taxation rate in the philippines

7/27/2019 Taxation Rate in the Philippines

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1. Taxation in the Philippines

The country's taxation system is governed by the Tax Reform Act 1997, passed into law on December 11, 1997 andbecame effective on 01 January 1998. The law was aimed at the expanding the country's tax base and maintaining thehealthy fiscal standing of the government.

1.1 Corporate Income Taxes

Domestic/Resident Foreign CorporationsRegular Income Tax Rate 32% of net taxable income

Non-Resident Corporation Regular Income Tax 32% of the gross amount of Philippine-source income such asdividend, rents, royalties, compensation, and remuneration for

technical services.

1.2 Income Tax Rates as Passive Income of Domestic/Resident Corporation

Dividends received from domestic corporations Not subject to tax

Interest on any currency bank deposit and yield or othermonetary benefit from deposit substitutes and from trust fundand similar arrangements

20% of final tax

Interest from foreign currency deposits with foreign currencydeposit units (FCDUs)

7 1/2% of final tax

gains from sale or exchange of shares of stock not listed andtraded in the local stock exchange

5% capital gains tax (CGT) on net gains not exceeding P 100,00and 10% on the excess.

Gains from sale or exchange of land or buildings not actuallyused in business and treated as capital issue

6% CGT on gross selling price or fair market value, whichever ishigher

Royalties 20% final tax

1.3 New Taxes for Corporation Under the Tax Reform Act of 1997

Minimum Corporate Income Tax (MCIT) - A 2% MCIT on gross income on an annual basis is imposed on corporations whoseregular corporate income tax liability is less than the MCIT beginning the fourth taxable year following the year they commencedbusiness operation. Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal tax for thethree (3) immediately succeeding taxable years.

Fringe Benefits Tax - Fringe benefits granted to supervisory and managerial employees are subject to 32% tax on the grossed-upmonetary value of the fringe benefit. Fringe benefits given by OBUs regional operating headquarters of multinational companies,petroleum contractors and subcontractors to qualified alien employees and in certain cases, to Filipino employees, are taxed at 15%of the grossed-up monetary value of the fringed benefit.

Improperly Accumulated Earnings Tax - a 10% tax is imposed on the improperly accumulated earnings of a corporation, exceptin the case of publicly held corporations, banks, and other non-bank financial intermediaries and insurance companies. When a

corporation allows its earnings or profits to accumulate beyond its reasonable needs, it shall be assumed that the purpose is toavoid tax on stockholders, unless proven to the contrary.

1.4 Preferential Income Tax Rates for Non-Resident Corporations

Interest on foreign loans 20%

Dividends received form domestic corporations In general, 32%. This is reduced to 15% if the recipient foreigncorporation is resident of a country which:

Does not impose any tax on dividends received fromforeign sources, or

Allows a credit against the tax due from thenonresident foreign corporation taxes deemed to havebeen paid in the Philippines equivalent to 17%

Income derived form any foreign currency transaction with FCDUsand OBUs

Exempt

Gains from sale of unlisted shares of stock in a domesticcorporation

5% capital gains tax (CGT) on net gains not exceedingP100,000 and 10% on the excess

Rents and other fees paid to nonresident corporate lessors ofaircraft, machinery and other equipment

7 1/2% on gross rentals or fees

Rents of charter fees paid to non-resident corporate owners ofvessels chartered by Philippine Nationals

4 1/2% on gross rentals or fees

Fees paid to non-resident cinematographic film owners or lessors 25% on gross income

1.5 Individual Taxation


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Non-resident aliens not engage in trade and business flat incometax rate

25%

Resident citizens/aliens (gainfully employed) Graduated incometax rates

0%-35%

Who Shall File:

1. An individual whose gross compensation income does not exceed his total personal and additional exemptions ;

2. An individual whose compensation derived from one year employer does not exceed P60,000 and the income tax on which hasbeen correctly withheld;

3. An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino employee occupyingthe same position as that of the alien employee of regional or area headquarters and regional operating headquarters ofmultinational companies, petroleum service contractors and sub-contractors, and offshore banking units, non-resident alien notengaged in trade or business), and

4. An individual who is exempt from income tax.

Married individuals shall file single return for the taxable year to include the income of both spouses, separately computing theirindividual income tax based on their respective taxable income. Where it is impracticable for the spouses to file one return, eachspouse may file a separate return.

TAX TABLE

If Taxable Income is: Tax Due is: If Taxable Income is: Tax Due is:

Not over P10,000 5%

Over P10,000 but not overP30,000

P500+10% of the excessover P10,000


P22,500+25% of the excessover P140,000







Over 500,000P125,000+34% of the excessover P500,000

1.6 Value Added Tax (VAT)

Sale of goods, other properties, and services in the Philippines, as well as importation of goods to the Philippines, are subject to the10% VAT. VAT is imposed on the gross selling price (in case of sale of goods) and gross receipts (in case of sale of services).

1.7 Stock Transaction Tax

1/2 of 1% of gross selling price is imposed on the sale, barter, exchange or other disposition of shares through the facilities of stockexchange.

1.8 Percentage Tax

TYPES OF BUSINESS PERCENTAGE OF TAX RATE

Banks - income from lending and financial leasing activities 1%, 3%, or 5% of gross receipts depending on the maturity date of the

instruments, tax exempt if maturity period is over seven years.Life insurance companies doing business in the Philippines 5% of the total premium collected

Electric, water and gas utilities 2% of gross receipts

Domestic common carriers of passengers 3% of gross receipts

International carriers 3% of gross receipts

Finance companies - income from lending and financialleasing activities

1%, 3%, or 5% of gross receipts depending on the maturity date of theinstruments, tax-exempt if maturity period is over seven years

Other non-VAT registered businesses 3% of gross sales or gross receipts not exceeding P550,000.

1.9 Income Tax Rate for Special Corporation Entity

ENTITY RATe TAXABLE BASE

International Carriers 2.5% Gross Philippine Billings originating from the Philippines

Non-resident foreign corporation 33% (1999)325 (2000)

Gross income from Philippine sources

Non-resident owner or lessor of aircraft,machinery and other equipment

7.5% Gross retails or fees

Offshore banking units (OBUs) and foreigncurrency deposit units (FCDUs) authorizedby the BSP

10% Income from foreign currency transactions with localcommercial banks, including branches of foreign banks thatmaybe authorized by the BSP to transact business with OBUsand FCDUs, including any interest income from foreigncurrency loans granted to residents.

Subcontractors engaged in Petroleumoperations, Subcontractors engaged inPetroleum operations

8% final tax Gross income from service contract

Regional operating headquarters 10% Taxable income from authorized incentives


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SOURCE:How to invest in the Phi l ippines, Joaquin Cunanan & Co.* data as of April 2003

1. COST OF INDUSTRIAL LAND AND FACTORY BUILDING

1.1 Selling Rates of Industrial Lots P 2800/sqm and above*

1.2 Standard Factory Bldg. in Export Processing Zone $ 2.5/sqm and above

1.3 Lease rates of Lots in Export Processing Zone $ .40/sqm.

SOURCE:Philearates depend on the location or site of the industrial land2. RATES FOR OFFICE SPACE

LOCATION SELLING RATES RENTAL RATES

Makati P 70,000-10,000/sq. m P 550-650/sq.m

Ortigas/Quezon City P 45,000-60,000/ sq. m P 400/sq. m and above

taxation rate in the philippines

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