With a new government in place from June 30 2016, expectations in the Philippines are high that a new comprehensive tax reform package will come into force.
The previous government had failed to successfully implement its own tax reform package which involved lowering the individual tax rate, increasing VAT and excise rates, the removal of bank secrecy laws for tax evaders and making tax evasion a predicate offence to money laundering, and increasing the size of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC).
The new administration has informally presented its own economic agenda to business leaders, which focuses on tax reform, more effective tax collection and indexing tax rates to inflation. Business leaders then engaged the incoming president on their preferences on tax reform, arguing the case for lowering the corporate and individual income tax rates.
"Given the backdrop of the ASEAN Economic Community which was launched on December 31 2015, everybody agrees that the Philippines' income tax rates, both for individuals and companies, should be reviewed if the Philippines wants to be competitive," said Fredieric Landicho of Deloitte.
"Some officials in the government forecast that the corporate income tax rate should be adjusted to the level of 24-26% from the current 30%, while the current individual income tax rate bracket should be expanded so that only those in the C-suite level gets taxed at 32%," he added.
In effect, there is a general agreement between stakeholders that the tax reform should be implemented. However, it will take three to six months to really see and understand the economic agenda of the new government.
Under the new administration, the market is anticipating a relaxation of the harsh and stringent interpretation and enforcement of tax laws, rules and regulations that was commonplace under the previous regime. Maria Peralta, head of tax at Manabat & Co, noted that tenure of the previous commissioner of the Internal Revenue (CIR), Kim Jacinto Henares, was characterised by unwarranted strictness and unfair implementation of tax rules.
On July 1 2016 the new CIR, Caesar Dulay, revoked one of the revenue memorandum orders (RMOs), which the previous CIR had released just a month before, on determining the real financial capacity of the buyer of properties or stock and the taxes applicable, and audit exposure, if the buyer did not have enough capacity.
Dulay also suspended the effectivity of all issuances from Jacinto Henares which were released in June 2016, and suspended specific audit activities conducted by BIR on the grounds that the audit investigations were an avenue for abuse of taxpayers, leading to corruption.
"We are very optimistic as the new government is looking at tax not just as a tool of collecting revenue but also trying to connect tax with economy development. We are also expecting BIR to be less strict and the agenda on the removal of crime and corruption will be focused," said Peralta.
A relaxation from the authorities in some areas will not remove the impact that greater international tax transparency will have, however. An awareness that the Philippine tax authority will exchange information with treaty countries, and with other countries with which the Philippines may enter into bilateral agreements with, is stimulating high net worth individuals to review their estate plans and trust structures.
"Wealthy individuals and private banks are more inclined now to review the estate planning or trust structures that are being established, and ascertain that the contemplated transactions will be tax compliant, as well as to determine the future tax exposure," said Dennis Dimagiba, the tax practice leader at Quisumbing Torres.
SGV & Co.
6760 Ayala Avenue
1226 Makati City
Philippines Tax Leader
Wilfredo U. Villanueva
Tel: +63 2 894 8180
Business Tax Services
Luis Jose P. Ferrer
Tel: +63 2 891 0307
Global Compliance and Reporting
Henry M. Tan
Tel: +63 2 8948350
People Advisory Services
Czarina R Miranda
Tel: +63 2 8948304
Mark Anthony P. Tamayo
Tel: +63 2 891 0307
International Tax Services
Fidela T. Isip-Reyes
Tel: +63 2 894 8204
Veronica A. Santos
Tel: +63 2 891 0307
Romulo S. Danao
Tel: +63 2 894 8392
Main Office: 15th Flr. Strata 2000, F. Ortigas Jr.
Rd. Ortigas Center Pasig City, 1600
Satelite Office: 7th Flr., Infinity Tower, 26th st.,
Bonifacio Global, Taguig City
Corporate & Tax Partner:
MARK S. GORRICETA
A full service law firm, Gorriceta Africa Cauton & Saavedra is one of the leaders in the fields of Capital Markets, Mergers & Acquisitions and Taxation in the Philippines.
The firm offers a full array of services such as corporate law, capital markets, M&A's, taxation, estate planning, litigation, transportation law, maritime, intellectual property law, labor law and business law, among others.
The firm helps solve problems for domestic and foreign clients and corporations. The firm's experience is built on securities offerings, restructuring and cross border acquisitions. The firm has been involves or is involved with several listing applications at the Philippine Stock Exchange.
