PCCI glad economic team staying; For think tank, Recto must go
Other Relevant Tax Updates:
- TAX & BUSINESS-RELATED NEWS [MAY 20-26]
- BIR ITAD RULINGS ON ROYALTIES, FVAT & FWT IMPOSITION ON OFFSHORE PAYMENTS, MFN CLAUSE & NON-SUBMISSION OF DOCUMENTS LEADING TO DENIAL OF TAX TREATY
- CTA CASE ON DST IMPOSITION ON LEASE AGREEMENT OF SUBIC-BAY FREEPORT REGISTERED ENTERPRISE
I. TAX & BUSINESS-RELATED NEWS [MAY 20-26]
- Philippines, Hong Kong negotiate double taxation agreement
- IWG says economic uncertainty may push demand for flexible workspaces
- Guiconsulta gains national attention
- Trump says US wants to make tanks, not T-shirts
- Mining appeal, green wish list greet next DENR chief
- 2GO program to produce 20K ship workers by 2026
- PCCI glad economic team staying; For think tank, Recto must go
- Outcry grows over alleged mining in Sierra Madre protected area
- Nordeco seeks SC TRO against ‘takeover’ of franchise areas
- CA orders ERC’s Dimalanta to inhibit from NGCP’s rate reset proceedings
- International Schools in Makati: A List
- Alaminos’ P249.8-M Sky Garden to boost Pangasinan tourism
- US-based wellness organization endorses Filipino sardines brand as ‘Superfood’
- GMA Network statement on estafa complaint against officers of TAPE, Inc.
- Duavit blames current programs for dip in ad revenues
- BIR allows certified true copies of receipts in VAT refund claims
- No new taxes stance ‘possible’ with crackdown on tax cheats
- IFC technical assistance tapped for PEZA eco-industrial park transition
- DTI: Lotte Group, South Korean firms eye expansion into Philippines
- SC: Ringtone previews do not violate copyright laws
- SC: Children with parents whose marriage was nullified are legitimate
- New hotel brand to open branches in Baguio, Moalboal
- Hospitals worried about bills of patients sponsored by losing bets
- Common station contract could be offered as PPP
- BSP defers rollout of new forex reporting system to June 2026
II.BIR ITAD RULINGS
TAX BENEFITS ARE GRANTED ONLY FOR GOODS & SERVICES DIRECTLY RELATED TO THE PROGRAM IMPLEMENTATION OF INTERNATIONAL GRANTS
Tetra Tech International Development Pty. Ltd. (TTIDP Ltd.), an Australian-registered company, was engaged by the Australian Government’s Department of Foreign Affairs and Trade (DFAT) as the managing contractor for the FAIR JUSTICE PROGRAM in the Philippines (2024–2029). The program, approved by the Philippine Supreme Court on January 30, 2024, is fully funded by the Government of Australia and aligns with the Philippine Development Plan (2023–2028) and the Supreme Court’s Strategic Plan for Judicial Innovations (2022–2027). The Australian Embassy requested confirmation that TTIDP Ltd.’s procurement of goods and services for the program is subject to 0% VAT or VAT-exempt under the General Agreement on Development Cooperation (GADC) between the Philippines and Australia. In reply, Article 7(1)(a) of the GADC, in relation to Sections 106(A)(2)(b), 108(B)(3), and 109(1)(K) of the Tax Code of 1997, as amended, provides that goods and services procured locally by TTIDP Ltd. for the FAIR JUSTICE PROGRAM are subject to 0% VAT, while direct importations are VAT-exempt. However, these VAT privileges are limited strictly to transactions necessary for the program’s implementation and cannot be applied to TTIDP Ltd.’s other activities. [BIR ITAD RULING NO. 027-25, MAY 6, 2025]
[INCOME TAX & VAT APPLY TO CROSS-BORDER SERVICES WHEN A PERMANENT ESTABLISHMENT IS CREATED IN THE PHILIPPINES] [REMUNERATION FOR SERVICES RENDERED IN THE PHILIPPINES BY EXPATRIATES IS TAXABLE UNDER ARTICLE 14 OF THE PH-SINGAPORE TAX TREATY IF IT IS PAID BY & BORNE BY A PERMANENT ESTABLISHMENT LOCATED IN THE PHILIPPINES]
