Philippines

Philippines: Department of Finance certifies tax reform bill

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The Department of Finance (DoF) declared that, the proposed second package of the Comprehensive Tax Reform Program (CTRP) will be submitted to the Congress by the fourth quarter of the year. According to the DoF government’s plan to introduce a fuel marking and monitoring system in the local downstream oil industry as a way to curb fuel smuggling that has been costing the government an estimated P26.9 billion to P43.8 billion in foregone revenues each year.

The comprehensive tax reform package proposed by the executive department requires considerable cuts in personal income tax rates, extension of the value added tax base, and adjustments of excise taxes on oil, automobiles and other products. The original proposal is expected to generate P162.5 billion.

The key features of the substitute bill include the following:

  • Lower PIT rates as proposed by the DOF but indexed to cumulative Consumer Price Index (CPI) inflation every three years;
  • A flat rate of 6%  for the estate and donor’s taxes;
  • Broadening the tax base by removing special laws on VAT exemptions, including those for cooperatives, housing and leasing, but retaining exemptions for senior citizens and persons with disabilities;
  • Staggered “3-2-1” excise tax increase for petroleum products from 2018 to 2020 but with no indexation to inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted from the hike;
  • A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax increases;
  • A tax on sugar-sweetened beverages or SSBs equivalent to P10 per liter; and
  • Earmarking of 40% of the proceeds from the fuel excise tax increase for social protection programs for the first three years of the tax reform measure’s implementation.

DTA between Philippines and Bahrain approves

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The Council of Ministers of Bahrain approved the amending protocol of Double Taxation Agreement (DTA) with Philippines on 22 May 2017.

Philippines: BIR issues tax provision for micro-finance NGOs

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The Bureau of Internal Revenue (BIR) has issued revenue regulations No. 3-2017 regarding executions of tax provisions for micro-finance NGOs on 24 February 2017. Regulation No 3-2017 shall take effect 15 days after its publication in the official journal or in a general newspaper.

Under the revenue regulation No. 3-2017, the micro-finance NGOs need to pay 2% tax based on their gross income from micro-finance operations rather than regular national taxes. The gross revenue should be based on income from lending business and insurance commissions. All other revenue generated by NGOs are subject to the applicable tax rates. Revenue Regulation No. 3-2017 shall take effect 15 days after its publication in the Official Gazette or in a general newspaper.

Japan- Philippines: Social security agreement ratified

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Social Security Agreement of 2015 between Japan and Philippines has been ratified by the Philippines’ Senate on 7 February 2017.

Philippines presents revised tax reform package

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The Chairman of the House Committee has proposed revised tax reform package on 17 January 2017. This tax reform package was submitted to Parliament on 29 September 2016. According to the revised tax reform package individual income tax exemption from individual earnings below PHP 250,000 and widening of existing tax brackets, but a 35% tax rate imposes on earnings more than PHP 5 million a year.

Italy-the protocol to treaty with Philippines approved

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The protocol to the Income Tax Treaty between Italy and Philippines of 1980 was approved by the Italian government on 12 January 2017. The protocol was signed on 9 December 2013.

According to the protocol, article 2 of the treaty would be modified to include Regional tax on productive activities in the list of taxes covered in the case of Italy. The Competent Authority of Italy will now be the Ministry of Economy and Finance. The approved protocol completely replaces article 25 of the treaty, providing for the exchange of information provision to be in line with article 26 of the UN Model (2011).

Philippines: New tax reform packages presented

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The Department of Finance submitted tax reform packages to the Congress on 29th of September 2016.

Under the tax reform packages the personal income tax rate decreased from 32% to 25% for taxpayers earning between PHP 500,001 to PHP 800,00; Excise tax on gasoline Increased from PHP 4.35 to PHP 10.00 per litre and tax rate increased for diesel at Zero to PHP 6.00 per litre.