[Ask the Tax Whiz] RMC No. 5-2025: Key amendments to align tax regulations with EOPT law

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The Philippine Tax Whiz discusses the key changes in relation to the updated tax regulations with the Ease of Paying Taxes Act

What are the changes with regard to RMC No. 11-2024 (leases)?

As stated in RMC No. 11-2024, Initial direct cost paid and incurred by the lessee (the one renting) can be claimed as business expenses in the year they paid provided that it has proper substantiation and withholding. However, RMC No. 60-2024 clarifies that non-withholding of tax will no longer be grounds for disallowance of claimed deductions/expenses.

RMC No. 5-2025 also clarifies that if the lessee pays for something that is actually the lessor’s (the person they’re renting from) responsibility, they can still claim it as an expense, as long as they have an invoice from the lessor. This amount will be counted as part of the lessor’s income and can be used as a deduction by the lessee.

Meanwhile, the value-added tax shall be creditable for the rentals incurred/accrued, not upon payment, as long as backed by a VAT Invoice.

Lastly, when it comes to the 5% withholding tax on lease payments, it should now be based on the amount the lessee is expected to pay, not the actual amount paid.

How should businesses convert foreign currency transactions for tax purposes under RMC No. 5-2025, and what specific exchange rate should be used?

RMC No. 12-2024 (Clarification on Foreign Currency Transactions Permitted on both Financial Reporting and Tax Purposes)

RMC No. 5-2025 says that when dealing with foreign currency transactions for taxes (except income taxes), the amount should be converted to Philippine peso using the prevailing spot rate on the day of the transaction.

For VAT, the tax should be based on the total sales of goods, services, or properties, and there must be a VAT invoice to back it up. For other types of taxes, it should be based on the total sales for the quarter.

Also, withholding taxes should be done either when the payment is due or when the sales invoice is issued — whichever happens first.

RMC No. 19-2024 (Interest expense)

The circulars updated the requirements to align with the EOPT Law, as the requirement to withhold taxes in order to claim the interest expenses was repealed.

RMC No. 13-2024 (Retirement benefits)

SMEs and/or small entities may avail of the provisions of RMC No. 13-2024 on an optional basis and to comply with the required disclosure under PFRS.

– Rappler.com

The content provided in this article above is for general purpose only. If you want to know how these regulations affect your business, CONSULT ACG or email us at consult@acg.ph.