Philippines clarifies local taxes for IT-BPM firms
MANILA, PHILIPPINES — The Philippines has issued new tax guidelines aimed at resolving long-standing inconsistencies in local government taxation of business firms, a move welcomed by the country’s fast-growing IT-BPM industry as it seeks greater regulatory stability and investor confidence.
According to a report from BusinessWorld, the Joint Memorandum Circular (JMC) 01-2026, released March 23 by the Philippine Department of the Interior and Local Government, Department of Finance, and Department of Trade and Industry, provides clearer rules on how local government units (LGUs) may impose taxes, fees, and charges on registered business enterprises (RBEs).
Industry stakeholders say the policy could help streamline compliance and improve the country’s investment climate.
Industry welcomes long-awaited policy clarity
The Information Technology and Business Process Association of the Philippines (IBPAP) said the circular addresses persistent inconsistencies that have affected business operations across various localities.
“The IT and Business Process Association of the Philippines (IBPAP) views the issuance of JMC 01-2026 as a necessary and long-awaited correction to persistent inconsistencies in how some LGUs (local government units) have imposed taxes, fees, and charges on RBEs (registered business enterprises),” IBPAP said in a statement.
The group added that the issue had been raised with government authorities for over a year due to conflicting local ordinances that often contradicted national investment policy frameworks.
“For the past year, we have raised these concerns with the government, as certain local practices, anchored on outdated or conflicting ordinances, have clearly run counter to the intent of the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act,” IBPAP added.
Standardized tax exemptions for investment firms
Under the new circular, tax exemptions vary depending on the incentive regime of each RBE.
Pre-CREATE firms availing of income tax holidays or a 5% gross income tax regime are granted exemptions from local taxes under defined transition periods, with some exemptions extending until 2034.
The JMC also requires LGUs to align or amend conflicting local ordinances within six months and states that certificates issued by investment promotion agencies will be sufficient proof for firms to claim tax exemptions.
IBPAP emphasized that the measure reinforces the supremacy of national law over inconsistent local policies. It said the circular “sends the message that national law must be upheld, and arbitrary or duplicative local impositions have no place in a competitive investment environment.”
Push for stable investment environment
Industry stakeholders are now calling for swift and uniform implementation across all LGUs to ensure predictability in business operations, particularly ahead of upcoming business permit renewal cycles.
The policy is widely seen as a critical step in improving ease of doing business in the Philippines, especially for multinational firms operating in the IT-BPM sector, one of the country’s top sources of employment and foreign exchange earnings.
The move strengthens the Philippines’ position in the global outsourcing market by reducing regulatory friction and improving investor confidence. If consistently enforced, the policy could reinforce the country’s reputation as a competitive outsourcing hub in Southeast Asia, where policy clarity and operational stability are key drivers of location decisions for global firms.