M Energy Solutions Philippines, Inc. (MAN PH) is a domestic corporation, entered into an Inter-Entity Service Agreement with M Energy Solutions Singapore Pte. Ltd. (MAN SG), a resident foreign corporation based in Singapore. It is engaged in repairing ships, converting, demolition, altering ships, etc. As part of the agreements, MAN SG shall provide engineers and technicians, who will assist with the installation and commissioning of engines and render advice on technicalities. Further, the services will be performed in the Philippines and shall not exceed an aggregate period of 183 days. MAN PH is seeking confirmation that the service fee paid to MAN SG is exempt from income tax. In reply, Section 28(B)(1) of the Tax Code, as amended, provides that nonresident foreign corporations are generally subject to a 25% tax on gross income derived from Philippine sources. However, tax treaty provisions may override domestic laws. The PH-Singapore Tax Treaty limits the taxation rights of the Philippines to income attributable to a Permanent Establishment (PE). A PE is deemed to exist if services are provided in the Philippines for more than 183 days, regardless of whether contracts are separate. MAN SG was found to have a PE in the Philippines, providing services for 275 days. Therefore, its profits attributable to that PE are taxable in the Philippines, with deductions allowed for related expenses. Regarding employee remuneration, Article 14 of the Treaty provides that such income is taxable in the Philippines if the services are performed there and borne by a Philippine PE. Although the employees were in the country for less than 183 days and were paid by MAN SG, however, the third condition was not met. Thus, the employees’ incomes are taxable in the Philippines under the Treaty, in relation to Section 25(B) of the Tax Code. Furthermore, the services rendered by MAN SG in the Philippines are subject to 12% VAT under the Tax Code. However, services performed outside the Philippines are not subject to VAT. [BIR ITAD RULING NO. 023-25, APRIL 24, 2025]
FAILURE TO COMPLY WITH THE BIR’S REQUEST FOR SUBMISSION OF REQUIRED DOCUMENTS TO SUBSTANTIATE THE CLAIM FOR PREFERENTIAL TAX TREATMENT MAY RESULT IN THE AUTOMATIC DENIAL OF THE TREATY BENEFIT APPLICATIONS
I Co. is seeking confirmation that the royalties paid to IC, a U.S. corporation, should be subject to a preferential income tax rate of 10% pursuant to the Philippines-United States (PH-US) Tax Treaty. As represented, I Co., a corporation registered under Philippine laws, entered into an Intercompany Agreement with IC, with I Co. to pay a Transfer Price for product licensing and support services outlined in the agreement. In reply, the BIR denied the request for confirmation of entitlement to the 10% preferential tax rate under the “Most Favored Nation” Clause of the PH-US Tax Treaty for failure to comply with multiple Notices to Submit Additional Documents. Pursuant to Section 5 of Revenue Memorandum Order (RMO) No. 14-2021, taxpayers are required to submit both the prescribed and additional documents to support their claims for treaty benefits. As tax exemptions or reduced rates must be strictly construed, the burden of proof rests with the taxpayer. In this case, the applicant failed to discharge that burden, resulting in the denial of the application and the imposition of the regular 25% income tax rate under Section 28(B)(1) of the Tax Code of 1997, as amended. [BIR ITAD RULING NO. 019-25, APRIL 14, 2025]
RETRANSMISSION OF COPYRIGHTED AUDIOVISUAL CONTENTS QUALIFIES AS ROYALTY UNDER THE PH-US & PH-UAE TAX TREATIES, BUT NON-COMPLIANCE WITH ALL MFN CLAUSE CONDITIONS PRECLUDES ITS APPLICATION
Cignal TV, Inc., (Cignal) a domestic corporation organized under the Philippine laws, is seeking confirmation on the proper tax treatment of royalty payments made to Turner Broadcasting System Asia Pacific Inc., a US-based corporation. Specifically, Cignal inquired on whether such payments qualify for the preferential 10% income tax rate under Article 13(2)(b)(iii) of the PH-US Tax Treaty, invoking the “Most Favored Nation” (MFN) clause in relation to Article 12(2) of the PH-UAE Tax Treaty. As represented, Cignal and Turner entered into a License Agreement, wherein Turner granted to Cignal a non-exclusive license to retransmit the 24-hour television programming services titled “CNN International”, “Cartoon Network”, “truTV”, “CNN International HD”, “Cartoon Network HD”, “Toonami”, and “Warner TV”. In consideration thereof, Cignal would pay monthly royalties to Turner. In reply, Section 28(B)(1) of the Tax Code of 1997, as amended, provides that royalties are generally subject to a 25% final withholding tax. However, in this case, Turner sought to apply the preferential 10% rate under the PH-US Tax Treaty, based on the MFN clause referencing the more favorable rate provided under the PH-UAE Tax Treaty. The BIR affirmed that the payments constituted “royalties” under both tax treaties and acknowledged the similarity in the subject matter—specifically, the retransmission of copyrighted audiovisual content. However, the BIR held that the second condition for invoking the MFN clause was not met. This condition requires similarity in the method of tax relief applied in the treaty partner’s jurisdiction. While the UAE adopts a full foreign tax credit method without limitation, the United States applies an ordinary foreign tax credit method, subject to limitations under U.S. domestic law. Due to this fundamental difference in the method of granting tax relief, the MFN clause could not be validly invoked. Consequently, the royalties paid by Cignal to Turner are subject to a 25% Final Withholding Tax pursuant to Article 13(2)(b)(i) of the PH-US Tax Treaty. In addition, the transaction is subject to 12% VAT under Sections 105 and 108 of the Tax Code, as it involves the lease or use of intellectual property—specifically, television programs—within the Philippines. This constitutes a taxable sale or exchange of services. As such, Cignal is required to withhold and remit the 12% VAT to the BIR within ten (10) days following the end of the month in which the payment was made. [BIR ITAD RULING NO. 011-25, APRIL 14, 2025]
III. CTA CASE
[DST IS A TAX ON THE PRIVILEGE OF ENTERING INTO TAXABLE TRANSACTIONS, NOT MERELY ON THE DOCUMENT ITSELF] [SUBIC BAY FREEPORT ZONE REGISTERED ENTERPRISES ARE EXEMPT FROM NATIONAL & LOCAL TAXES, INCLUDING DST, UNDER RA NO. 7227 & ITS IMPLEMENTING RULES] [THE ISSUANCE OF THE CERTIFICATE OF REGISTRATION & TAX EXEMPTION (CRTE) IS THE OPERATIVE BASIS FOR TAX EXEMPTION UNDER RA NO. 7227]
Petitioner Commissioner of Internal Revenue (CIR) and the Regional Director of Revenue Region No. 4 filed a Petition for Review challenging the earlier Decision of the Court in Division on partial deletion of the compromise penalty issued to the Respondent, The Teleempire, Incorporated, a Subic Bay Freeport (SBF) Registered Enterprise. The Petitioner argued that the Respondent remained liable for the full Deficiency Documentary Stamp Tax (DST), including the compromise penalty, on a Lease Agreement executed on February 26, 2016, prior to the issuance of the Respondent’s Certificate of Registration and Tax Exemption (CRTE). On the other hand, the Respondent countered that it should not have been assessed DST at all premised that as a registered SBF enterprise at the time of the Lease Agreement by virtue of its registration and board approval by the Subic Bay Metropolitan Authority (SBMA), and that the CRTE merely confirmed its entitlement to tax exemption under Section 12(c) of Republic Act No. 7227, or the Bases Conversion Development Act (BCDA) Law. In ruling, the Court held that tax exemptions under RA No. 7227 take effect only upon issuance of the CRTE, and that the Lease Agreement, executed before the CRTE was granted, was validly taxed. Consequently, the Respondent is liable to the corresponding DST accruing before the issuance of CRTE. However, it affirmed the deletion of the compromise penalty on the ground that no agreement to compromise had been reached. [COMMISSIONER OF INTERNAL REVENUE & REGIONAL DIRECTOR OF REVENUE REGION NO. 4, CITY OF SAN FERNANDO, PAMPANGA VS. THE TELEEMPIRE INCORPORATED, CTA EN BANC CASE NO. 2817, APRIL 29, 2025]
Philippines, Hong Kong negotiate double taxation agreement [The Philippine Star, May 26, 2025]
Key provisions of the tax treaty include mechanisms to prevent double taxation, tax relief measures and frameworks for mutual cooperation between the tax authorities of both countries.
