Bureau of Internal Revenue Issuances
REVENUE MEMORANDUM CIRCULARS
RMC No. 128-2024
November 25, 2024
Providing extension of the deadlines for the filing of tax returns and payment of the corresponding taxes due thereon, including submission of required documents for taxpayers within the jurisdiction of Revenue District Offices of the Bureau of Internal Revenue that were affected by Typhoons “Kristine”, “Leon”, “Marcel”, “Nika”, “Ofel” and “Pepito”
REVENUE DELEGATION OF AUTHORITY ORDERS
RDAO No. 25-2024
November 25, 2024
Delegates to Assistant Regional Director of RR No. 9B-LaQueMar the authority to sign specific documents in the Order in view of the approved leave of absence of RR No. 9B’s OIC–Regional Director.
RDAO No. 26-2024
November 25, 2024
Delegates to OIC-Assistant Regional Director of RR No. 1-Calasiao, Pangasinan the authority to sign specific documents in the Order in view of the applied vacation leave of RR No. 1’s Regional Director.
ADVISORY
Advisory on the Schedule of Availability of the Online Registration and Update System (ORUS)
Please be advised that the Online Registration and Update System (ORUS) will be accessible for use by taxpayers on the following schedule:
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https://bir-cdn.bir.gov.ph/BIR/pdf/ORUS%20ADVISORY%20-%202024.pdf
Advisory on Unavailability/Inaccessibility of the Internal Revenue Integrated System (IRIS).
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https://bircdn.bir.gov.ph/BIR/pdf/Advisory%20Unavailability%20Of%20Internal%20Revenue/
Tax Law
REPUBLIC ACT No. 12022
Official Gazette / October 2, 2024
An act defining the crimes of agricultural economic sabotage, prescribing penalties therefor, vesting jurisdiction over such offenses with the court of tax appeals, providing mechanism for its implementation and enforcement, repealing for the purpose Republic Act No. 10845 or the “Anti-Agricultural Smuggling Act of 2018”
https://www.officialgazette.gov.ph/2024/09/26/republic-act-no-12022/
REPUBLIC ACT No. 12023- VAT on Digital Services
Official Gazette / October 3, 2024
AN ACT AMENDING SECTIONS 105, 108, 109, 110, 113, 114, 115, 128, 236, AND 288 AND ADDING NEW SECTIONS 108-A AND 108-B OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED.
https://www.officialgazette.gov.ph/2024/10/02/republic-act-no-12023/
REPUBLIC ACT No. 12066 – CREATE MORE
Official Gazette / November 13, 2024
AN ACT AMENDING SECTIONS 27, 28, 32, 34, 57, 106, 108, 109, 112, 135, 237, 237-A, 269, 292, 293, 294, 295, 296, 297, 300, 301, 308, 309, 310, AND 311, AND ADDING NEW SECTIONS 135-A, 295-A, 296-A, AND 297-A OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES
https://www.officialgazette.gov.ph/2024/11/08/republic-act-no-12066/
Tax And Business Related News
BIR WEEKENDER BRIEFS
Volume No. 15 Issue No 47 Week ending November 22, 2024
RR 5-Caloocan City filed a criminal case against a taxpayer before the Office of the Provincial Prosecutor of Malolos, Bulacan under the BIR’s Run After Tax Evaders (RATE) Program last November 14.
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https://bir-cdn.bir.gov.ph/BIR/pdf/v15n47%20highres.pdf
BIR holds Public Consultation on proposed VAT regulations on Digital Services
On November 12, 2024, the Bureau of Internal Revenue (BIR) has conducted a Public Consultation at the BIR National Office in Quezon City to discuss the proposed Revenue Regulations (RR) to implement Republic Act (RA) No. 12023, a law amending several sections of the National Internal Revenue Code of 1997 relative to the imposition of Value-Added Tax (VAT) on digital services.
