BIR prepares for rollout of global minimum tax regime

By Justine Irish D. Tabile, Senior Reporter

THE BUREAU of Internal Revenue (BIR) is preparing for the implementation of a proposed global minimum tax (GMT) regime aimed at ensuring that large multinational companies pay a minimum level of tax on income earned in the Philippines.

“As global tax rules evolve, we have to make sure that income earned in the Philippines remains taxable in the Philippines,” said BIR Commissioner Charlito Martin R. Mendoza in a statement on Thursday.

“At this stage, our immediate priority is to build the capability of our personnel and prepare the systems, processes, and organizational structures needed to administer the proposed regime effectively,” he added.

The Philippines joined the Organisation for Economic Co-operation and Development’s (OECD) Inclusive Framework in 2023, with a commitment to adhere to the two-pillar solution that seeks to reform global corporate taxation and prevent multinational firms from moving their profits into low-tax jurisdictions.

Under Pillar Two, multinational enterprises with annual revenues of at least €750 million that operate in multiple jurisdictions are subject to a 15% minimum effective tax rate.

The Department of Finance proposed the qualified domestic minimum top-up tax (QDMTT) which is targeted to take effect on Jan. 1, 2027, according to Deloitte Philippines.

The BIR met with the DoF’s QDMTT team and the Fiscal Incentives Review Board to discuss the draft bill to be submitted to Congress. They discussed the tax administration considerations for its implementation, including compliance, reporting, audit readiness, and institutional capacity.

To ensure its proper implementation, the BIR is looking at conducting specialized training programs for BIR personnel, developing new tax forms and compliance mechanisms, and establishing organizational arrangements.

Finance Assistant Secretary Euvimil Nina R. Asuncion said it received feedback from multinational enterprises operating in the Philippines, who are prepared to comply with the measure.

“We have been informed that many of our multinationals would rather comply with the GMT domestically rather than comply with unfamiliar rules of other jurisdictions or pay top-up taxes abroad,” she said.

“The primary considerations are simplifying domestic compliance and ensuring that implementation is strictly in accordance with the international standards,” she added.

Raymond A. Abrea, founding chairman and chief executive officer of Asian Consulting Group, said the QDMTT would help the Philippines protect its taxing rights.

“Under the OECD GMT framework, if large multinational enterprises pay below the 15% minimum effective tax rate in the Philippines, another jurisdiction may collect the top-up tax,” he told BusinessWorld.

“The choice is simple: either the Philippines collects the revenue, or another country does,” he added.

Mr. Abrea said the country already lost P162.9 billion in foregone revenues from 2021 to 2023 due to the absence of the GMT regime.

“Delay poses a greater risk than implementation,” he added. “Proper implementation could generate substantial additional revenues without increasing taxes on ordinary Filipinos, micro, small and medium enterprises, or domestic businesses.”

However, he warned that the government must tackle challenges related to administering the QDMTT.

“The most important step today is for the government, particularly the BIR, to be brutally frank about its readiness, limitations, and resource requirements,” he said.

Mr. Abrea said the country could tap the OECD as well as the private sector in building capacity, strengthening compliance systems, and maximizing potential revenue collections.

“The objective is to implement it correctly, maximize revenues that rightfully belong to the Philippines, and create fiscal space for broader reforms — including increasing the take-home pay of the Filipino middle class and improving public services,” he added.

Asked about the impact of the reform on investors, Mr. Abrea said that he does not see it reducing the country’s competitiveness in attracting foreign investments.

“The global competition for investments is no longer based solely on low tax rates. Investors today prioritize policy stability, talent, infrastructure, energy security, ease of doing business, and regulatory certainty,” he said.

“The real opportunity is to shift from competing on tax incentives to competing on competitiveness.”