THE Bureau of Internal Revenue noted that some 8 business groups in the Philippines had called for the abolition of the 25 percent withholding tax and 12 percent final withholding value-added tax (VAT) on cross-border services.

According to the group, they explained that these will raise the costs of doing business in the Philippines, as well as drive foreign investors away from the country.

Likewise, they underscored that by subjecting foreign companies' income payments to withholding tax, it could push local clients to shoulder the tax burden of the income tax of the foreign company.

The groups noted that the BIR is implementing Revenue Memorandum Circular (RMC) 5-2024, which provides that services to a Philippine entity that are performed by a foreign entity are now taxable.

Likewise the group asked that for cross-border services, the jurisdiction providing the essential service for income generation is entitled to tax the income.

They cited the Supreme Court’s decision on Aces Philippines Cellular Satellite Corp. vs. Commissioner of Bureau of Internal Revenue.

It cited that the satellite air time fee payments by Aces Philippines, a domestic corporation, to Aces Bermuda, a non-resident foreign corporation (NRFC), is subject to final withholding tax.