BIR further clarifies the proper tax treatment of cross-border services
Other Relevant Tax Updates:
- TAX & BUSINESS-RELATED NEWS [MARCH 20-25]
- BIR FURTHER CLARIFIES THE APPLICATION OF RMC NO. 5-2024 & 38-2024 ON THE TAX TREATMENT OF CROSS-BORDER SERVICES
- SEC MEMORANDUM CIRCULAR FURTHER SUPPORTING MSMEs BY EXTENDING DISCOUNTED RATES FOR CERTAIN FILING FEES
- SEC LEGAL OPINION ON FOREIGN INVESTORS ENGAGED IN PRIVATE CONSTRUCTION PROJECTS & SEC JURISDICTION OVER NON-STOCK, NON-PROFIT CORPORATIONS VESTED WITH GOVERNMENTAL FUNCTIONS
- DOJ OPINIONS ON NEW GOVERNMENT PROCUREMENT ACT & AUTHORITY OF GOVERNMENT AGENCIES TO WAIVE FEES OR PENALTIES & GRANT DISCOUNTS
I. TAX & BUSINESS-RELATED NEWS [MARCH 20-25]
1. Bicol workers to receive pay hike this year – DOLE
2. Subsidy for 3.5M coco farmers sought amid plans to suspend biofuel blending
3. Diesel shock at sea: Cruise ships burn thousands of liters of fuel every hour — and that could send ticket prices rising
4. Zambales residents back charter changes for Magsaysay-named university, reject renaming
5. Gatchalian: US plan to turn PH into ammo hub favorable to country but…
Bicol workers to receive pay hike this year – DOLE [The Philippine Star, March 25, 2026]
Wage Order RBV-23 provides that the daily minimum wage in Bicol will be raised to P455 starting April 8, and to P480 on Dec. 1.
https://qa.philstar.com/nation/2026/03/25/2516582/bicol-workers-receive-pay-hike-year-dole
Subsidy for 3.5M coco farmers sought amid plans to suspend biofuel blending [GMA News Online, March 24, 2026]
Biofuel blending refers to the practice of mixing a certain percentage of biofuels—such as coconut-based biodiesel—with conventional petroleum fuels like diesel or gasoline.
Diesel shock at sea: Cruise ships burn thousands of liters of fuel every hour — and that could send ticket prices rising [The Manila Times, March 24, 2026]
Southeast Asian cruise routes — including voyages from Singapore, Japan, and Hong Kong — have been gaining popularity among Filipino travelers in recent years. If fuel prices continue climbing, passengers booking cruises later this year could see noticeably higher fares compared with current prices.
Zambales residents back charter changes for Magsaysay-named university, reject renaming [The Philippine Star, March 24, 2026]
Following the withdrawal of a bill seeking to rename the President Ramon Magsaysay State University (PRMSU) and enact certain amendments to its charter, Zambales residents now said they favor charter revisions but without the proposed name change.
Gatchalian: US plan to turn PH into ammo hub favorable to country but… [Manila Bulletin, March 23, 2026]
The United States’ supposed plan to turn the Philippines into an ammunition production hub could be favorable for the country but strict national security measures should be in place if it pushes through.
https://mb.com.ph/2026/03/23/gatchalian-us-plan-to-turn-ph-into-ammo-hub-favorable-to-country-but
II. BIR FURTHER CLARIFIES THE APPLICATION OF RMC NO. 5-2024 & 38-2024 ON THE TAX TREATMENT OF CROSS-BORDER SERVICES
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Revenue Memorandum Circular (RMC) No. 24-2026, issued on March 30, 2026, further clarifies the proper tax treatment of cross‑border services under RMC Nos. 5‑2024 and 38‑2024, in light of the Supreme Court’s ruling in Aces Philippines Cellular Satellite Corporation vs. Commissioner of Internal Revenue (CIR), August 30, 2022. The Circular reiterates that RMC No. 5‑2024, as clarified by RMC No. 38‑2024, provides the framework for determining the tax implications of services supplied, delivered, or rendered by non‑resident service providers to Philippine customers.
Highlights include:
1. Cross‑border services listed in RMC No. 5‑2024 are not automatically subject to Philippine income tax. Taxability depends on whether the income‑producing activity or service occurred within the Philippines.
2. To establish taxability, Revenue Officers must examine the entire cross‑border service arrangement and prove that: (1) parties include a Philippine payor and non‑resident provider; (2) the service is integral to the non‑resident’s operations; (3) the income‑producing activity is within the Philippines; and (4) no applicable income tax exemption under treaties or domestic law.
