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Senator seeks probe of taxes on cross-border services

DAVID ARROWSMITH-UNSPLASH

A PHILIPPINE senator has filed a resolution seeking to investigate the tax bureau’s imposition of a 25% withholding tax and 12% value-added tax (VAT) on cross-border services of foreign corporations, saying it could drive away businesses.

“This could hike the cost of doing business in the Philippines, which will further erode the country’s competitiveness in attracting foreign investors,” Senator Sherwin T. Gatchalian, who filed Senate Resolution No. 955, said in a statement on Sunday.

He was referring to a Jan. 10 memo issued by the Bureau of Internal Revenue (BIR), which imposed taxes on services rendered by nonresident foreign corporations.

In issuing the memo, the agency cited a Supreme Court (SC) decision that said satellite airtime-free payments are subject to final withholding tax.

“We need to carefully review the issuances of the BIR, which implements laws and Supreme Court decisions,” Mr. Gatchalian said. “We must ensure that these issuances do not go beyond the law and SC decision.”

The senator earlier filed a resolution that seeks an inquiry in aid of legislation into complaints made by foreign companies on a large volume of denied VAT refund claims.

Citing business groups, he said foreign companies might end up passing on their VAT and withholding tax payments to their clients.

Congress has approved a bill seeking to make paying tax easier by exempting micro-taxpayers from withholding tax and reducing penalties for smaller businesses. — John Victor D. Ordoñez

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