MANILA, Feb. 28 (PNA) — Remittances of overseas Filipino workers (OFWs) will not be taxed, Sen. Juan Edgardo Angara said Tuesday allaying concerns of value-added tax (VAT) on services fees of money transfer centres in the country.
Angara, chair of the Senate Committee on Ways and Means, made this clarification after the Department of Finance (DOF) explained in a Senate hearing that only service fee of domestic remittances and not actual remittance will be taxed with 12 percent VAT under their proposal.
“We want to clarify to our kababayans abroad that the remittances they send their families in the Philippines will not be taxed. We will make sure that they will not shoulder additional burdens,” Angara said.
DOF Undersecretary Karl Kendrick Chua said that the agency’s jurisdiction is “only domestic transfers”.
For instance, if sending PHP5,000 within Metro Manila, the money transfer center charges PHP125 pesos, so the VAT is PHP15 only, he said.
He clarified that such reform only targets businesses such as pawnshops, which are initially not registered as remittance centres.
Angara, who sponsored the law that raised the tax exemption cap of balikbayan boxes, added that OFW remittances are likewise exempt from paying documentary stamp tax pursuant to Republic Act 10022 or the amended migrant workers law.
Package 1 of the Duterte administration’s comprehensive tax reform program seeks broaden the VAT base and lower personal income tax rates, and to adjust excise taxes of petroleum products.
He, meanwhile, recognized the significant contribution of OFWs in the economy, citing recent data from the Bangko Sentral ng Pilipinas (BSP) that showed that OFW cash remittances reached USD26.9 billion or more than PHP1 trillion last year, which accounted for 9.8 percent of the gross domestic product (GDP).