

2) Issued capital - The amount of capital (out of subscribed capital) which has been issued by
the company to the subscribers and thus are now shareholders.

3) Called-up capital - In some jurisdictions, company is permitted to ask for only part of the
total issued capital i.e. company will require shareholders to pay only part of the amount of
the shares they hold and not to pay fully. The partial amount (out of issued capital) so
asked by the company from the shareholders out of the total value of shares is called-up
capital.

4) Paid-up capital - The amount of capital (out of called-up capital) against which the
company has received the payments from the shareholders so far.

─ The amount of a company's capital that has been funded by shareholders.

Example:

ABC Ltd was registered with registrar with a registered capital of Php 20,000,000.00 where
each share is of Php 10.00.

In response to the advertisements made by the company to buy shares in the company
applications have been received for 1,000,000 shares but company actually issued 700,000
shares where company has called for Php 8.00 per share.

All the calls have been met in full except three shareholders who still owe for their 6000 shares
in total.

Solution:

Authorized capital = Php 20,000,000

Subscribed capital = 1,000,000 x Php 10.00 = Php 10,000,000.00

Issued capital = 700,000 x Php 10.00 = Php 7,000,000.00

Called-up capital = 700,000 x Php 8.00 = Php 5,600,000.00

Paid-up capital = 5,600,000 – (6000 x Php 8.00 ) = Php 5,552,000.00

i) Difference between Capital and Capital Stock - Capital is the overall amount invested by
investors or owners in business while capital stock is the share of capital which any
shareholder can purchase if he wants to invest in a company.

j) Ad Valorem Tax (Latin for "according to value") – It is a tax whose amount is based on the
value of a transaction or of property. It is typically imposed at the time of a transaction, as in
the case of a sales tax or value-added tax (VAT).