IT-BPM firms urge repeal of cross-border taxes

Bureau of Internal Revenue (BIR)

A local trade organization of information technology and business process management (IT-BPM) firms on Thursday urged the government to reconsider a revenue regulation that imposes taxes on all cross-border services rendered by nonresident foreign corporations.

IT & Business Process Association of the Philippines, Inc. (IBPAP) chief operating officer Celeste Ilagan said they are “very concerned” about Revenue Memorandum Circular (RMC) 5-2024, which the Bureau of Internal Revenue (BIR) released in January, as it mandates a 25 percent withholding tax and 12 percent value-added tax (VAT) on business entities providing cross-border services.

“It is a huge concern because it impacts the cost of doing business immensely,” Ilagan told reporters during a Zoom interview.

“That has not been planned in the budget of the local business process outsourcing firms and has not been included in their contracts with their non-resident foreign corporation vendors,” she said further.

READ: 10 business groups slam taxes on cross-border services

The IBPAP official also said they have joined other business groups in bringing the issue to the government’s economic czar, Secretary Frederick Go, and Senator Sherwin Gatchalian, who chairs the upper chamber’s committee on ways and means.

“They have listened to the arguments and they believe that there is basis to the arguments of the business sector. They are studying the RMC and we look forward to a quick resolution,” sad Ilagan.

Based on the RMC, taxable cross-border services include consulting services, IT outsourcing, financial services, telecommunications, engineering and construction, education and training, tourism and hospitality, and other similar services.

READ: Senator eyes probe of cross-border taxes

In April, Gatchalian filed the Proposed Senate Resolution No. 955 to study the measure in aid of legislation.

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