3. To prove that income paid to a non‑resident was not Philippine‑sourced, taxpayers may submit documents such as sworn statements, contracts, invoices, Tax Residency Certificates, SEC Non‑registration, proof of remittance, and other evidence proving that the subject income is not from sources within the Philippines.
4. A BIR confirmatory ruling is not mandatory to apply the correct tax treatment for cross‑border services. However, taxpayers may still request a ruling for certainty based on existing procedures. |
III. SEC MEMORANDUM CIRCULAR
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SEC FURTHER SUPPORTS THE GROWTH & EXPANSION OF MICRO, SMALL & MEDIUM-ENTERPRISES (MSMES) BY EXTENDING DISCOUNTED RATES FOR CERTAIN FILING FEES SEC Memorandum Circular (MC) No. 13, Series of 2026, issued on March 26, 2026, extends the discounted filing fees for Micro, Small, and Medium Enterprises (MSMEs) to further support business growth, reduce compliance costs, and promote ease of doing business. The Circular continues the 20% discount on corporate registration fees for MSMEs until December 31, 2026, and maintains the 50% discount on securities registration fees under MC No. 8, series of 2025, until June 30, 2026, covering certain industries such as power generation, real estate, agri-business, and hospitals. To avail of these discounts, applicants must meet the MSME asset thresholds under Republic Act (R.A.) No. 9501, specifically Micro (up to Php 3 Million), Small (Php 3–15Million), and Medium enterprises (Php 15–100 Million), and submit a Certification of MSME Qualification, with agri-business corporations additionally required to have a paid-up capital of Php 25 million. [SEC MEMORANDUM CIRCULAR NO. 13, SERIES OF 2026, MARCH 26, 2026] |
IV. SEC LEGAL OPINIONS
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FOREIGN INVESTORS MAY FULLY OWN DOMESTIC CORPORATIONS ENGAGED IN PRIVATE CONSTRUCTION PROJECTS; RESTRICTIONS REMAIN ONLY IN DEFENSE-RELATED & GOVERNMENT PROCUREMENT CONTRACTS C Co. is seeking an opinion on whether a domestic construction company engaged purely in private construction may lawfully be 100% foreign-owned, in light of the Supreme Court (SC) ruling in Philippine Contractors Accreditation Board (PCAB) v. Manila Water Company, Inc., which invalidated the PCAB’s regulatory requirement that construction companies be at least 60% Filipino-owned. In reply, there is no nationality or foreign equity restriction on construction companies engaged solely in purely private construction, as neither Republic Act (RA) No. 4566, nor the Contractors’ License Law, the 1987 Constitution, the Foreign Investments Act (FIA), nor the current Foreign Investment Negative List (FINL) imposes such a limitation. Consistent with PCAB v. Manila Water, it is confirmed that administrative rules cannot create nationality restrictions absent statutory basis. However, it clarified that equity limitations remain applicable to defense‑related construction and government infrastructure procurement. Therefore, a construction company operating purely in the private sector may be 100% foreign‑owned, provided it does not engage in regulated or restricted construction activities. [SEC OFFICE OF THE GENERAL COUNSEL LEGAL OPINION NO. 26-07, MARCH 24, 2026]
NON‑STOCK, NON‑PROFIT CORPORATIONS VESTED WITH GOVERNMENTAL FUNCTIONS REMAIN SUBJECT TO THE SEC’s JURISDICTION The Manila Economic and Cultural Office (MECO) sought an opinion regarding its legal nature and character, given that it is a non-stock, non-profit corporation vested with governmental functions. As represented, MECO is subject to oversight not only by the President of the Philippines but also by the Department of Trade and Industry (DTI), and that its Board of Directors are indirectly appointed by the President. In its opinion, the SEC clarified that MECO does not qualify as a Government-Owned or Controlled Corporation (GOCC) nor as a Government Instrumentality. Under Republic Act (R.A.) No. 10149, or the GOCC Governance Act of 2011, an entity must meet the following criteria to be considered a GOCC: (1) It is established by original charter or through the general corporation law; (2) It is vested with functions relating to public need; and (3) It is directly owned by the government or by its instrumentality, or where the government owns a majority of the outstanding capital stock. Applying these requisites, MECO fails to meet the third requirement, as it is not owned or controlled by the government. Furthermore, the SEC emphasized that a government instrumentality must not have been organized as a stock or non-stock corporation. Since MECO was organized as a non-stock corporation under the general incorporation law, it cannot be classified as a government instrumentality. Therefore, MECO remains under its jurisdiction for regulatory purposes. As such, MECO is required to comply with reportorial obligations, including the annual filing of its General Information Sheet (GIS), and must secure SEC approval for any amendments to its Articles of Incorporation and By-Laws. [SEC OFFICE OF THE GENERAL COUNSEL OPINION NO. 26-06, MARCH 19, 2026] |
