If tax reform had a streaming platform, the BIR’s 2025 lineup would definitely be trending! With full-fledged issuances serving as teasers, cliffhangers on the horizon and additional “episodes” hinted at in the pipeline, it has been a season worth following — especially for businesses and taxpayers trying to stay ahead of the plot.

Just as the third season of Squid Game made its highly anticipated return on Netflix, capturing the attention of viewers worldwide, a similar anticipation brews in the world of taxation — with the BIR rolling out some of its anticipated “episodes” through key issuances and other reforms. From the early implementation of VAT on digital services to updated guidelines on administrative compliance, these releases have set the tone for a more streamlined and transparent tax environment.

So, whether you are glued to your screen for drama or tax updates, 2025 is definitely keeping us all on the edge of our seats with the release of significant issuances this year.

IMPLEMENTATION OF THE CREATE MORE ACT
This year marked the full implementation of the CREATE MORE Act, with the following key provisions being highlighted:

• Adjustment of the corporate income tax rates for domestic and resident foreign corporations classified as registered business enterprises (RBE) under the enhanced deduction regime.

• New allowable deduction of input tax paid on local purchases attributable to VAT-exempt sales from gross income.

• Revised tax treatment for VAT zero-rated transactions; VAT incentives and longer incentive periods for the exporters and RBEs.

• Broadened VAT zero-rating coverage now includes services that are “directly attributable” to the registered project or activity of the RBE. This includes expenses for janitorial, security, financial, consultancy services, and more.

• Administrative measures have been established to ensure compliance with the invoicing and reporting standards that were introduced alongside new alphanumeric tax codes.

The full implementation provided clearer rules, lower rates, and enhanced tax incentives, which create a more favorable business environment, stimulate economic growth, and attract foreign investment. Some taxpayer effort is expected in terms of reporting and compliance.

IMPLEMENTATION OF VAT ON DIGITAL SERVICES
With the full implementation of the VAT on digital services effective June 2, foreign digital services providers (DSPs) now carry extra compliance and reporting duties even without being physically present in the Philippines. They do not need a local representative but may appoint one for administrative purposes, in which the registration has been extended to July 1, pursuant to RMC 58-2025. On another note, consumers face price increases, as most foreign DSPs like Netflix, Spotify and Google Play are now passing on the 12% VAT to end-users, which could influence their spending habits.

CMEPA
The Capital Markets Efficiency Promotions Act (CMEPA), officially known as Republic Act No. 12214, took effect on July 1. This transformative legislation aims to enhance the competitiveness of the capital markets by simplifying the taxation of passive income and reinforcing fiscal stability with the following key takeaways:

• Stock Transaction Tax (STT) reduced from 0.6% to 0.1% to encourage more trading activity.

• Standardized Final Withholding Tax (FWT) at a flat rate of 20% tax on all interest income from peso and foreign currency bank deposits, trust funds and similar instruments, eliminating multiple rates and exemptions.

• Harmonized Capital Gains Tax at a flat rate of 15% tax on capital gains from the sale of shares in foreign corporations not traded on the local exchange.

• Reduced Documentary Stamp Tax (DST) rates from 1% to 0.75% on the original issuance of shares.

• Enhanced PERA incentives for employers matching PERA contributions of employees can claim an additional 50% deduction.

This act is expected to significantly impact investors, financial institutions, and corporations by promoting fairness in taxing passive income that boosts market participation and promotes capital market growth.

E-INVOICING AND DIGITALIZATION
The BIR has introduced significant changes with the implementation of e-invoicing and e-sales reporting systems for required taxpayers, with additional deductions provided to offset the cost of setting up the electronic systems pursuant to RR 11-2025. This initiative is part of BIR’s digital transformation strategy to enhance tax compliance and modernize record-keeping for faster refunds and fewer audit disputes.

IMPROVING AUDIT EFFICIENCY AND RISK PROFILING
Pursuant to audit reforms brought by RMO 7-2025’s revised audit selection thresholds, more businesses may fall under scrutiny depending on their gross sales. Also, the BIR has improved its risk targeting audits, focusing on high-yield or high-risk accounts instead of random selection.

ESTATE TAX AMNESTY
The estate tax amnesty applies to estates of decedents who died on or before May 31, 2022, with unpaid estate taxes as of that date. The amnesty aims to simplify the process of settling estate taxes, making it easier for heirs and beneficiaries to comply.

Pursuant to RA 11569 as implemented by RR 10-2023, the availment of the estate tax amnesty was extended until June 14, allowing taxpayers to settle and pay their estate tax obligations without incurring penalties. To provide taxpayers with additional time to comply with the submission of documentary requirements, the BIR issued RR  16-2025 extending the deadline for submission of complete documentary requirements to June 30, 2025.

Though we are halfway through 2025, just like any good series, there’s more to come. With several high-impact regulations still in the pipeline, we are to expect the release of the IRRs for CMEPA, enforcement of VAT on digital services, phase 2 of the e-Invoicing System (EIS) drive, additional CREATE MORE Act-related issuances if any and other issuances and regulations the BIR has in store for taxpayers.

We can say that the BIR is at the onset of its “Kaizen” journey — committed to continuous improvement and innovation. This commitment has yielded favorable developments, particularly in streamlining processes to make them more convenient for taxpayers. By simplifying complex procedures, the BIR promotes voluntary compliance, fosters a more conducive investment environment and contributes to long-term revenue stability.

The stage is set — now all eyes are on what’s next in the BIR’s reform rollout.

Let’s Talk Tax is a weekly newspaper column of P&A Grant Thornton that aims to keep the public informed of various developments in taxation. This article is not intended to be a substitute for competent professional advice.

Neymhel Marie I. Obedencio is a senior in charge of the Tax Advisory & Compliance Practice Area of P&A Grant Thornton, the Philippine member firm of Grant Thornton International Ltd.

business.development@ph.gt.com