IWG says economic uncertainty may push demand for flexible workspaces [BusinessWorld, May 26, 2025]
MULTINATIONAL office space provider International Working Group Plc (IWG) said it is looking to bolster its presence in the Philippines as geopolitical and economic uncertainties may prompt companies to adopt more flexible and cost-efficient workspace strategies, the company’s new country manager said.
Guiconsulta gains national attention [The Manila Times, May 26, 2025]
Launched in late 2024, Pangasinan’s Government Unified Incentives for Medical Consultations, or Guiconsulta, grants a P300 cash incentive to individuals who enroll in the Konsulta program.
https://www.manilatimes.net/2025/05/26/regions/guiconsulta-gains-national-attention/2120591
Trump says US wants to make tanks, not T-shirts [ABS-CBN News, May 26, 2025]
U.S. President Donald Trump said on Sunday (May 25) that he was not interested in moving textile manufacturing back to America, saying instead he was focused on “big things” like computer chips and tanks.
https://www.abs-cbn.com/news/business/2025/5/26/trump-says-us-wants-to-make-tanks-not-t-shirts-1024
Mining appeal, green wish list greet next DENR chief [Philippine Daily Inquirer, May 25, 2025]
COMP chair Michael Toledo said in a statement that the chamber was referring specifically to the establishment of “an enabling environment for mining, including the reduction of the mining and exploration permitting process as well as other investment-friendly initiatives.”
https://newsinfo.inquirer.net/2063312/mining-appeal-green-wish-list-greet-next-denr-chief
2GO program to produce 20K ship workers by 2026 [The Philippine Star, May 25, 2025]
2GO said its new partnership with job platform WorkAbroad.ph would offer a training course called Enrollment to Employment (E2E) Program, specifically designed to accelerate the careers of hospitality and maritime students.
https://www.philstar.com/business/2025/05/25/2445514/2go-program-produce-20k-ship-workers-2026
PCCI glad economic team staying; For think tank, Recto must go [Philippine Daily Inquirer, May 24, 2025]
Recto also supported Republic Act No. 12066, or the Create More Act, which returns the “old but already discredited practice of granting overgenerous and unnecessary fiscal incentives to firms in economic zones.”
https://newsinfo.inquirer.net/2063137/pcci-glad-economic-team-staying-for-think-tank-recto-must-go
Outcry grows over alleged mining in Sierra Madre protected area [Philippine Daily Inquirer, May 24, 2025]
A viral photo showing a heavily logged area in the Northern Sierra Madre Natural Park in Dinapigue, Isabela, has ignited widespread outrage over alleged mining activities in the region, prompting environmental advocates to call for an investigation.
Nordeco seeks SC TRO against ‘takeover’ of franchise areas [ABS-CBN News, May 24, 2025]
The Northern Davao Electric Cooperative Inc. (Nordeco) on Friday filed a petition for certiorari and prohibition before the Supreme Court to challenge the passage of a law allowing Davao Light and Power Company, Inc. to expand into and operate in its areas.
CA orders ERC’s Dimalanta to inhibit from NGCP’s rate reset proceedings [GMA News Online, May 24, 2025]
The CA, meanwhile, said in its decision that “Dimalanta’s declarations showed that she already had a preconceived result in mind, that is, the reduction of transmission charges and its inaction on the motions filed displayed bias and prejudice against the petitioner.”
International Schools in Makati: A List [smartparenting, May 23, 2025]
Looking for a diverse, inclusive school for your little ones where they can be exposed to the world and gain different perspectives? Look no further! We’ve compiled a list of international schools in Makati to explore.