The firm also specializes in providing counsel on the whole legal spectrum of doing business in the Philippines that ensures tax efficiency from project conceptualization to capital and profits repatriation. The firm has extensive experience in complicated tax structures, tax examinations, and investigations and tax ruling applications. In recent years, Gorriceta Africa Cauton & Saavedra has provided tax advice to most of the Top 100 companies in the Philippines.
|Corporate Income Tax||30%|
|Capital Gains Tax||5%||6%||10%||A|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||20%||E|
|Branch Remittance Tax||15%|
A These rates apply to capital gains on shares and real property in domestic corporations not traded on a local stock exchange. The real property rate is 6% and the rate on shares is 5/10%.
B Certain types of Philippine-source income of foreign corporations are taxed at preferential rates.
C Under domestic law, dividends paid to domestic corporations or resident foreign corporations are not subject to tax. Dividends paid to non-resident foreign corporations are generally subject to a final withholding tax of 30%. However, this rate may be reduced to 15% if certain conditions are met.
D The withholding tax rate for interest on peso deposits derived by domestic and resident foreign corporations is 20%.
E Under domestic law, if the recipient is a non-resident foreign corporation, the final withholding tax rate is 30%. For reduced rates under tax treaties for non-resident foreign corporations.
Baniqued & Baniqued offers advice on areas of tax such as corporate tax, international tax, strategic tax planning for cross-border transactions, tax-efficient structuring, tax controversy and litigation, tax due diligence and local and real property taxation.
The clients of the firm are from diverse industries such as manufacturing, oil and gas, distribution, services, real estate, airlines, food and franchising, and include Coca-Cola, British American Tobacco, Nido Petroleum, Citco, Jardine Distribution, Sunrise Properties, Jollibee, Hawaiian Airlines and more.
Carlos Baniqued and Angel Baniqued are the co-founders of the firm. Carlos Baniqued has rich experience in advising high net worth individuals and large businesses in various tax matters including estate planning, dispute resolution, M&A, tax planning and transfer pricing. Angel Baniqued is a litigation specialist and also a former professor of law.
Du-Baladad and Associates – WTS's tax advisory, compliance and litigation department houses three partners and 19 professionals. Benedicta Du-Baladad is the managing partner and CEO of the firm and she is competent to advise on every tax matter which could appear in the market. She has more than 25 years of expertise in tax including international tax and corporate law.
In keeping with Du-Baladad's expertise, the firm primarily focuses and specialises on taxation and corporate law. Core practice areas include tax litigation, handling disputes and claims, advisory and tax planning, incentives availment assistance, corporate services, M&A, transfer pricing and tax treaty application, tax compliance and advocacy.
During the last year, Du-Baladad and other professionals provided tax compliance review to appraise a bank of the risks and possible tax liabilities arising from its practices, and from possible non-compliance with the applicable tax laws, rules and regulations, going on to quantify these risks where possible.
The review covered both the regular banking unit and foreign currency deposit unit, and included the following national internal revenue and local taxes. The team was able to resolve a number of tax issues and advise the client of possible course of action to minimise and/or remove the tax risks , especially as regards documentary stamp taxes, which are a source of some of the largest tax assessments in case of tax audits.
Isla Lipana & Co, the PwC member firm in the Philippines, offers a broad spectrum of tax services for individuals and businesses across all kinds of sectors within the Philippines as well as across the borders. The firm offers a range of tax services, including tax planning, tax opinions and rulings, tax assessments and claims for tax refunds, tax returns, tax audits, start-up issues for foreign investors, legal services, tax compliance, accounting and payroll services, Japanese development and customs and international trade.
Managing partner Maria Lim is the head of tax of the firm. She has more than 16 years of experience in tax consulting, particularly in corporate tax planning and tax due diligence, for companies in different sectors including financial services, consumer and industrial products and services, energy, oil and gas and real estate.
As a part of the Deloitte network, Navarro Amper & Co's tax practice provides an array of tax services and offers practical solutions to different types of clients. It comprises four partners and 100 specialised professionals supporting clients with comprehensive tax solutions. The professionals are trained to understand the complications of local tax rules and to provide timely assistance.
The country tax leader, Fredieric Landicho, has more than 17 years of experience in delivering tax and legal assistance and is mainly involved with tax advisory, due diligence, tax refunds, structuring, litigation support and the privatisation of government-owned and controlled corporations.
Walter Abela leads the firm's M&A tax offering, specialising in tax assessments, due diligence, tax rulings, and government regulatory registration and advice for multinational companies. Richard Lapres is the head of indirect tax and Imelda Tapay heads the business process solutions with a focus in the industries of energy and resources, financial services, real estate and technology, media and telecommunications (TMT).