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https://bir-cdn.bir.gov.ph/BIR/pdf/PR91NOV2724.pdf
Tax Justice Network: Philippines’ annual tax losses hit 1.8% of GDP
Business World / November 26, 2024
The Philippines’ annual tax losses reached $6.99 billion, according to the latest estimates in the 2024 edition of the State of Tax Justice by advocacy group Tax Justice Network. This was equivalent of 1.8% of the county’s gross domestic product (GDP), the fourth-highest share in the region and even surpassing Asia’s 0.3% total share. The report monitors the amount of money lost per country in tax to multinational corporations and wealthy individuals who use tax havens to underpay tax.
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https://www.bworldonline.com/infographics/2024/11/26/637056/tax-justice-network-philippines-annual-tax-losses-hit-1-8-of-gdp/
Transfer pricing rules for BPO companies “Let’s Talk Tax”
Business World / Patrick Manuel R. Olarte / November 25, 2024
One of these changes is the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act. Perhaps the industry most impacted by CREATE MORE is the Information Technology Business Process Outsourcing (IT-BPO) sector. IT-BPO entities will greatly benefit from the introduction of the lower corporate income tax rate applicable to those under the Enhanced Deductions Regime (EDR) and the more flexible work-from-home arrangements required to avail of fiscal incentives. With the implementation of such a law, foreign investors are incentivized to indeed “create more” new BPO projects in the Philippines. Current industry players are also expected to expand their operations to fully capitalize on the various incentives introduced. However, along with these benefits comes a heightened responsibility to comply with transfer pricing (TP) requirements. The Bureau of Internal Revenue (BIR) is expected to increase its scrutiny of related party transactions of multinational companies to ensure that they are being priced fairly.
ARM’S LENGTH PRINCIPLE – The most fundamental concept governing TP is the arm’s length principle, which raises the question of whether transactions between related entities are conducted as if they were between independent entities under similar conditions. Such a principle dictates that the prices, terms, and conditions of intercompany transactions should reflect what unrelated parties would agree upon in a comparable transaction in the current market.
ENTITY CHARACTERIZATION – Service providers like BPO entities are generally categorized as either full-fledged service providers or routine service providers. Its FAR profile usually reflects its capabilities to generate profit on its own.
SELECTION OF TP METHODOLOGY – There are generally five methodologies to calculate the arm’s length TP: Comparative Uncontrolled Price (CUP) Method, Cost Plus Method (CPM), Resale Price Method (RPM), Profit Split Method (PSM), and Transactional Net Margin Method (TNMM). For BPO entities, the three methods below are the generally adopted approaches.
TP SUPPORTING FILES – To ensure compliance with regulations and avoid potential disputes with the tax authorities, BPO companies must maintain comprehensive TP supporting files, such as but not limited to TP policy, TPD, contracts and agreements, and/or proof of transactions; the Annual Information Return on Related Party Transactions (BIR Form No. 1709), if required; the Annual Income Tax Return; Audited Financial Statements; and the Advance Pricing Agreement, if any.
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https://www.bworldonline.com/economy/2024/11/25/637137/transfer-pricing-rules-for-bpo-companies/
Recto on G2G partnership with Sweden: PH will have a greater opportunity to invest in more projects that matter most to Filipinos
Department of Finance / November 25, 2024
Finance Secretary Ralph G. Recto is confident that the Philippines will have a greater opportunity to invest in more projects that matter most to the Filipino people with the recently sealed government-to-government financial and development cooperation agreement with Sweden. “I am proud to take our collaboration to the next level. We entered another agreement that will enhance the economic security of Filipinos through increased access to Swedish financing for our development initiatives,” he said during the ceremonial signing of the agreement. The Memorandum of Understanding on Financial and Development Cooperation between the Government of the Republic of the Philippines and the Government of the Kingdom of Sweden was signed between Secretary Recto and Minister for Infrastructure and Housing Andreas Carlson on November 22, 2024.
