New Laws in Taxation and Property: A 2024 Primer on RA 12001, RA 11976, RA 12023, and RA 12066

By: Aubrey Camille J. Perez

Research and Content Coordinator

Institute of Corporate Directors

The Philippine government has recently signed into law important reforms aimed at modernizing the tax system, improving property valuation, and creating a more attractive environment for businesses and investors. RA 12001, RA 11976, RA 12023, and RA 12066, all passed in 2024, represent significant changes that will impact local government units (LGUs), businesses, and taxpayers.

RA 12001 (Real Property Valuation and Assessment Reform Act)

Enacted on June 13, 2024, RA 12001 standardizes real property valuation in the Philippines. The law mandates that property valuations be based on market value to promote fairness and uniformity across LGUs. One of the main goals is to increase local government revenues, improve transparency in real estate transactions, and foster technology in property tax systems.

The Bureau of Local Government Finance (BLGF), under the Department of Finance (DOF), plays a central role in implementing RA 12001. It develops and maintains the Philippine Valuation Standards (PVS), guiding LGUs in preparing their Schedule of Market Values (SMVs). LGUs must conduct public consultations before submitting their SMVs for approval, which take effect after certification by the Secretary of Finance and publication.

A notable provision of the law is a two-year real property tax amnesty for delinquent property owners, allowing them to settle unpaid taxes without penalties. LGUs will also receive subsidies to fund the updating of SMVs and ensure tax compliance across regions.

Before RA 12001, the Local Government Code of 1991 (RA 7160) granted LGUs autonomy to set their own property valuations, leading to inconsistent assessments across regions. This lack of uniformity resulted in unequal tax burdens for property owners, depending on the location of their properties. RA 12001 standardizes the process, ensuring uniformity and establishing a single valuation standard for all LGU assessors.

RA 11976 (Ease of Paying Taxes Act)

RA 11976, signed into law on January 5, 2024, simplifies tax compliance and modernizes tax administration. It directs the Bureau of Internal Revenue (BIR) to implement a digitalization roadmap that reduces the need for face-to-face transactions, improving overall efficiency. The law introduces special concessions for micro and small businesses, such as a simplified two-page Income Tax Return, reduced penalties for late filing, and a 50% reduction in compromise penalties.

RA 11976 also enhances digital systems for filing returns and payments, encouraging online transactions. VAT-registered individuals must issue VAT invoices for all sales, barters, exchanges, or leases of goods and services. Additionally, all individuals subject to internal revenue tax must issue registered sale or commercial invoices for transactions of ₱500 or more. VAT refund claims are streamlined into low, medium, and high-risk categories, and the BIR must process refund claims within 180 days.

Before RA 11976, the National Internal Revenue Code of 1997 (RA 8424) aimed to promote economic growth but left the tax system complex, particularly for small businesses. Taxpayers were required to fill out numerous forms and file returns manually at Revenue District Offices (RDOs), leading to inefficiencies. This process was time-consuming, often resulting in delays and frustration. RA 11976 streamlines this by enhancing digital systems, allowing taxpayers to file returns and make payments electronically, significantly reducing the need for in-person visits.

RA 12023 (Value-Added Tax on Digital Services Act)

Enacted on October 2, 2024, RA 12023 expands the scope of VAT to cover digital services provided by both resident and nonresident digital service providers in the Philippines. Digital services like online platforms, cloud services, and digital goods, which were previously exempt from VAT, are now subject to a 12% VAT.

Under this law, digital service providers, whether or not they have a physical presence in the Philippines, are required to assess, collect, and remit VAT on services consumed in the country. Nonresident providers must register for VAT and remit the tax directly to the BIR. Certain digital services are exempt from VAT, including educational services provided by accredited institutions and services related to the financial sector. Additionally, 5% of the incremental VAT revenues generated from digital services will go to developing the creative industries for five years.

Before RA 12023, the Philippine tax system did not cover digital services, particularly those provided by foreign companies. Local digital service providers were subject to VAT, but foreign companies without a physical presence in the country were largely exempt. This created a significant tax gap, as local companies were taxed, while foreign companies were not. RA 12023 addresses this gap by taxing digital services provided by both local and foreign providers, leveling the playing field.

RA 12066 (CREATE MORE Act)

RA 12066, signed into law on November 11, 2024, reforms the Philippines' tax incentives system, making it more competitive and transparent. The law allows registered business enterprises (RBEs) to choose between two incentives: the 5% Special Corporate Income Tax (SCIT) or the Enhanced Deductions Regime (EDR). Tax incentives are extended from a maximum of 10 years to up to 17 or 27 years, with additional incentives for labor-intensive projects.

Registered export enterprises (REEs) and high-value domestic market enterprises (DMEs) with significant investments can enjoy additional benefits. REEs can choose from three incentive options: an Income Tax Holiday (ITH) followed by SCIT or EDR,  SCIT that replaces all national and local taxes, or EDR.

RA 12066 also reduces the corporate income tax (CIT) rate from 25% to 20%, benefiting RBEs, and increases deductions for the manufacturing sector. It introduces a 20-working-day decision timeframe for tax incentive applications to streamline the process and reduce bureaucratic delays. RBEs can also implement flexible work arrangements without losing tax incentives.

Before the CREATE Act, the tax incentives system under the National Internal Revenue Code of 1997 (RA 8424) was complex and less adaptable. Tax incentives had shorter benefit periods and higher tax rates. RA 12066 addresses these issues by offering longer, more flexible incentives, helping businesses plan for the long term and promoting investment in the country.