OFW remittances not covered by tax reform package — DOF

MANILA, Philippines -  Money sent home by overseas Filipino workers will not be subject to duties under the Duterte administration’s proposed tax reform program, the Department of Finance (DOF) said yesterday.

In a statement, Finance Undersecretary Karl Kendrick Chua said the government has no legal jurisdiction over money transfers from abroad.

 “We have to distinguish between the foreign and the domestic remittances. Those coming from abroad are not within our tax regime, so that is not covered (under the CTRP),” Chua said.

However, Chua said money sent to the Philippines would be levied depending on the tax laws implemented in the country of origin of the remittance.

Chua said domestic money transfer  is also not taxed as only transfer fees are levied with the value-added tax (VAT).

“Let me be clear, it’s not a VAT on remittance, it is VAT on the money transfer like all other services which has been VAT-able from before,” he said.

Chua also noted that transfer fees for domestic remittances have not been fully collected by the Bureau of Internal Revenue (BIR).

To plug the leakage, he said the BIR intends to issue a revenue regulation to remind companies that transfer fees on domestic remittances are subject to VAT.

 “The [money] transfers are being done in any kinds of businesses like pawnshops, which used to be only pawning. Now, they are also into money transferring. This is the gray area or loophole that we are correcting. But we were advised by the BIR...to just clarify it through a regulation,” Chua said.

The first package of the CTRP is contained in House Bill 5636, or the Tax Reform for Acceleration and Inclusion Act (TRAIN) recently approved by the House of Representatives.

The bill aims to lower the personal income tax rates, unify estate and donor’s taxes at a flat rate of six percent, and  broaden the tax base by removing VAT exemptions.

It also seeks to adjust the excise taxes on petroleum products and automobile, and impose excise tax on sugar-sweetened beverages.

According to the DOF’s estimates, House Bill 5636 may bring in P133.8 billion in additional revenue for the government in its first year of implementation.

This is lower as compared to the P157.2 billion projected under the original CTRP proposal as some provisions have been tempered down in the final version.

Meanwhile, the first CTRP package is now being discussed by the Senate ways and means committee.