MANILA – The Department of Finance (DOF) refined its proposal for Package 4 of the Comprehensive Tax Reform Program (CTRP) that will simplify the tax structure on passive income and certain instruments and other financial products.
In a statement on Thursday, the DOF said the refined proposal seeks to maintain the structure of some products and instruments while deferring the implementation of certain provisions by 2028.
Under the revised proposal, interest income tax will be harmonized at 20 percent in 2024 while royalties will be maintained according to the existing tax code until 2027, subsequently harmonized and decreased to 15 percent in 2028.
The dividend income tax will remain unchanged until 2027, with a proposed harmonization of 10 percent in 2028.
The stock transaction tax will gradually be reduced annually by 0.1 percent, from 0.5 percent to 0.1 percent in 2028.
The DOF said current taxes on financial transactions, including sales, agreements to sell, memoranda of sales, deliveries or transfer of shares or certificates of stocks, will be maintained until 2027 and subsequently removed in 2028.
The same timeline applies to taxes on all bills of exchange or drafts.
Tax rates on bank checks, drafts, certificates of deposit not bearing interest, and other instruments will remain unchanged.
From the current 12 percent value added tax imposition on HMO, pre-need and pension plans, a 2-percent premium tax will be imposed to harmonize the instruments with the tax on life and health insurance.
"This is to encourage participation in life insurance products," the DOF said.
Rates on policies of insurance upon property, fidelity bonds and other insurance policies, meanwhile, will gradually be decreased annually by 1 percent, from 12.5 percent to 7.5 percent in 2028.
Taxes on Philippine Charity Sweepstakes Office (PCSO) tickets, prizes and other winnings will have no changes while taxes on mortgages, pledges and deeds of trust will stay as is until 2027, after which they will be lowered to 0.3 percent in 2028.
The DOF said the refined proposal was presented by Undersecretary Karlo Adriano to finance sector stakeholders in a briefing on March 1, 2024.
The stakeholder briefing was participated by representatives from the Philippine Chamber of Commerce and Industry, Financial Executives Institutes of the Philippines, Foundation for Economic Freedom, Philippine Racing Commission, Philippine Stock Exchange, Capital Market Development Council, Trust Officers Association of the Philippines, Chamber of Automotive Manufacturers of the Philippines Inc., National Development Company, Chamber of Thrift Banks, PCSO and Bangko Sentral ng Pilipinas. (PNA)
