THE beginning of every year is always a good opportunity to look back at the events of the past year, to give thanks and learn from them, as well as to look forward and plan ahead.
In 2024, we saw the passage of the following laws amending our National Internal Revenue Code (“Tax Code”): Republic Act (RA) 11976, or the Ease of Paying Taxes (EOPT) Act, that was passed in January 2024; Create More Act, or RA 12066, which was passed in November 2024; and Republic Act 12023, imposing value-added tax (VAT) on digital services that was passed in December 2024. On June 13, 2024, RA 12001, or the Real Property Valuation and Assessment Reform Act (RP-VAR Act), was passed.
These laws are game changers relative to Philippine taxation.
The EOPT Act made tax filing and payment easier by allowing the filing of returns and payment of all internal revenue taxes manually or electronically with any authorized agent bank or revenue district office (RDO).
It also standardized the basis for VAT, both for the sale of goods and services, to be “gross sales,” changing the landscape of VAT taxation on service providers, which were previously taxed based on gross receipts. The new law also introduced classifications of taxpayers into micro, small, medium and large taxpayers for income tax purposes, as well as low, medium and high-risk claims for value-added tax (VAT) refund purposes. Further, it amended Sections 204 and 229 of our Tax Code to modify the rules and procedures on the claims for the refund of erroneously paid or illegally collected taxes.
The Create More Act, meanwhile, introduced amendments to provisions in our Tax Code on income tax, VAT, especially on VAT zero-rating on purchases, incentives enjoyed by registered business enterprises, on powers of the Fiscal Incentives Review Board and the investment promotion agencies, on refunds of excise taxes on petroleum products sold to international carriers, and on electronic invoicing, among others.
RA 12023, which imposed VAT on digital services and amended several provisions of our Tax Code, expanded the “nexus” of VAT taxation on digital services to provide that “digital services delivered by nonresident digital service providers shall be considered performed or rendered in the Philippines if the digital services are consumed in the Philippines.”
It introduced a definition of “digital services” in Section 108-A of the Tax Code to refer to any service that is supplied over the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated. Digital services, the new law declared, shall include online search engines, online marketplaces or e-marketplaces; cloud services; online media and advertising; online platforms; or digital goods.
The RP-VAR Act, meanwhile, will significantly change the landscape of our real property valuation (and consequently, the taxation of real property). It mandated that all real properties be valued or appraised based on prevailing market values in the locality where they are situated, in conformity with the Philippine Valuation System (PVS), which shall conform to international standards of valuation. The RP-VAR Act also provided for an amnesty on real property taxes, and set caps on subsequent increases in valuation, for the benefit of taxpayers.
Pending bills
There were laws we hoped would be passed but were not in 2024. Still pending at the Senate is the Pifita, or the Passive Income and Financial Intermediary Taxation Act Bill (Senate Bill 1848), which seeks to reform the taxation of capital income and financial services by simplifying rates and tax bases, and rationalizing the imposition of documentary stamp tax. Although the counterpart House Bill 4339 was approved on third and final reading by the House of Representatives on Nov. 14, 2022, it is still pending with the Senate to this date.
As an alternative, and “to enhance the efficiency and dynamism of the Philippine capital markets,” House Bill 9277, or the “Capital Markets Efficiency Promotion Act” (the CMEPA bill), which also passed third reading at the House of Representatives, is pending with the Senate as Senate Bill 2865.
The bill proposes to reduce immediately the stock transaction tax from 0.6 percent to 0.1 percent and reduce the tax on dividends received by non-resident individuals from 25 percent to 10 percent to
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