The great American baseball pitcher Satchel Paige once said: “Don't look back. This is a good advice for a lifetime – However, this is not the case in improving our competitiveness compared to our ASEAN peers.
There, the Philippines is always wise to look around, looking around, looking for ways to expand our international trade in goods and services and attract foreign investment to drive economic growth. Sometimes even technically high problems can have a huge impact on promotion – Or block – Our country's growth. This is an example that can be easily solved to show that the Philippines treats its foreign partners fairly.
Like most countries, the Philippines has series The treaty with our major trading partners is designed to avoid double taxation. In other provisions, the treaty usually stipulates that payments for services provided by clients of the Philippines to foreign companies are not subject to Philippine taxes, especially tax deductions. This is fair and is the standard provision of these tax treaties.
However, at present, the process of obtaining the benefits of the treaty is cumbersome, heavy and unusually slow. Under Revenue Memorandum Notice (RMC) No. 77-2021, domestic taxpayers must make a confirmation request (RFC) and if a treaty rate is applied for, or a tax treaty relief application (TTRA) must use the regular interest rate and then apply for a refund. The documentary burden is high and the refund requirement can take years to resolve.
The solution is simple: BIR should follow international best practices to eliminate the need to obtain tax treaty benefits beforehand. Countries such as Thailand and Australia do not require approval. Additionally, the process can be moved online and replaced with a direct notification (rather than approval) system, similar to the methods used in Singapore and Indonesia. These simplified systems reduce barriers to investors – a model that the Philippines is desperately needed.
The current manual approval process in the Philippines requires a large number of documents (some require notarization), face-to-face meetings and other requirements Revenue Memorandum Order 14-2021 – Then, follow the customer one by one to carry out the whole process Rather than having a certificate for a foreign taxpayer All income paymentsall persons can automatically be entitled to benefits under the Tax Treaty. It prevents companies from investing here when treaty benefits can be automatically obtained elsewhere. One benefit of simple notification is that it focuses on who claims to benefit.
The Philippines stands out in ASEAN as they impose over-duty and document-heavy procedures to obtain tax treaty benefits. This not only delays legal claims, but can also trigger other audits, thus preventing investment. Despite the need to prevent abuse, eligible taxpayers should be able to obtain treaty benefits simply and effectively.
Our tax treaty partners, including the United States and Japan, should directly receive the benefits of the treaties signed with the Philippines.
These heavy demands hurt foreign investors and their Filipino partners, many of whom choose to absorb taxes rather than endure slow, complex processes or face potential audits. This uncertainty deprives them of their legitimate interests and raises the cost of doing business in the country for everyone involved.
Indonesia is now experiencing record levels of foreign investment, with Thailand's applications rising sharply. In the digital world, our English-speaking rival Malaysia is reaching new heights. The Philippines does see an increase in overall investment in 2024, but this is a sign of a decline in 2023, and there is still room for improvement in this sign. In today’s competitive landscape, removing barriers to investors is more important than ever.
BIR should act quickly through new regulations to simplify access to treaty benefits. Withdrawals should be eligible for people – just as Filipino companies enjoy them abroad. Simplifying this process will support local companies, attract technology investments and strengthen the broader economy.
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Daniel A. Witt is the president of the International Taxation and Investment Center (ITIC), a global organization that promotes pro-investment tax and economic reforms in 85 countries. With over 30 years of experience, he led policy dialogue in border markets and co-founded the major regional tax forums in Asia, Africa and the Middle East. Recognized for his work in Kazakhstan and other transition economies, he continues to provide advice on tax and investment policies to governments, industry leaders and global institutions.
MON ABREA, CPA, MBA, MPA He is the founder and CEO of the most important real tax reform in the Asia Consulting Group (ACG) and the Philippines. Harvard graduates also completed Oxford’s climate policy administration program, where he advises governments, multinational corporations and global institutions on tax policy, governance and sustainable investment. He has conducted investment and tax briefs in more than 50 countries and states in Asia, North America, Europe, Australia and the Middle East. He also hosts podcasts for Thoughts and Game Changers, where he talks with experts in global taxation, sustainability and innovation. Follow him: @askthetaxwhiz.
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