PHILIPPINES Law and Practice Contributed by: Carina Laforteza, Joanna Marie Joson, Kristina Paola Frias and Joanna Marie Reyes, SyCip Salazar Hernandez & Gatmaitan
government committed to participate in the Two-Pillar Solution of BEPS. The Philippine government has yet to announce spe - cific plans on implementing Pillars One and Two of BEPS. 9.3 International Tax Traditionally, international tax does not have a very high public profile in the Philippines, although there is now more awareness of it due to the number of foreign investors in the Philippines and increasing outward investments of Philippine companies. Transfer pric - ing concerns arising from related-party transactions of local subsidiaries with their foreign parent compa - nies or affiliates continue to drive the discourse on developing more comprehensive guidelines for the implementation and enforcement of regulations on transfer pricing. The 2013 transfer pricing guidelines allow taxpayers to enter into APAs with the BIR, but separate guidelines on APAs are not yet in place. In August 2019, the BIR issued transfer pricing audit guidelines prescribing standardised audit procedures and techniques in auditing taxpayers with related- party or intra-group transactions. While these guide - lines serve as an internal manual for BIR examiners in the conduct of their tax audit, the guidelines contain the application of the arm’s length principle in spe - cific common transfer pricing issues (eg, intra-group services, intangible assets), transfer pricing meth - ods and factors that the taxpayer may find valuable in its preparation of transfer pricing documentation. In 2020, the BIR issued regulations setting out the guidelines, procedure and the required forms for the proper disclosure of related-party transactions that were intended to improve the BIR’s transfer pricing risk assessment and audit functions. 9.4 Competitive Tax Policy Objectives Currently, the Philippines has a competitive tax policy and grants generous fiscal and non-fiscal incentives to inward investments. The CREATE Law reduced the corporate income tax rate and rationalised tax incen - tives to make the incentive system performance- based, targeted, time-bound and transparent. Follow - ing the membership of the Philippines in the OECD/
G20 Inclusive Framework on BEPS on 8 November 2023, several tax laws have been enacted. On 22 January 2024, the EOPT Law, which simplified tax compliance requirements to modernise the Philip - pines’ tax administration, took effect. Republic Act No. 12023, which subjects digital ser - vices rendered by resident and non-resident digital service providers to 12% VAT, took effect on 18 Octo - ber 2024. Shortly thereafter, the CREATE MORE Law, which enhanced the tax regime under the CREATE Law, became effective on 28 November 2024. On 1 July 2025, CMEPA took effect, which aimed to standardise taxes on financial products to discourage arbitrage opportunities. 9.5 The Competitive Tax System Tax leakages under the Philippine tax system may be attributed to transfer pricing and tax avoidance cases. In this regard, the actions recommended by BEPS may have a more significant impact on transfer pric - ing provisions and tax avoidance rules, especially if applied to transactions between related parties where the local affiliate enjoys income tax incentives (eg, enterprises located at ecozones and freeport zones). Another area of vulnerability lies in the taxation of the digital economy. Cross-border digital services previ - ously escaped VAT, creating significant leakages in consumption-based taxation. Republic Act No 12023 now ensures VAT capture on digital services rendered by resident and non-resident providers. However, enforcement against non-resident digital service pro - viders remains challenging, highlighting the need for a stronger compliance mechanism. The Philippine government has issued transfer pricing guidelines, although it appears that the BIR has not strictly implemented the rules. The incentives under the CREATE Law and the CREATE MORE Law were designed to be performance-based and time-bound. Hence, enterprises intending to avail themselves of the incentives after the lapse of the incentive period, including any extension granted under the CREATE MORE Law, must register new activities that are listed
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