Philippines - Taxation

Philippines Taxation 1093
Photo by: Oleg Mitiukhin

The individual income tax consists of taxes on compensation income (from employment), business income, and passive income (interests, dividends, royalties, and prizes). In 1998 compensation income tax rates were restructured into 6 bands with marginal rates ranging from 5% to 35%. Exemption levels are 20,000 pesos (about $400) for individuals, and 32,000 pesos (about $640) for married couples. In 2000, the business income tax rate was lowered from 33% to 32%. The tax rate on passive income is 30%. For resident foreign corporations, after-tax profits remitted abroad are subject to a 15% tax, except for corporations registered with the Philippine Economic Zone Authority (PEZA), the Board of Investment (BOI), the Bases Conversion Development Authority, or operating in independent special economic zones (ecozones), all of which are eligible for special tax and customs incentives, exemptions and reductions designed to attract foreign, new, necessary and/or export-oriented foreign investment. The Omnibus Investment Code of 1987 lays out tax incentives administered by the BOI of the Department of Taxation and Development, and the annual Investment Priorities Plan (IPP) sets out the investment areas, national and regional, to which these incentives currently pertain. In 2002 the national list included export activities, industrial development and mining, agricultural/fishery production and processing, logistics, drugs and medicine, engineered products, environmental projects, IT services, Infrastructure, mass housing projects, R and D activities, social service, tourism, patriotic and documentary motion pictures and new projects with a minimum cost of $2 million. Special economic zones (SEZs) can be designated as export processing, free trade and/or information technology (IT) parks, each designation providing a schedule of tax holidays, exemptions from import duties on capital goods and raw material, and preferential income tax rates with more favorable treatment accorded pioneer industries over nonpioneer or expanding companies.

Taxes on transactions include a value-added tax (VAT) of 10%. For smaller businesses not registered with the VAT a percentage sales tax of 3% to 5% is applied, although higher for activities involving issues of public morality: cockpits are taxed 18%, caberets, 18% and jai-lai and racetracks, 30%.

Excise taxes are imposed on selected commodities such as alcoholic beverages, tobacco products, jewelry and petroleum products. In addition, the government levies a variety of other taxes, including mining and petroleum taxes, residence taxes, a head tax on immigrants above a certain age and staying beyond a certain period, document stamp taxes, donor (gift) taxes, estate taxes, and capital gains taxes. A document stamp tax is charged on stock certificates, proofs of indebtedness, proofs of ownership, etc, and normally amount to .75% to 1% of the par or face value of the certificate. A progressive schedule of donor taxes begins with gifts above P 100,000 (about $18,500), and lays out seven bands (2%, 4%, 6%, 8%, 10%, 12%, and 15%) with the top marginal rate applying to gifts above P 10,000,000 (about $186,520). The progressive estate tax begins at P 200,000 (about $37,000) and lays out five bands (5%, 8%, 11%, 15% and 20%) up to P 10,000,000 (about $186,520). The capital gains tax is 6% on real property; 5% on gains of P 100,000 or less from the sale of stock not listed on the stock exchange, and 10% on gains over P 100,000. Some cities, such as Manila, levy their own wholesale and retail sales taxes.

Government revenues in 2001 amounted to 14.8% of GDP, short of total expenditures and net lending for the year, which came to 19.1% of GDP, leaving a deficit of over 4% of GDP. The US State Department reports that the main factor underlying the deficit is inadequate revenue collections due to widespread tax evasion. Attempts by the Bureau of Internal Revenue to increase compliance have met with strong resistance.

User Contributions:

