Legislative Tax Developments to expect in 2024
By: Atty. Euney Marie J. Mata-Perez on January 4,2024
Happy new year everyone! Time flies so fast, and we are now in 2024. It has been four years that our law firm, Mata-Perez, Tamayo & Francisco has been contributing weekly to this column, More to Follow Column of The Manila Times. It has been and continues to be an enriching experience for us, including our lawyers and associates, to write for The Manila Times, since writing for this column impels us to study and be updated on recent tax and other laws and jurisprudence.
In any case, as start for 2024, we look back at the tax laws passed in 2023 and look forward to what shall be in store in 2024.
In 2023, we did not see major tax laws passed. The remaining bills of the Tax Reform, namely the Passive Income and Financial Intermediary Taxation Act (PIFITA) and the Real Property Valuation Reform Act remained pending.
We did see the approval (or lapse into law) on August 5, 2023 of Republic Act No. 11956 (“RA 11956”), the Extension of Estate Tax Amnesty, which extended the deadline to avail the estate tax amnesty for another two years, or until June 14, 2025. The law also extends the coverage of the amnesty to the estates of persons who passed away on or before May 31, 2022.
What can we expect in 2024 then?
In the offing is the approval of the Ease of Paying Taxes Bill (EOPT), Senate Bill No. 2224, which has passed third reading at the Senate in September 27 2023, and is just waiting for the President’s approval (or its lapse into law soonest). This bill basically seeks to amend our National Internal Revenue Code (“Tax Code”), as follows: (a) allows the payment of taxes manually and electronically at any authorized agent bank, Revenue District Office (RDO), or authorized tax software provider, (b) allows taxpayers to register manually or electronically, (c) makes clear that the obligation to deduct and withhold the tax arises at the time the income has become payable, (d) repeals withholding of tax as a requirement for deductible payments from gross income, and (e) makes uniform the basis for VAT on sale of goods and services, and thus, shifts basis for VAT for sale of services to gross sales (which currently, is based on gross receipts). “Gross sales” is defined as the amount which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter, or exchange of services that has already been rendered by the seller and the use or lease of properties that have. This bill also seeks to provide not only a more efficient and effective tax administration but also an update on the taxation system while protecting and safeguarding taxpayer rights.
Another bill to watch out for is the Digital Services Tax Bill, House Bill (HB) No. 4122 and now Senate Bill (SB) No. 250, which aims to impose 12% VAT on the sale of digital services such as the host of online auctions and platforms, subscription-based online services, supplier of goods and online services Thus far, SB is still pending in the Committee on Ways and Means, and a technical working group has been established and has undergone deliberation at least five (5) times within the Committee.
House Bill (HB) No. 8937, a proposed bill Enhancing the Fiscal Regime for the Mining Industry, was approved by third reading by the House of Representatives in September 2023. The bill seeks to amend certain provisions of the Tax Code basically by (a) subjecting large-scale metallic mining operations within mineral reservations to a royalty rate of four percent of the gross output of the minerals or mineral products extracted or produced, (b) imposing margin-based royalty on income from metallic mining operations on large-scale metallic mining operations outside mineral reservations, and (c) imposing royalty rate equivalent to one-tenth of one percent for small-scale metallic operations. In addition, it imposes windfall profits tax would also be imposed for each taxable year on income from metallic mining operations. The bill also seeks to limit interest expense deductions for metallic mining contractors if, at any time during the taxable year, their debt-to-equity ratio exceeds the threshold prescribed under the proposed bill.
The bill further requires small-scale miners to register with the Mines and Geosciences Bureau and the Mining Board and encourages them to organize into cooperatives to qualify for the awarding of a People’s Small-Scale Mining Contract.
There is also a draft house (in substitution of house bill no. 8968), popularly labeled as “Create More”, which seeks to enhance the Philippine tax incentives policy and administration. The bill proposes to classify taxpayers, for VAT refund purposes, under a risk-based framework which takes into account the size of the tax refund, track record of the taxpayer, and the completeness and adequacy in form of the required submissions. It also proposes to clarify the rules on the VAT exemption or vat zero rating on the local purchases of goods and services directly attributable to the registered project or activity. Among the rules clarified is that the sale of goods and/or services by a VAT registered seller to registered export enterprises, regardless of location, shall be subject to zero percent (0%) VAT.
All the above shows that still so much to expect in 2024 from the government’s tax legislative agenda.
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 incoming 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.