Tax Articles

Philippine Taxation: 2025 in Review

By: Atty. Jomel N. Manaig

Atty. Jomel N. Manaig Partner   +632 8403-2001 loc. 140 This email address is being protected from spambots. You need JavaScript enabled to view it. View Profile

The Philippine tax landscape in 2025 was shaped by three main forces: enactment/enforcement of new tax laws, issuances of implementing rules and regulations with other related issuances, and key rulings from the Supreme Court – with each carving its own mark.

NEW TAX LAWS AND THEIR IMPACT. Several laws which were enacted or took effect in 2025 changed basic tax rules for businesses and individuals:

Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act amended the corporate tax incentive framework. The law expanded enhanced deductions and introduced a special 20 percent corporate income tax rate for registered activities under the Enhanced Deductions Regime. It also clarified the scope of VAT zero-rating for suppliers of goods and services to registered projects. These reforms aim to balance competitiveness with fiscal needs.

VAT on Digital Services, which began affecting 2025 filings, expanded VAT to nonresident digital service providers. Under new provisions, non-resident digital service providers must register with the BIR and remit VAT on services consumed in the Philippines. This law seeks to create an even playing field between resident and nonresident digital service providers. At the same time, it broadened the tax base to include online platforms, cloud services, and digital goods.

Capital Markets Efficiency Promotion Act (CMEPA) was enacted with the goal of making the tax regime for investments simpler and more consistent across instruments. It mainly affects banks, investors, and the retirement plans of individuals. In a nutshell, the law rationalized the tax treatments of passive investment income and capital market transactions. Some of the major changes include: i) removing the tax exemption on long-term time deposits; ii) introduction of a uniform final withholding tax on interest income; iii) simplification of the tax treatment of gains from shares and bonds; and iv) rationalization of documentary stamp taxes on fund units and securities. 

Enhanced Mining Fiscal Regime revamps the country’s mining taxation system to secure a more equitable government share while maintaining investment viability. It replaces the prior fragmented framework with a unified regime featuring margin-based royalties, a windfall profits tax, project-level ring-fencing, and limits on excessive debt financing. The law also reinforces transparency through stricter monitoring, audit, and disclosure rules. Overall, it aims to balance fiscal stability, investor predictability, and the sustainable use of the Philippines’ mineral resources. 

Looking ahead, other legislative developments require monitoring. Proposals in Congress include excise taxes on single-use plastics, further extension for the estate tax amnesty, a general tax amnesty, and a qualified domestic minimum top-up tax, but these remain under discussion and have not yet become law. 

ADMINISTRATIVE ISSUANCES: IMPLEMENTATION AND COMPLIANCE. Several government agencies were active in issuing guidance to implement recent laws and modernize tax administration. While a significant number of administrative issuances pertain to the implementation and interpretation of the new tax laws, we will be focusing on other significant issuances made by the Bureau of Internal Revenue (BIR).

Revenue Regulations (RR) No. 2-2025 implements the tax provisions of the Securitization Act of 2004. It defines key terms such as securitization and asset-backed securities, clarifies tax treatment of gains, interest, and fees, and outlines exemptions and compliance requirements for participants in securitization transactions. The regulation provides certainty on tax liabilities and reporting duties, which supports the development of the local capital markets by encouraging securitization activities while reducing ambiguity in tax application for investors and originators. 

RR No. 15-2025 revises and clarifies tax rules for private retirement benefit plans, detailing qualification criteria for tax-exempt status, confirming that retirement payouts and trust income are non-taxable for compliant plans, and reaffirming employer contribution deductibility, while emphasizing BIR approval and compliance to avail incentives. 

Revenue Memorandum Circular (RMC) No. 81-2025 reiterates the statutory requirements for deducting business expenses under the Tax Code. Deductible expenses must be ordinary, necessary, paid or incurred within the taxable year, directly connected to business operations, and supported by adequate documentation. The circular underscores strict substantiation and proper accounting treatment. Practically, it signals heightened audit scrutiny and reinforces the need for disciplined record-keeping, as inadequately supported expenses face disallowance, potentially increasing taxable income and exposure to deficiency assessments. 

RMC No 107-2025 perhaps is the most recently talked about issuance of the BIR. It temporarily halts all BIR field audits and related operations, including issuance of Letters of Authority (LOA) and Mission Orders (MO), until the Commissioner lifts the suspension, with limited exceptions for urgent or legally mandated cases. This pause allows a comprehensive review of audit procedures to strengthen taxpayer protections, enhance fairness, and rebuild trust, but compliance obligations and statutory deadlines remain in force. The directive also signals future reforms that could increase transparency and consistency in audit selection and execution. Subsequent pronouncements signal a policy direction to restrict the issuance of LOAs and MOs to only the Office of the Commissioner of Internal Revenue as well as to limit the frequency with which taxpayers are audited in a particular year. 

Other BIR issuances are also still in the pipeline and may be issued in 2026: i) the regulations for the Advance Pricing Agreement; ii) the regulations for the Enhanced Mining Fiscal Regime; and iii) the lifting of the suspension of BIR audit activities and the corresponding changes to the assessment process. 

SUPREME COURT DECISIONS: INTERPRETATION AND CLARITY. The Supreme Court in 2025 rendered decisions that narrowed the interpretive space for both incentives and administrative enforcement remedies. 

VAT Zero-Rating Incentives under CREATE has been clarified to apply to all registered business enterprises (RBE), regardless if it is export-oriented or caters to the domestic market, as long as the local purchases are directly and exclusively used in the registered activity or project. The inconsistent regulation of the BIR, which limits the incentive to export-oriented enterprises, has been declared void. While this is a win for taxpayers, the possibility of recovery of the VAT passed-on to the domestic market enterprises is still a different matter. Further, with the entry of CREATE MORE, the distinction and the availment have been codified. 

Summary Collection Remedies, on the other hand, has been held by the Court to be applicable only if there are “delinquent taxes”. In other words, there should either be an unpaid self-assessed tax or a deficiency assessment which has become final and executory. The Court further warned that absent any delinquent taxes, the BIR cannot be overzealous in its collection efforts. 

WHAT THIS MEANS FOR BUSINESS LEADERS? First, compliance processes must be reviewed. New laws and regulations change how income and transactions are reported. Information systems and controls must be updated to reflect new tax codes, forms, and electronic filing requirements. Second, tax positions must be well documented. Courts have signaled that legal benefits will be upheld only when supported by clear statutory bases and compliance with procedural rules. Third, operational clarity can reduce disputes. The focus in 2025 was on defining rather than unilaterally making new tax obligations. This makes risk management more about precision and less about broad interpretation. 

CONCLUSION. The year 2025 bore developments in the character of both legal refinement as well as broad tax reform. New laws adjusted tax treatment for investments, incentives, and digital services. Supreme Court decisions reinforced strict interpretation of tax statutes. BIR issuances provided rules for compliance. For executives, the work now is to implement these developments in internal policies and systems to ensure predictable and efficient tax outcomes.