THREE ECONOMIC REFORMS gained ground in the House of Representatives on Monday evening, with the measure removing restrictions on foreigners from practicing their professions in the Philippines and another simplifying taxes on financial instruments both bagging final approval.
Meanwhile, the tax reform which slashes corporate income tax rates but also removes redundant perks was approved on second reading.
FOREIGN PROFESSIONALS, SMES
With 201 affirmative votes, six negative votes and seven abstentions, House Bill No. 300, which proposes to amend Republic Act No. 7042, or the “Foreign Investments Act (FIA) of 1991”, was passed by the chamber on third and final reading.
The measure — authored principally by Tarlac 2nd District Rep. Victor A. Yap — will allow foreigners to practice their professions in the Philippines in order to facilitate transfer of knowledge and technologies to locals. It “aims to exclude the ‘practice of professions’ from the coverage of the Foreign Investments Act so as to attract foreign professionals to practice in the Philippines wherein they would be able to bring in technology and know-how from abroad and attract foreign direct investments, and help generate more employment opportunities in the country.”
The bill also reduces to 15 from 50 currently the minimum number of direct local hires required of foreign investors setting up small- and medium-sized enterprises (SMEs) with minimum paid-in capital of $100,000.
Counterpart bills — Senate Bill No. 418 and 419 — have been filed anew in the Senate by Senators Francis N. Pangilinan and Sherwin T. Gatchalian, respectively.
FOURTH TAX REFORM
With 186 affirmative votes, six negatives and two abstentions, HB 304, or the proposed Passive Income and Financial Intermediary Tax Act (PIFITA), which makes up the fourth package of the government’s comprehensive tax reform program (CTRP) also bagged the chamber’s final approval.
The bill, introduced by Albay 2nd district Rep. Jose Ma. S. Salceda, proposes a unified 15% income tax rate on interest, dividend, and capital gains from the current range of zero to 30%.
Package 4 of the CTRP also proposes the reduction of the stock transaction tax from 0.6% to 0.1% and imposition of a 0.1% transaction tax on debt instruments listed and traded on the Philippine Dealing Exchange. It will also remove the initial public offer tax.
The measure will also impose a uniform five percent gross receipt tax on banks and other financial intermediaries, and will reduce the 12% value added tax (VAT) to a two percent premium tax on health insurance organizations, pension and pre-need insurance.
Amendments to the original version of the bill so far include:
• dividends received by a domestic corporation from another domestic firm will not be subject to tax;
• exemption from document stamp tax of non-monetary documents like diplomas, transcripts of records and other school certifications; oath of office for barangays, good standing certification from the Professional Regulation Commission, affidavits, certificates of no marriage record, baptismal certificates and marriage license certificates.
CORPORATE INCOME TAX
HB 4157, or the proposed “Corporate Income Tax and Incentives Reform Act” CITIRA (in the past Congress, called the “Tax Reform for Attracting Better and High-quality Opportunities” or TRABAHO), was approved on second reading.
The bill seeks to cut the current 30% corporate income tax rate — described as the highest among major Asian markets — by one percentage points every other year to 20% in 2029.
Amendments to the original version so far include a provisionthat businesses in areas beside Metro Manila will have four years of income tax holiday and three years of reduced corporate income tax, while those farther away will benefit from six years of income tax holiday and four years of reduced corporate income tax.
It also gives fiscal incentives only to exporters and industries listed in the Strategic Investments Priority Plan, taking into account amount of investments, employment generation, use of new technologies, adequate environmental protection systems, promotion of competitiveness, and added SME output, among others. — V. A. C. Ferreras