Part 1
In 2024, Congress, in its role as the legislative branch of government, submitted numerous bills to the President for approval. Among these, over one hundred were either signed into law by the President or passed into law automatically (which occurs when the President neither signs the bill within 30 days nor vetoes it). Below are some of the significant laws passed in 2024:
Sovereignty
1. Republic Act (RA) 12064 (Philippine Maritime Zones Act)
This law establishes the Philippines’ legal rights and entitlements over its maritime zones and defines the country’s jurisdiction over various maritime areas, including internal waters, archipelagic waters, territorial seas, contiguous zones, exclusive economic zones (EEZ), and the continental shelf.
The law sets the maximum extent of the territorial sea at 12 nautical miles, the contiguous zone at 24 nautical miles, the EEZ at 200 nautical miles, and the continental shelf, which may extend beyond 200 nautical miles in accordance with Article 76 of the UNCLOS (United Nations Convention on the Law of the Sea).
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It grants the Philippines sovereign rights to explore and exploit both living and non-living resources within its maritime zones, in compliance with the UNCLOS, international laws and treaties, and the ruling from the Permanent Court of Arbitration in the 2016 South China Sea Arbitration between the Philippines and China.
Any violation of the Philippines’ rights under this law will result in a fine of $600,000 up to $1,000,000.
2. RA 12065 (Philippine Archipelagic Sea Lanes Act)
This law was enacted to prevent arbitrary international passage through the Philippine archipelago. It designates specific sea lanes and air routes suitable for foreign ships and aircraft to pass through or over Philippine archipelagic waters and territorial seas.
It outlines the rights and obligations of foreign ships and aircraft exercising the right of archipelagic sea lane passage and imposes penalties, including imprisonment and fines, for non-compliance.
Economic
1. RA 12001 (Real Property Valuation and Assessment Reform Act)
The main purposes of the law are to provide for a standardized valuation of real property and develop an electronic database of real estate transactions.
The Department of Finance through the Bureau of Local Government and Finance shall develop, adopt, maintain, and implement a uniform valuation standard for real properties which shall be used by all appraisers and assessors in local governments for valuing real properties for taxation purposes. There shall be created a Schedule of Market Values to provide a uniform value for real properties in the country which aims to resolve the existing different values such as the zonal value by the Bureau of Internal Revenue and the Real Property values used for real property taxes.
The law also provides for the creation of an electronic database to store records of the sale, exchange, lease, mortgage, donation, transfer and other real property transactions in the country which shall also include the cost of construction or renovation of buildings and other structures as well as that of prices of plant, machinery, and equipment.
2. RA 11976 (Ease of Paying Taxes Act)
This law was passed to enhance taxpayer rights, simplify compliance, and modernize tax administration.
Among the salient points of this law are:
a. Taxpayers are now classified into micro, small, medium, and large based on their gross sales, with micro and small taxpayers receiving special concessions;
b. Value Added Tax (VAT) on services is now based on gross sales instead of gross receipts. This change is important because previously, sellers of services were only required to report the output VAT upon receipt of the revenue or payment from the client whereas, sellers of goods had to report the output VAT on the date of the sale regardless if payment was received by them on a later date. Now both sellers of goods and services must report and declare the output vat on the date of the sale;
c. The tax base for percentage taxes has been changed from “gross receipts” to “gross sales” for various sections of the NIRC;
d. Tax returns can now be filed electronically or manually and taxpayers can pay taxes through authorized agent banks or software providers;
e. The 25% surcharge for filing tax returns with the wrong venue has been removed;
f. Taxpayers are now required to keep their records for only 5 years, instead of 10 years;
g. The threshold for mandatory issuance of invoice and receipts is now P500;
h. Taxpayers can cancel their registrations by simply filing, manually or electronically, a request for registration information update with the BIR; and
i. The refund process for input taxes and erroneously paid or illegally collected taxes has been simplified.
3. RA 12023 (VAT on Digital Services)
This law classified supply of digital services as a sale or exchange of service subject to 12% value added tax.
A “digital service” is defined as any service delivered over the internet or an electronic network using information technology, where the service is essentially automated. Examples of digital services include:
a. Online search engines
b. Online marketplaces (e-marketplaces)
c. Cloud services
d. Online media and advertising
e. Online platforms
f. Digital goods (e.g., e-books, music, videos, games, subscriptions, etc.)
To qualify as a “digital service,” two conditions must be met:
a. The service must be provided over the internet using information technology.
b. The service must be essentially automated.
If a service does not meet both conditions (for instance, if it requires significant human intervention), it will not be considered a digital service and will instead fall under the general definition of services for VAT purposes.
Digital services will be subject to 12% VAT if consumed in the Philippines. In contrast, services, other than digital services, will only be subject to 12% VAT if they are performed in the Philippines.
4. RA 12066 (CREATE MORE Act)
Following the passage of the CREATE Act (RA 11534) in 2021, the CREATE MORE Act was signed into law on November 11, 2024.
This law reduces the income tax rate for Registered Business Enterprises (RBEs) to 20% and expands eligibility for the Expanded Deductions Regime (EDR) and Special Corporate Income Tax (SCIT) options. It broadens the range of businesses that can qualify, aiming to make the Philippines an attractive investment destination for both local and foreign investors.
Other provisions include:
a. Increased deductions for energy costs and other qualifying expenses;
b. Changes to the allowable period for carrying over net operating losses (from 5 years when the loss was incurred to 5 years from the last year of availing of the Income Tax Holiday);
c. A local tax of up to 2% of gross income in lieu of other local taxes for companies enjoying tax incentives;
d. Allowed for up to 50% of the workforce to avail of a telecommuting program; and
e. Clarification of VAT exemptions and zero-rating for Registered Export Enterprises (REEs).
5. RA 12079 (VAT Refund for Non-Resident Tourists)
The law is meant to boost tourism and retail economic activity with the aim of increasing tourist spending by 30%.
It establishes a VAT Refund System on locally purchased goods where tourists can claim a refund on the VAT for goods personally purchased at accredited retail outlets, provided these goods are taken out of the country within 60 days and meet a minimum transaction amount of P3,000.
The author, Atty. John Philip C. Siao, is a practicing lawyer and founding Partner of Tiongco Siao Bello & Associates Law Offices, an Arbitrator of the Construction Industry Arbitration Commission of the Philippines, and teaches law at the De La Salle University Tañada-Diokno School of Law. He may be contacted at jcs@tiongcosiaobellolaw.com. The views expressed in this article belong to the author alone.