Cross-border tax policy implemented on ‘case-to-case’ basis – BIR
THE Bureau of Internal Revenue (BIR) clarified that its taxation policy on crossborder services would be implemented on a case- tocase basis.
Commissioner Romeo Lumagui Jr. said those covered by the regulation would be determined during the auditing process.
“We’re not saying that, automatically, you’re liable here. As to what exactly falls under the cross-border transactions, whether you’re taxable here or not, and whether you have a treaty applicable, it depends on a case-to-case basis,” Lumagui said at the sideline of an event by Fintech Alliance.Ph.
His remarks come after some of the biggest business groups in the Philippines asked the BIR to scrap Revenue Memorandum Circular (RMC) 5-2024, which imposes a 25 percent withholding tax and 12 percent final withholding value- added tax ( VAT) on cross- border services or services to a Philippine entity that are performed by a foreign entity.
In a joint statement, they said imposing these would raise the costs of doing business in the Philippines which could potentially drive foreign investors away.
Lumagui said the BIR was only “applying” a Supreme Court decision.
The memo had cited the high court’s ruling on Aces Philippines Cellular Satellite Corp vs Commissioner of Bureau of Internal Revenue, which stated that the satellite air time fee payments by Aces Philippines, a domestic c o r p o r a t i o n , t o Ac e s Bermuda, a non- resident foreign corporation (NRFC), is subject to final withholding tax.
But the business groups noted that the factors present in the Aces case are not necessarily applicable in other cross- border services like consultancy firms.
The signatories of the letter include the Philippine Chamber of Commerce and Industry ( PCCI), Philippine Exporters Confederation ( Philexport), Management Association of the Philippines ( MAP), Tax Management Association of the Philippines (TMAP), Philippine Institute of Certified Public Accountants ( PICPA), and the Financial Executives of the Philippines (FINEX).