The Bureau of Internal Revenue (BIR) is set to make tax payments easier for foreigners betting on stocks and other assets which would attract more investors.
A draft memorandum circular posted on the BIR’s Web site last week outlines a “simplified” procedure for non-residents to claim “preferential” tax rates for dividend, interest and royalty incomes incurred in the Philippines under tax treaties forged by the Philippines with other countries.
TMAP President Benedict R. Tugonon said the planned reform would “certainly improve the ease of doing business” in the country, and in turn would attract more investors to make their bets here.
“When businesses invest here like in shares of stock in Philippine companies, they would always want to know how much dividends they get after tax. With these simplified rules, it’s relatively easier to avail this tax rate. It will definitely encourage them (foreign investors),” Mr. Tugonon said in a phone interview last week.
Under the proposal put forward by BIR Commissioner Caesar R. Dulay, foreigners only need to submit a Certificate of Residency (CoR) to be eligible for lower tax rates as covered by an existing tax treaty between the Philippines and his/her home country.
The CoR will also be the basis for company officials and other withholding agents in applying the reduced income tax rate to non-residents. In turn, these agents must submit the form to the bureau within 30 days from income payments.
Mr. Tugonon sees Mr. Dulay’s proposed reform as the BIR’s way to “correct” an old rule started by former BIR Chief Kim S. Jacinto-Henares that required non-residents to first secure tax treaty relief applications (TTRA) before a lower tax rate can be availed of.
“Foreign investors don’t like changing rules mid-game. This is going back to original practice that you don’t really have to file TTRA,” Mr. Tugonon added.
The TMAP head also lauded the new BIR’s efforts to consult stakeholders before releasing the new guidelines, describing it as a “very huge departure” from the previous administration. The agency is accepting comments on the proposed memorandum order until today.
The Finance department has created an anti-red tape unit to review current procedures among its attached agencies, following a directive from President Rodrigo R. Duterte to trim the bureaucracy and fast-track the delivery of government services.