DoF refines Package 4 of tax reforms
THE Department of Finance (DoF) has modified the proposed bill for Package 4 of the Comprehensive Tax Reform Program (CTRP) to simplify taxes on passive income, financial instruments, and products.
In a statement on Wednesday, the DoF said it met finance sector stakeholders earlier this month to discuss potential refinements to the tax reform.
“The proposal will ensure a more efficient Philippine tax system, boost the competitiveness of the country’s capital markets, and foster greater financial inclusion among Filipinos,” the department said.
Finance Secretary Ralph Recto revised the proposal to preserve the structure of certain products and instruments while deferring the implementation of specific provisions until 2028.
The DoF announced that interest income tax will be standardized at 20 percent in 2024, while royalties will adhere to the current tax code until 2027, before being reduced to 15 percent in 2028.
Likewise, dividend income tax will stay the same until 2027, with a suggested standardization of 10 percent in 2028.
Conversely, the stock transaction tax will see a gradual annual reduction of 0.1 percent, declining from 0.5 percent to 0.1 percent by 2028.
Existing taxes on financial transactions, covering sales, agreements, memoranda, deliveries, or transfers of shares or stocks, will remain until 2027, and then be removed by 2028. The same applies to taxes on bills of exchange or drafts.
Tax rates on bank checks, drafts, and similar instruments will remain unchanged.
Transitioning from the current 12 percent Value-Added Tax (VAT) on HMO (health maintenance organization), pre-need and pension plans, the DoF said that a 2.0 percent premium tax will be introduced to align with life and health insurance taxes.
“This is to encourage participation in life insurance products,” it said.
Conversely, rates on property insurance, fidelity bonds, and other policies will gradually decrease by 1.0 percent annually, reaching 7.5 percent by 2028 from the current 12.5 percent.
Taxes on Philippine Charity Sweepstakes Office tickets, prizes and winnings will remain unchanged.
Meanwhile, mortgages, pledges and deeds of trust taxes will remain at their current rates until 2027, and then will be reduced to 0.3 percent in 2028.
The DoF acknowledged the concerns raised by stakeholders during the briefing and stressed the importance of close collaboration between the department and key stakeholders to enhance the proposed Package 4 of the CTRP.
It added that stakeholder briefings will be conducted for the proposed excise tax on single-use plastics, the Motor Vehicle User’s Charge, and the VAT on digital service providers.