The Department of Tourism (DOT) and the Department of Finance (DOF) are moving to calm nerves across the travel industry, forming a technical working group (TWG) to address tax concerns triggered by a sweeping new revenue regulation.
Tourism Secretary Christina Garcia Frasco and Finance Secretary Frederick D. Go agreed on January 9 to convene the TWG with the Bureau of Internal Revenue (BIR) following mounting feedback from hotels, travel agencies, and tour operators over Revenue Memorandum Circular (RMC) No. 5-2024. The circular expands the tax reach over tourism services, particularly those involving foreign service providers with Philippine-linked operations.
At the center of the controversy is the RMC’s broader definition of “income sourced in the Philippines.” Under the rule, services related to trip planning, accommodations, transportation, tour packages, and entertainment are considered locally sourced—and therefore subject to Philippine income tax and value-added tax—if they are performed, used, or consumed in the country. This applies regardless of where payments are made or received.
For global hotel chains, online booking platforms, and foreign travel agencies, the rule potentially pulls cross-border transactions into the Philippine tax net when local tourism activities are essential to service delivery and benefits are enjoyed domestically. The policy aligns with source-based taxation and the benefits-received principle, but industry players warn it could raise compliance costs and complicate partnerships.
Frasco and Go said the TWG will serve as a platform to clarify implementation issues, address operational concerns, and mitigate unintended consequences for tourism stakeholders, while maintaining the government’s tax policy objectives.
Beyond taxes, the two agencies also agreed to explore the creation of a quick-response fund for tourism, aimed at speeding up recovery during natural disasters. The DOT renewed its call—first raised in July—for a dedicated disaster rehabilitation budget to quickly restore tourism infrastructure and provide immediate support to affected businesses and workers.
For an industry still rebuilding, both moves signal a more consultative—and responsive—approach from economic managers.
