The Bureau of Internal Revenue (BIR) has released the new revenue regulations that will implement the provisions of Corporate Recovery and Tax Incentives for Enterprises or Create Act.
Revenue Regulation (RR) 2-2021, in particular, imposes a tax of 20-percent on certain passive income received from all sources within the Philippines.
In terms of final withholding tax, 15 percent shall be imposed on any profit remitted by the Philippine branch of a foreign corporation to its head office abroad; 20-percent for interest on any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and royalties derived from sources within the Philippines; 15 percent for interest income derived from a depository bank under the Expanded Foreign Currency Deposit System; and 15 percent for capital gains from sale of shares of stock not traded in the stock exchange.
RR 4-2021, meanwhile, provides the rules on value-added tax (VAT) exemptions.
In particular, it said that beginning this year, “the VAT exemption shall only apply to sale of real properties not primarily held for sale to customers or held for lease in the ordinary course of trade or business; sale of real property utilized for socialized housing as defined by Republic Act (RA) 7279, as amended; and, sale of house and lot, and other residential dwellings with selling price of not more P2 million . . .”
Also exempted from VAT are the sale, importation, printing or publication of books, and any newspaper, magazine, journal, review bulletin, or any such educational reading material covered by the United Nations Educational, Scientific and Cultural Organization Agreement on the importation of educational, scientific and cultural materials, including the digital or electronic format thereof.
Another exempted is the sale or importation of prescription drugs and medicines for diabetes, high cholesterol, hypertension, cancer, mental illness, tuberculosis and kidney diseases.
The sale or importation of capital equipment necessary for coronavirus disease 2019 (Covid-19) prevention; drugs, vaccines and medical devices specifically prescribed and directly used for the treatment of Covid-19; and drugs for the treatment of the virus approved by the Food and Drug Administration for use in clinical trials, including raw materials directly necessary for the production of such drugs, are also VAT exempt.
Lastly, RR 5-2021 retroactively reduced the income tax of domestic corporations to 25 percent from 30 percent.
Meanwhile, the corporate income tax rate for local businesses with a net taxable income of P5 million and below, and total assets (excluding land) of up to P100 million was trimmed from 30 percent to 20 percent.