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Oct 25, 2007 @ 3:03 am
genesis cuizon
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Jan 27, 2008 @ 8:20 pm
will you please send me the opinions of legal luminaries regarding the taxation in the philippines...i'm studying taxation and i need those asap... thanks in advance
reynold Jallorina jr.
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Jun 18, 2009 @ 12:00 am
will you please send me a data regarding about the compensation of tax?
and why it is called compensatory? studying Philippine income TAX
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Oct 3, 2009 @ 5:05 am
Can you please send me the differences and similarities of income taxation between Philippines and Japan?
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Oct 4, 2009 @ 9:21 pm
can you help me know the differences and similarities of income taxation between philippines and malaysia?
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Dec 27, 2009 @ 1:01 am
I'm involved in a trading business right now, my products are auto parts and electronics imported from japan. I want to know all the legal requirements for this kind of business. Thanks
Cristita Icalabis
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Jan 9, 2010 @ 2:02 am
hi? I'm having my research about economics and I've chosen taxation as part of my research
I want to know more about taxation in the Philippines. the different types of taxes and their purposes . Thank you, and God Bless
Andrew Macalma
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Jan 13, 2010 @ 6:18 pm
Thank you for the quick info on taxation. Is there any benefit to the operation and management of a business organization when the said organization pays its taxes?
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Feb 25, 2010 @ 9:09 am
is the Philippines income taxation system is fair enough , applicable to all business and individual taxpayers considering the newly amended personal exemption?
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Apr 6, 2010 @ 10:22 pm
Are passive income, particularly rolyalties, subject to VAT? Business Tax?
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Apr 14, 2010 @ 4:04 am
what are the revision made or amendment on the exemption of individual tax payers?
Effect implications to the current tax system?
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Aug 25, 2010 @ 11:23 pm
in the current tax system, how much tax are we asking from mining industries?
please kindly send the response to my e-mail address.i really need the info as soon as possible.
thanks and God bless!
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Jan 30, 2011 @ 10:22 pm
can you tell me what is taxation???what is the effect of taxation in the economy??its purpose and its importance..thank you!!!
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Feb 3, 2011 @ 7:07 am
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Feb 18, 2011 @ 3:03 am
how many percent should the minimum workers tax to be paid?
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Mar 31, 2011 @ 12:00 am
What is your reaction about the tax measures and expenditure activities of our government here in the Philippines?
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May 4, 2011 @ 10:22 pm
How are the different organization tax by the government?
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May 30, 2011 @ 7:07 am
how much is the tax for import or export machine?example the machine come from brasil...
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Jun 16, 2011 @ 11:23 pm
can you give me the different issues about taxation in the philippines? thank you
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Aug 30, 2011 @ 4:04 am
Good day. Iam now doing my report about taxation in my advanced economics subject, Can you please email me the latest taxation in the philippines, diff types of taxation etc. and also what is the best topics that i can add to my report related to taxation and economics.thank you and God bless.
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Sep 14, 2011 @ 6:18 pm
please show me the tax incentives in the Philippines for petroleum industries, coal mining and other endeavors which contributes to climate change. thank you.
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Oct 30, 2011 @ 11:11 am
What Is The History Of Taxation In The Philippines?
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Dec 29, 2011 @ 1:01 am
Can you please post the problem of taxation in the philippines?thank you...I'm hoping to your
e mediate response.
Elsie Pang
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Feb 14, 2012 @ 10:10 am
How much is the import or local sales tax if I ordered some essential oils from the US and have it couriered to me in the Philippines.
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Mar 21, 2012 @ 5:05 am
Is overtime fee taxable? What are nonvat purchases? If we purchase nonvat goods do we need to pay for import taxes?
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Apr 12, 2012 @ 10:22 pm
Please advise if Filipino work in Hong Kong, they need to pay income tax to Philippine? If yes, what is the tax measure?
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Apr 26, 2012 @ 9:21 pm
i'm having a term paper my topic is THE NATURE OF TAXATION IN THE PHILIPPINES" my Problem there is what should be the things that i have to research for the contents or outline of my works? can you help me?
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May 20, 2012 @ 9:09 am
Is this the meaning of tax in philipinse?can u help me? coz i have assignment this month?
Dexter Egod
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Sep 1, 2012 @ 6:06 am
Will you give me some proof or issues that will justify that the Philippine has a sound tax system? I would appreciate your response even more if I will be able to have it tomorrow. thanks allot and God bless.
jay r
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Sep 28, 2012 @ 1:01 am
how much will i pay to the bureau of customs if i buy an air gun from the us? it cost $600
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Nov 29, 2012 @ 11:23 pm
how about the "evolution of taxation here in the Philippines"?
ray bayo
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Dec 3, 2012 @ 1:01 am
I am studying public fiscal management. Can you share ideas how income taxation works in our economy? How it can stabilize economy? Many thanks!

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