Tax laws passed and pending bills
By: Atty. Euney Marie Mata-Perez on January 9,2025
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”): (a) Republic Act (RA) No. 11976, or the Ease of Paying Taxes (EOPT) Act, which was passed in January 2024, (b) CREATE More Act or RA No. 12066 which was passed in November 2024, and (c) Republic Act RA No. 12023 imposing value-added tax (VAT) on digital services which was passed in December 2024.
On 13 June 2024, RA No. 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 made uniform the basis for VAT, both for 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. It 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 procedure on the claims for refund of erroneously paid or illegally collected taxes.
The CREATE More Act (RA No. 12066) 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 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 No. 12023, which imposed value-added tax (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 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, on the other hand, 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 passed in 2024.
Still pending at the Senate is the PIFITA or the Passive Income and Financial Intermediary Taxation Act Bill (Senate Bill No. 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 No. 4339 was approved on third and final reading by the House of Representatives on November 14, 2022, it is still pending with the Senate up to this date.
As an alternative and “to enhance the efficiency and dynamism of the Philippine capital markets,” House Bill No. 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 No. 2865. The pending bill proposes to reduce immediately the stock transaction tax from 0.6% to 0.1%, and reduce the tax on dividends received by non-resident individuals from 25% to 10%, to harmonize the cash and property dividend rate on dividends received by resident and non-resident individuals.
Erstwhile, the Proposed Mining Fiscal Regime (House Bill No. 8937), which has been approved by the House of Representatives on third reading in September 2023, is still pending with the Senate as Senate Bill No. 8626. This bill seeks to propose a single fiscal regime applicable to all large-scale metallic mining operations in the Philippines.[JS1]
When Congress resumes session next week, they will have barely three weeks to conduct sessions before they adjourn in February in view of the coming elections. They will next resume for a few weeks in May before they fully adjourn for this Congress.
There seems to be not much time left for the passage of the capital markets bills mentioned above. However, considering the significant need to pass them, we still hope that Congress will treat them as priority bills and pass them this year.
Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer and has been ranked as one of the top 100 lawyers of the Philippines by Asia Business Law Journal and is the Chair of the Tax Committee of the Management Association of the Philippines. This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question or comment regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com