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Additional Details on Philippines Second Tax Reform Package — Orbitax Tax News & Alerts

The Philippines Department of Finance has issued two releases providing additional details on the second package of the Comprehensive Tax Reform Program (CTRP). According to the first release, the second package includes:

  • A phased-in reduction in the corporate tax rate from 30% to 25% with an initial reduction of 1% dependent upon an additional revenue trigger of PHP 26 billion in the previous year (to be achieved mainly through reduced incentives);
  • The expansion of the functions of the Fiscal Incentives Review Board (FIRB) to oversee all investment promotion agencies (IPAs);
  • The repeal of 150 special laws on the granting of fiscal incentives to businesses, which will be replaced with an omnibus law that would provide a single set of incentives applicable to all IPAs;
  • The introduction of grandfathering periods once the law repealing incentives is enacted, with a period of two years for companies with incentives of more than 10 years and a period of three years for incentives of 5 to 10 years, while companies with incentives of less than 5 years will continue to enjoy them for five more years; and
  • Changes to improve compliance by simplifying tax rules for corporations, which would include cutting the number of tax forms and procedures; reviewing the National Internal Revenue Code to improve general anti-avoidance regulations and transfer pricing; and reducing the optional standard deduction from 40 percent to 20 percent of gross income.

In the second release, additional reforms are noted, including:

  • The removal of the value-added tax (VAT) exemptions for coal and casino operations;
  • Further adjustment of excise taxes on tobacco products and hikes in alcohol excise taxes; and
  • The introduction of a comprehensive mining tax.

The second release also notes that tax reform packages three and four will be introduced later in the year for the reform of property taxation and capital income, respectively.