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The force majeure of 2020









By: Euney Marie Mata-Perez on December 31, 2020

2020 will always be a year the world cannot forget. At its start, we saw the eruption of the beautiful Taal Volcano. And then we faced a force majeure like no other — the Covid-19 pandemic, prompting countries to try containing it, including imposing lockdowns.

Covid-19 measures

Governments all over the world responded to the pandemic with several measures. In the Philippines, Republic Act (RA) 11469, or the “Bayanihan to Heal as One Act” (Bayanihan 1) was passed. This law declared a national health emergency and authorized President Rodrigo Duterte to adopt emergency measures to respond to the health crisis. It also extended statutory deadlines and timelines to ease the burden of taxpayers suffering from Covid-19-related mobility restrictions.

This was followed by RA 11494, or the “Bayanihan to Recover as One Act” (Bayanihan 2), which extended the carryover period of losses incurred in 2020 and 2021 to five years, among others.

The Bureau of Internal Revenue (BIR) also made several issuances extending tax deadlines. This include the extension of the Tax Amnesty on Delinquents (TAD) until June 2021. The original deadline for availing of the TAD was Dec. 31, 2020, as stated under Revenue Regulations (RR) 15-2020. This was an amendment to earlier BIR issuances to implement RA 11213, or the “Tax Amnesty Law.”

Tax Code amendments

We finally saw the Senate approve Senate Bill 1357, or the “Corporate Recovery and Tax Incentives for Enterprises Act” (Create), which intends to reform our corporate income tax (CIT) and incentive system and proposes significant amendments to our National Internal Revenue Code (Tax Code). We are disappointed that Create was not passed into law or adopted by the House of Representatives in toto in 2020. The delay in its passage would bring confusion on the effectivity of the reduced CIT.

Amid the pandemic, our people need government support, not just by merely extending tax deadlines, but by offering real tax benefits, which the immediate lowering of the regular CIT rate to 25 percent (or 20 percent for smaller businesses) would bring about. Thus, we urge our legislators to act expeditiously on this significant tax measure.

Nonpassage of economic measures

We also, unfortunately, did not see the passage of other economic measures, like the proposed amendments to the Retail Trade Liberalization Act (RTLA), Foreign Investment Act, and the Public Service Act (PSA).

The PSA amendments would have eased the nationality restrictions on various industries by removing the nationality restriction on public utilities. The RTLA amendments were supposed to reduce the minimum capital for foreign enterprises from the current $2.5 million to $200,000. This would also eliminate the barrier to market access of foreign investors and may achieve the law’s goal to provide Filipino consumers with lower prices, higher-quality goods, better services, and wider range of choices.

Digital Economy Taxation Act

The government is yet to set clear rules on the taxation of the digital economy. The House has proposed House Bill 6765, or the “Digital Economy Taxation Act of 2020,” which seeks to impose value-added tax on online transactions of goods and services, and requires nonresidents rendering digital services in the Philippines to have a resident agent. For its part, the Senate filed Resolution 410, which seeks the taxation of multinational online streaming services and the digital economy. But as of today, Congress is yet to pass a law that specifically addresses online transactions and businesses.

Other BIR issuances

We saw the BIR made some significant issuances other than those related to Covid-19. We saw it move on transfer pricing with the issuance of the controversial RR 19-2020, later amended by RR 34-2020, which prescribed the guidelines and procedures on the submission of transfer-pricing documentation and other supporting documents, amending pertinent provisions of RR 19-2020 and 21-2002.

The BIR also offered a voluntary assessment and payment program (VAPP) with the issuance of RR 21-2020. RR 33-2020 extended the deadline for the VAPP until June 2021.

Indeed, looking back, 2020 was a year like no other. We saw the passage of several issuances, but we are disappointed by the nonpassage of major tax economic measures.

There is actually much that the government, especially our legislators, can and should do.

We continue to hope that our government officials continue to work on passing those aforementioned measures.

In any case, we look forward to 2021 with optimism. We wish you all a blessed and prosperous new year.

The force majeure  of 2020

Contact Information

Our office address:

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Euney Marie J. Mata-Perez

Mark Anthony P. Tamayo

Gerardo Maximo V. Francisco