V. DOJ OPINIONS
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[ENGAGING A GFI AS A PROCUREMENT AGENT & UNDERGOING A NEGOTIATED SALE TO ACQUIRE A NEW OFFICE ARE LEGALLY PERMISSIBLE, PROVIDED THAT THE CONDITIONS UNDER THE NEW GOVERNMENT PROCUREMENT ACT & RIGHT-OF-WAY ACT, AS AMENDED BY THE ACCELERATED & REFORMED RIGHT-OF-WAY ACT, ARE COMPLIED WITH] [MYCA REQUIREMENT APPLIES TO BOTH LOAN-FINANCED ACQUISITION WITH IMMEDIATE TRANSFER OF OWNERSHIP & LEASE-PURCHASE ARRANGEMENT WITH DEFERRED OWNERSHIP TRANSFER] The Insurance Commission (IC) is requesting a legal opinion on whether its proposed methods of acquiring a new office building are legally valid. Specifically, it seeks (1) whether it may engage a Government Financial Institution (GFI) as a procurement agent and use negotiated sale under two Models, Loan-Financed Acquisition with Immediate Transfer of Ownership to IC (Model 1) and Lease-Purchase Arrangement with Deferred Ownership Transfer to IC (Model 2); (2) whether a Multi-Year Contractual Authority (MYCA) is required for these two models; and (3) whether Property Swap either Assets-for-Asset or Asset-for-Shares (Model 3) is permissible. In reply, engaging a GFI as a procurement agent and undergoing a negotiated sale to acquire a new office are legally permissible, provided that the conditions and rules under the New Government Procurement Act (R.A. 12009) and Right-of-Way Act (R.A. 10752), as amended by R.A. 12289, or the Accelerated and Reformed Right-of-Way (ARROW) Act are complied with. This includes maintaining IC’s authority over contract awards, ensuring active oversight, and executing a Memorandum of Agreement (MOA). Moreover, the MYCA requirement applies to Models 1 and 2, of which both involve financial obligations spanning multiple years in the form of loan amortizations and lease-purchase payments, respectively. However, Model 3 lacks a clear legal basis, as current rules do not expressly authorize barter or equity exchanges involving government real property; such transactions may fall under the jurisdiction of Department of Budget and Management (DBM), Department of Public Works and Highways (DPWH) and Department of Environment and Natural Resources (DENR), Government-Owned or Controlled Corporations (GCG), and Commission on Audit (COA), and could be considered ultra vires or disallowable without explicit statutory authority. [DEPARTMENT OF JUSTICE OPINION NO. 05, SERIES OF 2026, FEBRUARY 23, 2026]
NGA & GOCC CANNOT UNILATERALLY WAIVE FEES OR PENALTIES, NOR GRANT DISCOUNTS, UNLESS EXPRESSLY AUTHORIZED BY LAW OR THEIR CHARTER The National Government Agencies (NGAs) and Government‑Owned and/or‑Controlled Corporations (GOCCs) are requesting a legal opinion on whether they may exempt clients from paying fees or waive such fees without express authority, and whether they may condone, waive, or alternatively grant discounts or reductions on fines and penalties without statutory authorization. In response, DOJ affirmed a restrictive view, holding that NGAs and GOCCs have no such authority in the absence of an express statutory provision or charter authority. As administrative agencies, NGAs and GOCCs may exercise only those powers that are expressly granted or necessarily implied by law. While Section 54(1) of Executive Order (E.O.) No. 292, or the Administrative Code of 1987, authorizes NGAs and GOCCs to impose, charge, and collect fees, it does not confer any authority to waive or exempt such fees. With respect to fines and penalties, the DOJ emphasized that waiver, condonation, discounting, or reduction may be allowed only when expressly authorized by law or by the agency’s charter. In the absence of such express authority, neither the waiver nor the granting of discounts or reductions on fines and penalties is legally permissible. Thus, the DOJ concluded that NGAs and GOCCs cannot unilaterally waive fees or fines, condone penalties, or grant discounts or reductions, unless there is a clear and express authorization under law or their respective charters. [DEPARTMENT OF JUSTICE OPINION NO. 03, SERIES OF 2026, JANUARY 28, 2026] |
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