Tax Articles

A Refresher on the New Tax Laws in 2024

By: Atty. Rodel C. Unciano

Atty. Rodel C. Unciano Partner   +632 8403-2001 loc.380 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

As we bid goodbye to 2024 today, let’s take a look one more time at some of the more significant features of the tax legislations during the year that have once again reshaped the landscape of taxation in the Philippines.

We welcomed the year 2024 with the signing into law of the Ease of Paying Taxes (EOPT) Act in January, followed by the Real Property Valuation and Assessment Reform Act (RPVARA) towards the middle of the year, then the imposition of value-added tax (VAT) on digital services in October and the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) in November. And to cap the year, a short but tourist-welcoming piece of legislation was passed and signed into law which created a VAT refund mechanism for non-resident tourists.

With the effectivity of Republic Act (RA) No. 11976 or the EOPT Act, we now have a uniform use of VAT invoice for both sale, barter, exchange, or lease of goods or properties, and for every sale, barter, or exchange of services. So, for VAT compliance and for the purpose of claiming input tax credit, only VAT invoice is the acceptable proof to substantiate the claim for input tax credit, whether it is a purchase of goods or purchase of services.

While invoice is now the primary document supporting sale of both goods and services, the taxpayer is not precluded from issuing supplementary document other than sales or commercial invoice. But for purposes of VAT, supplementary documents are not valid proof to support the claim of input taxes by the buyers/purchasers of goods and/or services. All VAT-registered persons and those required to register for VAT are now required to issue VAT invoice as the principal document and are required to comply with the amended invoicing requirements under the EOPT Act.

On the other hand, RA 12001, or the RPVARA has modified the real property valuation system in the country through the development and maintenance of a just, equitable, impartial, and nationally consistent real property valuation based on internationally accepted valuation standards, concepts, principles, and practices. With the signing of the RPVARA into law, we should now follow a single valuation based on matters of imposition of real property taxes and relevant national taxes on transactions involving real properties.

While the valuation of real properties still remains with the concerned local government units, the same is now subject to review and approval by the Bureau of Local Government Finance and the Secretary of Finance to ensure that the valuation is in accordance with the national valuation standards.

In October, RA 12023 was likewise passed into law imposing VAT on digital services. As defined, the term 'digital service’ shall refer to any service that is supplied over the Internet or other electronic network with the use of information technology and where the supply of the service is essentially automated. It includes online marketplace or e-marketplace and online platform, among others.

Meanwhile, RA 12066, or the CREATE MORE has reformed the bundle of tax incentives available to Registered Business Enterprises (RBE) duly registered with the Fiscal Incentives Review Board (FIRB) and other Investment Promotion Agencies (IPA).

Subject to certain conditions and period of availment, types of incentives that may be granted to registered projects or activities include 1) Income Tax Holiday (ITH), 2) Special Corporate Income Tax (SCIT) Rate, 3) Enhanced Deductions Regime (EDR), 4) Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories, 5) VAT exemption on importation and VAT zero-rating on local purchases, and 6) RBE Local Tax.

ITH is an exemption from income tax on registered project or activity and is available for both export and domestic market enterprises. The SCIT is a tax equivalent to five percent (5%) of gross income earned and is in lieu of all national and local taxes and local fees and charges. Only registered export enterprises may avail SCIT.

Under CREATE MORE, EDR has been made a separate tax regime where qualified enterprises shall be taxed at a rate equivalent to twenty percent (20%) of taxable income derived from registered projects or activities. This is in addition to the enhanced deductions enumerated under the law.

The RBE local tax may be imposed by the concerned local government unit through an ordinance issued by the concerned Sanggunian, at a rate of not more than two percent (2%) of an RBE's gross income during the ITH and EDR. This shall be in lieu of all local taxes and local fees and charges imposed by the local government unit. RBE local tax shall not be imposed on RBEs under SCIT.

As regards duty exemption, CREATE MORE modified the rules such that the exemption shall now apply to the importation of capital equipment, raw materials, spare parts, or accessories directly attributable to the registered project or activity of RBEs, including goods used for administrative purposes, unlike the old provision where the exemption applies only to those exclusively used in the registered project or activity.

For VAT, the exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly attributable to the registered project or activity of a registered export enterprise, or a registered high-value domestic market enterprise, including expenses incidental thereto.

Finally, with the signing into law of RA 12079, a non-resident tourist shall now be eligible for a VAT refund on locally purchased goods if the goods are purchased in person by the tourist in duly accredited stores, the goods are taken out of the Philippines by the tourist within sixty (60) days from the date of purchase and that the value of goods purchased per transaction is equivalent to at least Three Thousand Pesos (P3,000.00).

Happy New Year!