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The legendary American baseball pitcher Satchel Paige once remarked, “Don’t glance back. Something may be closing in on you.” That’s excellent counsel for life — but not when striving to enhance our competitiveness relative to ASEAN counterparts.
In this context, the Philippines should consistently reflect on past actions, observe current circumstances, and seek methods to broaden our international trade in products and services, as well as draw in foreign investments, all aimed at stimulating economic advancement. Occasionally, even highly specialized matters can significantly influence the promotion — or hindrance — of our nation’s growth. Here’s a straightforward example that can be easily addressed to demonstrate that the Philippines treats its international partners equitably.
Like many nations, the Philippines maintains a collection of agreements with our primary trading allies aimed at preventing double taxation. Among other provisions, these agreements generally stipulate that payments made by residents within the Philippines for services provided by a foreign entity should not incur Philippine taxation, particularly a withholding tax. This is fair and is a typical clause in these tax agreements.
Currently, however, accessing this treaty advantage is cumbersome, burdensome, and notably slow. According to Revenue Memorandum Circular (RMC) No. 77-2021, local taxpayers must submit a Request for Confirmation (RFC) if the treaty rate has been applied, or a Tax Treaty Relief Application (TTRA) if the standard rate has been used — followed by a request for a refund. The documentation requirements are substantial, and refund requests can take years to resolve.
The remedy is straightforward: the BIR should adopt international best practices by eliminating the necessity for prior approval to access tax treaty benefits. Nations like Thailand and Australia do not require any such approval. Alternatively, the procedure could be transitioned online and replaced with a simple notification (rather than approval) system, akin to the systems implemented in Singapore and Indonesia. These more efficient approaches lower barriers for investors — a model that the Philippines desperately needs to embrace.
The current manual approval procedure in the Philippines demands numerous documents — some necessitating notarization — in-person consultations, and other stipulations as specified in Revenue Memorandum Order No. 14-2021 — and then repeating the procedure for each individual customer instead of issuing a single certificate for one foreign taxpayer covering all income payments, all to obtain a benefit that the foreign entity should automatically receive under the tax treaty. It disincentivizes companies from investing here when treaty advantages can be acquired automatically elsewhere. A benefit of a simple notification process is that it clearly indicates who is claiming the benefits.
The Philippines is unique in ASEAN for enforcing an excessively burdensome and document-heavy process to access tax treaty benefits. This not only delays valid claims but can also provoke additional audits, discouraging investment. While protections against misuse are essential, eligible taxpayers should be able to access treaty benefits with simplicity and efficiency.
Our tax treaty associates, including the United States and Japan, deserve uncomplicated access to the advantages granted by the treaties they established with the Philippines.
These onerous stipulations negatively impact both foreign investors and their Filipino collaborators, many of whom opt to absorb the tax rather than endure a protracted, complex process or risking potential audits. This unpredictability denies them rightful advantages and escalates the cost of doing business in the country for everyone involved.
Indonesia is currently witnessing unprecedented levels of foreign investment, with applications in Thailand rising significantly. In the digital arena, our English-speaking rival Malaysia is achieving remarkable success. The Philippines did experience an uptick in overall investment in 2024, but this followed a drop in 2023 — an indication that there’s still plenty of room for enhancement. In today’s competitive milieu, eliminating obstacles for investors is crucial.
The BIR should promptly implement new regulations to simplify access to treaty benefits. Withholding tax relief should be automatic for eligible parties — just as Philippine companies experience abroad. Streamlining this process will bolster local firms, attract technology investments, and bolster the wider economy.
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Daniel A. Witt is the President of the International Tax and Investment Center (ITIC), a global organization promoting pro-investment tax and economic reforms in over 85 nations. With more than 30 years of experience, he has facilitated policy dialogues across frontier markets and co-created major regional tax forums in Asia, Africa, and the Middle East. Acknowledged for his contributions in Kazakhstan and other transitioning economies, he continues to advise governments, industry leaders, and global institutions on tax and investment strategies.
Mon Abrea, CPA, MBA, MPA is the Founder and CEO of the Asian Consulting Group (ACG) and the Philippines’ premier advocate of authentic tax reform. A graduate of Harvard who also completed an executive program on Climate Policy at Oxford, he provides guidance to governments, multinational corporations, and global institutions on tax policy, governance, and sustainable investment. He has conducted investment and tax briefings in over 50 countries and regions across Asia, North America, Europe, Australia, and the Middle East. Additionally, he hosts the podcast Thought Leaders and Game Changers, where he converses with global authorities on taxation, sustainability, and innovation. Follow him: @askthetaxwhiz.
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