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https://www.dof.gov.ph/recto-on-g2g-partnership-with-sweden-ph-will-have-a-greater-opportunity-to-invest-in-more-projects-that-matter-most-to-filipinos/
VAT exemption for all prescription drugs
Business World / Marvin Tort / November 26, 2024
The Food and Drug Administration (FDA) recently updated its list of prescription drugs and essential medicines exempt from value-added tax (VAT), adding 16 new medicines for the treatment of cancer, diabetes, and mental illnesses. The VAT exemption aims to make these medicines more affordable for the general public. However, this piecemeal approach, while commendable, falls short of addressing the broader issue of healthcare affordability. Seniors and Persons With Disabilities (PWDs) already enjoy VAT exemptions on their prescription medicines, coupled with a 20% discount. This also extends to their vitamins and supplements, if prescribed. Additionally, certain medicines for hypertension, cancer, mental illnesses, tuberculosis, kidney diseases, diabetes, and high cholesterol are now universally exempt from VAT. These measures are steps in the right direction, but they leave significant gaps.
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https://www.bworldonline.com/editors-picks/2024/11/28/637737/vat-exemption-for-all-prescription-drugs/
CREATE MORE, PPP reforms inspiring ‘cautious optimism’
Business World / Aubrey Rose A. Inosante / November 26, 2024
RECENT economic reforms have raised confidence in the Philippines prospects, though ease of doing business remains the main challenge in attracting investors, business leaders said. “I’m actually very cautiously optimistic. The government has I think made really good strides in enacting the Public-Private Partnership (PPP) Code for one, and the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) law,” according to Cosette V. Canilao, president and chief executive officer (CEO) at Aboitiz InfraCapital, Inc.
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https://www.bworldonline.com/economy/2024/11/26/637537/create-more-ppp-reforms-inspiring-cautious-optimism/
Tax reforms to propel greater economic growth
The Manila Times / Enrico Tabag / November 27, 2024
“THE key to boosting our economy and creating more jobs is inviting more investors in. And the key to inviting more investors in? Taking care of the ones who are already here. With the Create More Act now signed into law, we can look forward to new investors entering the country, and old ones expanding their investments even further.” – Sen. Juan Miguel Zubiri, principal author of Republic Act 12066, also known as the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy. In my article titled “Enhance Create Act to Create More,” published in December last year, I discussed several issues that emerged during the implementation of Republic Act (RA) 11534, also known as the Corporate Recovery and Tax Incentives for Enterprises Act (Create Act) of 2021, and explored potential areas for improvement. On Nov. 11, 2024, President Ferdinand Marcos Jr. signed RA 12066, also known as the Create More Act, aimed at positioning the Philippines as a leading investment hub. Many believe that the amendments to the Create Act significantly strengthened the law, making it more globally competitive, investment-friendly, transparent and reliable. The Create Act states that only local purchases directly and exclusively used in the registered project or activity of registered business enterprises (RBEs) are subject to VAT zero-rating. However, the revenue regulation issued by the Bureau of Internal Revenue (BIR) specifically refers to local purchases made by registered export enterprises, not RBEs, leading to issues in interpretation and implementation. The Create More Act resolves this issue by clarifying that the following goods and services, when used directly in the registered activity, will be eligible for VAT exemptions or zero-rating: janitorial services, security services, financial services, consultancy services, marketing and promotional services, and administrative operations, including human resources, legal and accounting services.
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https://www.manilatimes.net/2024/11/27/business/top-business/tax-reforms-to-propel-greater-economic-growth/2011716
JOINT STATEMENT ECONOMIC MANAGERS UNDETERRED BY POLITICS, WELCOME IMPROVED CREDIT RATINGS
Department of Finance / November 27, 2024
The Philippines’ economic managers welcomed the news that S&P Global Ratings (S&P) has raised the Philippines’ credit rating outlook to “positive,” indicating a possible upgrade to an “A-” rating within 24 months. S&P pointed to the Philippines’ above-average growth potential, effective policymaking, fiscal reforms, improved infrastructure and policy environment, and solid external position as the key factors for the improved rating. These developments may also, in part, reflect the country’s on track fiscal consolidation plan, the recent passage of the CREATE MORE and PPP laws, and its sufficient buffers to ensure unhampered strong growth, supported by its robust consumer base, past structural reforms, and steady inflows coming from overseas remittances and BPO receipts.