Punongbayan & Araullo, a member firm of Grant Thornton, provides various tax services including tax advisory, tax compliance, corporate tax services and tax education and advocacy.
The firm's tax practice is led by Lea Roque, who has been in the field of taxation for more than 16 years advising a range of clients on direct international tax, tax due diligence, M&A, personal income tax advisory and planning and tax-efficient structuring. She also provides her clients with tax updates through numerous tax seminars.
The tax practice of Quisumbing Torres, Baker & McKenzie Philippines, is led by partner Dennis Dimagiba, who has 30 years of experience in general tax planning, tax litigation and customs issues and controversies. The team has two partners and five other professionals. Marianne Ko joined the firm as associate in December 2015.
The firm's other partner, Ronald Bernas is respected for his experiences and skills in handling tax controversies as well as general tax planning, and customs issues and procedures.
The tax team regularly advises clients on tax structuring for M&A, corporate reorganisations, tax incentives available to foreign investors, taxation of employee compensation and benefits, real estate transactions, income and withholding taxes, tax treaty issues, tax and customs audits, valuation and classification issues, international trade and customs issues, trusts and wealth management, VAT, local business taxes and property tax issues.
The firm's lawyers and tax specialists deliver tax and customs support services in the BPO, information technology, telecommunications, pharmaceuticals, manufacturing and mining industries.
Maria Peralta heads RG Manabat & Co's tax practice, which employs specialists in global mobility services, transfer pricing and international trade and customs engagements. The team is made up of seven partners and over 100 professionals adept in handling engagements involving corporate tax, indirect tax, and business taxes.
During the last year, the firm provided domestic tax advice on the taxation of a transport network company (TNC). The team advised the client at the time when there were no rules yet on the taxation of TNCs. The absence of such rules impacted on the determination of the client's tax reporting obligations.
The advice delivered to the client was based on the evaluation of the applicability of certain basic tax concepts with respect to VAT. Subsequently, the Philippines tax office issued the pertinent rules which essentially mirrored the tax advice given to the client. Thus, the client did not incur any cost in complying with the new rules and there was no need to consider any restructuring of its operations.
The tax practice at Salvador Llanillo & Bernardo, Taxand Philippines has seven partners and 18 other professionals and is led by managing partner Serafin Salvador, who has more than 30 years of experience as a tax lawyer.
The firm's practitioners have extensive experience in commercial and tax law and providing high-quality tax advice to clients across 50 countries. The firm's core tax services include tax advocacy and litigation support services, which involves representing clients in various tax cases before tax authorities. It also assists in handling tax audits and investigations for refund of overpaid taxes.
At the time of writing, the firm is handling more than 280 tax cases involving national and local taxes including more than 120 judicial claims for refund and more than 150 judicial protests of deficiency tax assessments.
Over the past year, the tax team acted as counsel of the government of Singapore in filing a judicial claim for refund of overpaid income tax on interest on T-Bonds issued by the Philippine government.
Wilfredo Villanueva leads the tax and general counsel service line at SyCip Gorres Velayo & Co. He has been providing services in corporate tax planning and advisory engaged with direct and indirect tax, local tax and international tax issues for the past 24 years. His areas of expertise include tax advocacy and controversy.
As a member firm of EY, SyCip is capable of covering all tax matters for clients across a number of industries. The firm offers services including tax compliance review, tax planning engagement, tax due diligence review, tax advocacy and controversy work, litigation support, investment advisory, general advisory, transfer pricing, customs, contract tax and outsourcing, income tax return preparation, estate and family wealth planning and tax seminars.
Angelo Advincula oversees the tax practice of Zambrano & Gruba Law Offices with five other partners. Advincula specialises in commercial law, government policy commercial litigation and arbitration, as well as taxation.
The main industries that the firm advises are financial services, transport, hospitality (including the casino and gambling industry), food and fast-moving consumer goods (FMCG) and TMT.
One of the most notable transactions the team worked on in the past year was to challenge the collection of deficiency taxes after a client failed to duly protest the assessment within the time allowed by the rule. The firm was able to have the assessment reopened, allowing for its revision.
|Tier 1- Philippines|
|Isla Lipana & Co|
|Navarro Amper & Co|
|RG Manabat & Co|
|SyCip Gorres Velayo & Co|
|Tier 2- Philippines|
|Baniqued & Baniqued|
|Salvador Lianillo & Bernardo, Taxand Philippines|
|Zambrano & Gruba Law Offices|
|Tier 3- Philippines|
|Du-Baladad and Associates - WTS|
|Punongbayan & Araullo|