The tax landscape: Where we are and what is ahead

Marion Castañeda Tax Senior Manager, PwC Philippines 11 May 2022

“Out with the old, in with the new” seems to be the prevailing mood. With the government’s term expiring, the Philippines will soon usher in a new President and install a new set of administrators. The Bureau of Internal Revenue (BIR) is naturally one of the government agencies affected by the turnover of leadership, with the Commissioner of Internal Revenue (CIR), who heads the BIR, being a presidential appointee.

Turning the page may also be in the air for BIR regulations and issuances. Looking back to the July 2016 edition of this column, I would like to revisit some of the significant changes in our tax landscape and look ahead at developments that we can anticipate.


Upon appointment of the then new CIR, Revenue Memorandum Circular (RMC) No. 69-2016, dated July 1, 2016, suspended the implementation of BIR issuances from June 2016. Upon review, many of these issuances were subsequently reinstated by RMC Nos. 80-2016, 88-2016, and 127-2016.

Notably, one issuance that remained suspended was Revenue Memorandum Order (RMO) No. 27-2016, dated June 23. 2016. This RMO was to set the guidelines for availing of tax treaty relief on dividends, interest, and royalties. Instead, the coverage of this RMO was tackled in newer issuances in 2017, 2020, and 2021, as discussed below.


Under Revenue Regulations (RR) No. 12-2013, no deduction for income tax purposes was allowed in case of failure to withhold tax, notwithstanding subsequent payment of such withholding tax at the time of audit investigation or reinvestigation/reconsideration. This RR was revoked in 2018 with the issuance of RR No. 6-2018, reverting to the previous rule allowing expenses as a deduction, provided that the required withholding tax is remitted to the BIR during a tax audit/investigation, with the concurrent penalties from under-withholding or non-withholding.

It is noteworthy, though, that in tax cases, the Court of Tax Appeals has held that payment of deficiency withholding tax after the issuance of a Final Decision on Disputed Assessment is not considered a remittance during a tax audit/investigation; hence the tax court upheld the disallowance of expenses and sustained the assessment of deficiency income tax thereon.


Republic Acts 10963 and 11534, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) laws, were signed in 2017 and 2021, respectively. These laws are two of the major tax reform packages, which primarily tackled personal (TRAIN) and corporate (CREATE) income tax.

Numerous regulations were issued to implement the Tax Code amendments from these tax reforms, including the amended RR Nos. 11-2018 and 5-2021, primarily touching upon the personal and corporate income tax changes under the respective tax reform laws. Other important issuances include: RR No. 12-2018 (donor’s and estate taxes); RR Nos. 13-2018, 4-2021 and 21-2021 (value-added tax); RMC No. 19-2022 (tax-free exchange); and the CREATE Implementing Rules and Regulations covering Title XIII of the Tax Code.


While the transfer pricing guidelines were promulgated in RR No. 2-2013, which required the maintenance of contemporaneous transfer pricing documentation to support the pricing of intercompany transactions, more transfer pricing rules and guidance were introduced starting in 2019. Revenue Audit Memorandum Order No. 1-2019 prescribes the procedures and audit guidelines to be followed in the event of a transfer pricing audit. Moreover, the Related Party Transaction Form (or BIR Form No. 1709) now forms part of annual income tax compliance, as mandated for certain taxpayers pursuant to RR No. 19-2020, as amended by RR No. 34-2020.


In a welcome development, tax treaty relief for dividends, interests, and royalties was initially simplified with the issuance of RMO No. 8-2017, under which accomplishment and submission of a Certificate of Residency for Tax Treaty Relief (CORTT) Form by the Philippine tax resident-payee and the foreign income recipient domiciled in a treaty country would be considered sufficient compliance. However, the 2017 RMO was superseded by RMO No. 14-2021, which provides updated procedures for availing of tax treaty benefits covering all types of income payments, including dividends, interest, and royalties. While the 2021 RMO was issued in compliance with the Ease of Doing Business Act in mind, its requirements are arguably less simple than the CORTT Form requirement under the 2017 RMO.

Meanwhile, RMO No. 46-2020 provides for the guidelines and procedures for availing of the reduced 15% dividends tax paid to a nonresident foreign corporation under Section 28(B)(5)(b) of the Tax Code, also known as the tax sparing rule. While arguably the Tax Code provision is self-executing, this 2020 RMO nonetheless provides more consistent guidance to taxpayers, who previously sought BIR rulings as a conservative measure when using such reduced dividends tax rate.


There are still two pending major tax reform proposals in Congress, covering real property valuation and taxation of passive income and financial intermediaries. There is also a pending proposal to include non-resident digital service providers within the 12% value-added tax coverage, being deliberated currently at the Senate Committee on Ways and Means level, as of this writing. It remains to be seen whether the incoming administration will prioritize these tax measures, but if passed into law before the new administration takes over, we can expect the promulgation of implementing regulations covering the same, perhaps soon.

The changes in the tax landscape these last six years were unprecedented, and more changes could be coming soon. Dutifully keeping on top of tax updates is a must for taxpayers and tax experts alike.


The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

This article was originally published in BusinessWorld.


Contact us

Marion Castañeda

Marion Castañeda

Tax Senior Manager, PwC Philippines

Tel: +63 (2) 8845 2728

Lyn Golez-Geronan

Lyn Golez-Geronan

Tax Librarian, PwC Philippines

Tel: +63 (2) 8845 2728