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https://www.dof.gov.ph/joint-statement-economic-managers-undeterred-by-politics-welcome-improved-credit-ratings/
NEDA: Targets achievable without new taxes
The Philippines Star / Alexis Romero / November 29, 2024
MANILA, Philippines — President Marcos wants to ensure that his administration’s priority projects for next year will be funded so that development targets are reached, a goal which the National Economic and Development Authority (NEDA) said could be achieved without raising new taxes. Funding for the proposed 2025 national budget and priority projects under the Philippine Development Plan (PDP) were tackled during Marcos’ meeting with economic managers, Speaker Martin Romualdez and Senate President Francis Escudero yesterday at Malacañang. “A big part of that would be the aim to achieve or to enhance food security, to improve the economic climate by way of improving access to infrastructure and the quality of our infrastructure,” NEDA Secretary Arsenio Balisacan told a Palace briefing.
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https://www.philstar.com/headlines/2024/11/29/2403747/neda-targets-achievable-without-new-taxes
16 more drugs exempted from VAT
The Philippine Star / Rhodina Villanueva / November 27, 2024
MANILA, Philippines — The Food and Drug Administration (FDA) has added 16 more drugs to the list of essential medicines that are exempted from value-added tax (VAT) as mandated by law. In FDA Advisory 2024-1618 date-stamped Nov. 22, the agency listed 16 more medicines that must be VAT-exempt as provided under Republic Act (RA) 11534, or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. “The FDA is directed to identify and transmit the VAT-exempt health products to other implementing agencies,” the agency said. “In this regard, provided below are the latest updates on the list of VAT-exempt health products pursuant to RA 11534, effective upon the issuance of this advisory,” it added. Added to the list are medicines for cancer, namely degarelix 80 milligrams, degarelix 120 mg, tremelimumab 25 mg/1.25 milliliters (20 mg/mL) and tremelimumab 300 mg/15 mL (20 mg/mL). Also added are medicines for diabetes, namely sitagliptin 25 mg, sitagliptin (as hydrochloride) + metformin hydrochloride 50 mg/1 g, sitagliptin (as hydrochloride) + metformin hydrochloride 50 mg/850 mg, sitagliptin (as hydrochloride) 25 mg, sitagliptin (as hydrochloride) 50 mg, sitagliptin (as hydrochloride) 100 mg, sitagliptin (as hydrochloride monohydrate) 25 mg, sitagliptin (as hydrochloride monohydrate) 50 mg and linagliptin 5 mg. Medicines for mental illnesses, namely clomipramine hydrochloride 25 mg, chlorpromazine (as hydrochloride) 200 mg and midazolam 15 mg are also included in the list.
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https://www.philstar.com/nation/2024/11/27/2403166/16-more-drugs-exempted-vat
The principle of non-retroactivity of tax rulings
The Manila Times / Raida Argeli Grefiel / November 28, 2024
AS a general principle, our laws are prospective and forward-looking in nature. As expressed in Article 4 of the Civil Code of the Philippines, laws shall have no retroactive effect unless the contrary is provided. In other words, the law shall apply only to cases that arise upon its effectivity, except when otherwise provided. Relative to this rule, the decisions of the Supreme Court, made in the exercise of its power to interpret the law, retroact to the date the law was enacted. As explained in the case of San Miguel Corporation v. Commissioner of Internal Revenue (CIR) (GR 257697, April 12, 2023), citing the 1996 case of Columbia Pictures, Inc. v. Court of Appeals (CA) (GR 110318), these judicial decisions simply reflect the legislative intent behind the law. However, if the Supreme Court reverses its previously established doctrine, the new interpretation must be applied prospectively and should not prejudice those who have relied on the old doctrine in good faith. On the matter of tax rulings and regulations, the CIR is authorized under the National Internal Revenue Code of 1997, as amended (Tax Code), to interpret tax laws and to reverse, revoke, or modify an existing ruling of the Bureau of Internal Revenue (BIR).
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https://www.manilatimes.net/2024/11/28/business/top-business/the-principle-of-non-retroactivity-of-tax-rulings/2012383
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