CORPORATE INCOME TAX
A domestic corporation is taxed on its net income (gross income less allowable deductions) from all sources at the rate of 30%. A resident foreign corporation, such as a branch, is taxed only on its net income from Philippine sources at the same rate as a domestic corporation.
A non-resident foreign corporation is subject to final withholding tax on its gross income (without the benefit of deductions) from Philippine sources at the rate of 30%.
A foreign corporation is considered a resident when it is engaged in trade or business in the Philippines and is licensed by the Philippine SEC to engage in trade or business in the Philippines.
INDIVIDUAL INCOME TAX
A resident citizen is taxed on income from all sources at progressive rates ranging from 5 to 32% of net taxable income.
A non-resident alien engaged in trade or business in the Philippines is generally subject to tax on net income from Philippine sources at the same progressive tax rates imposed on resident aliens and citizens. A non-resident alien is deemed engaged in trade or business if he or she stays in the Philippines for an aggregate period of more than 180 days during any calendar year.
A non-resident alien not engaged in trade or business in the Philippines is taxed on gross income from Philippine sources at the rate of 25%, withheld at source.
VALUE ADDED TAX (VAT)
VAT is a tax on consumption levied on the sale, barter, exchange or lease of goods or properties and services in the Philippines, and on the importation of goods into the Philippines.
A person becomes subject to the 12% VAT when his or her gross sales or receipts for the past 12 months exceed PHP3,000,000.
A VAT taxpayer is allowed input VAT credits against his or her output VAT liability, subject to certain limitations.
LOCAL & REAL PROPERTY TAXES
Local government units, such as provinces, cities, municipalities and barangays, may also levy taxes and impose local license fees pursuant to the Local Government Code. Furthermore, real property tax applied solely to the lands, buildings and other improvements thereon is levied on the assessed value of the real property.
Currently, the Philippines has entered into tax treaties with 41 countries which include the following members of the EU: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Netherlands, Poland, Romania, Spain, Sweden, and the United Kingdom. Under these treaties, the final withholding tax on dividends, interest and royalties can be as low as 10%.