Alaminos’ P249.8-M Sky Garden to boost Pangasinan tourism [Philippine News Agency, May 23, 2025]
Dubbed a “game-changer” for regional tourism, the Sky Garden is envisioned as a modern green space featuring elevated gardens, panoramic viewing decks, interactive zones, walkways, and retail spaces designed to attract both local and foreign tourists.
https://www.pna.gov.ph/articles/1250721
US-based wellness organization endorses Filipino sardines brand as ‘Superfood’ [The Philippine Star, May 22, 2025]
This reportedly makes the canned sardines brand the first in the world to receive this such recognition.
GMA Network statement on estafa complaint against officers of TAPE, Inc. [GMA News Online, May 22, 2025]
The complaint stems from respondents’ failure to remit advertising revenues collected from clients, which had been contractually assigned to GMA Network under a 2023 Assignment Agreement. Despite multiple formal demands, the funds were not transferred to GMA because they were instead used for TAPE’s operational expenses, in violation of the trust arrangement outlined in the agreement.
Duavit blames current programs for dip in ad revenues [Philippine Daily Inquirer, May 22, 2025]
GMA Network wants to put out “more responsive” content both for the broadcast and online spaces, noting current programs were not doing well and have caused a decline in advertising revenues.
https://business.inquirer.net/526573/duavit-blames-current-programs-for-dip-in-ad-revenues
BIR allows certified true copies of receipts in VAT refund claims [ABS-CBN News, May 21, 2025]
Commissioner Romeo D. Lumagui, Jr. said government is simplifying tax refund claims to better serve the public.
No new taxes stance ‘possible’ with crackdown on tax cheats [BusinessWorld, May 21, 2025]
THE Philippines’ decision to not impose new tax measures until 2028 is deemed feasible if accompanied by stepped-up enforcement against tax evaders, analysts said.
IFC technical assistance tapped for PEZA eco-industrial park transition [BusinessWorld, May 21, 2025]
“Our ecozones must evolve beyond being just viable locations for foreign direct investment (FDI). They must now enable industrial symbiosis, climate resilience, green infrastructure, and energy efficiency to ensure sustainable growth while upholding social responsibility, environmental stewardship, and ethical excellence,” he added.
DTI: Lotte Group, South Korean firms eye expansion into Philippines [Manila Bulletin, May 21, 2025]
Top South Korean companies, including the conglomerate Lotte Group, are planning to invest and expand into the Philippines, with a focus on food service, franchising, and retail modernization.
https://mb.com.ph/2025/05/21/dti-lotte-group-south-korean-firms-eye-expansion-into-philippines
SC: Ringtone previews do not violate copyright laws [ABS-CBN News, May 21, 2025]
The Supreme Court has ruled that allowing customers to listen to a 20-second ringtone sample before purchasing it does not violate copyright laws.
SC: Children with parents whose marriage was nullified are legitimate [Inquirer.net, May 21, 2025]
The SC Second Division ruled that legitimate children retain their legitimacy status even after their parents’ marriage was nullified based on psychological incapacity, as stated in Article 36 of the Family Code.
New hotel brand to open branches in Baguio, Moalboal [The Philippine Star, May 21, 2025]
Chroma Hospitality officially launched its new hospitality brand, the Grafik Hotel Collection, joining other brands Crimson Hotels & Resorts and Quest Hotels.
Hospitals worried about bills of patients sponsored by losing bets [The Philippine Star, May 20, 2025]
Citing political sponsorship issues following the recent elections, private hospitals raised concern yesterday over more than P7 billion worth of unpaid medical services rendered under the government’s Medical Assistance for Indigent and Financially Incapacitated Patients (MAIFIP) program.
Common station contract could be offered as PPP [BusinessWorld, May 20, 2025]
Last week, the DoTr issued a notice of termination to the contractors of the Unified Grand Central Station at North Avenue-EDSA, Quezon City, also known as the common station for the Metro Rail Transit (MRT) and Light Rail Transit (LRT) lines and the Metro Manila Subway.
BSP defers rollout of new forex reporting system to June 2026 [BusinessWorld, May 20, 2025]
The ITRS is a data collection mechanism that will allow the BSP to monitor and supervise cross-border and foreign exchange (forex) transactions.
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