Year 2019 is here. With the tax reform and other relevant pending legislations, it is the time to consider the pending bills in Congress that may impact business operations.
With the objective of redesigning Philippine taxation to become a simpler and fairer system, the much-awaited phase 2 of the tax reform package also known as Tax Reform for Attracting Better and High-Quality Opportunities under House Bill 8083 is in the Congressional pipeline. Companies under special laws will be the most affected because of the sunset provision of their tax exemption privileges, while private educational institutions must comply with certain criteria to be established by the Department of Education and Commission on Higher Education for these schools to continuously enjoy their current preferential income tax rate of 10 percent. The good news for corporations will be the gradual decrease of corporate income tax rate from 30 to 20 percent beginning 2019 up to 2029.
Another pending legislation is Senate Bill (SB) 2059 or the tax amnesty bill. The purpose of the said bill is to provide one-time opportunity for taxpayers to settle their tax obligations through an amnesty program, which will cover taxable year 2017 and prior periods. Those availing themselves of tax amnesty can choose either to pay the 2-percent tax on total assets or 5 percent of net worth that will be declared by taxpayers. There will also be an amnesty on estate tax at 6 percent of the estate tax value. The proposed bill also provides for certain restrictions on who are excluded from the tax amnesty program such as but not limited to those with tax evasion cases, issues of graft and corruption, violation of the anti-money laundering law, fraud and other similar cases.
SB 1280 is an act amending the Corporate Code of the Philippines. The objective of this bill is to simplify the registration of corporation by introducing a one-person corporation and provide a perpetual life for corporations.
Companies that employ seasonal and/or contractual employees must also prepare for the possible impact of SB 1826 or the Security of Tenure bill, which will prohibit the contractualization practices and labor-only contracting.
House Bill 6770 which is already approved on third and final reading aims to increase the current Service Incentive Leaves of employees with at least one year of tenure with the company from five to 10 days.
To prolong the life of Social Security System and to meet its current pension obligations, SB 1753 seeks to gradually increase social security contributions by one percent every two years starting 2019 up to 2025. After these increases, the contribution will be at 15 percent from the present 11 percent.
These changes are inevitable. It is the responsibility of the company to maximize the possible benefits that can be derived, as well as to mitigate the risks associated with these pieces of legislation. Let us all hope that 2019 will be prosperous and beneficial not only to businesses but to our nation and its citizens.
This column accepts contributions from accountants, especially articles that are of interest to the accountancy profession, in particular, and to the business community, in general. These can be e-mailed to boa.secretariat.@gmail.com.
Jeffrey Galang Salazar is a Certified Public Accountant and a Master in Business Administration degree holder. He is a PRC-BOA accredited public practitioner and professor.