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Philippines Corporate Taxation

Posted by Dave on Thursday, May 7th, 2009

Companies that are resident of the Philippines are taxed on worldwide income. Non-resident companies are taxed only Philippines income (branch office in the Philippines). Dividends received by Philippine Corporations or resident foreign corporations are not taxed.

Capital Gains Taxes

Capital Gains Taxes are usually taxed as income. The sale of shares that are not listed on the stock exchange are taxed as capital gains:

- 5% withholding tax on the first Php 100,000.00 and 10% on anything above.

The sale of shares listed and traded on the stock exchange is taxed at ½ of 1 % of the gross selling price.

Real Estate Sales are taxed at 6% on the sales price or the zonal value; whichever is higher.

Corporate Income Tax

The tax rate for Domestic Corporations is 30% on worldwide income.

Foreign Branch Offices have a tax rate of 30% on Philippines based income.

Withholding Taxes

Dividends:

Dividends distributed to non resident entities are subject to a 15% withholding tax as long as the country where the foreign corporation resides allows for a tax credit of 15%. Otherwise all dividends are subject to a 30% tax.

Interest:

Interest paid to Non-residents is taxed at 20%.

Royalties:

Royalties paid to non-residents are taxed at 30%. Royalties paid to a domestically to a Filipino entity or a resident foreign corporation are taxed at 20%.

Branch Office Profit Remittances:

After tax profits remitted by a branch office to its parent are taxed at 15%

VAT (Value Added Taxes)

Most sales of goods and services are subject to a value added tax of 12%

Last updated May, 2009.

Tax incentives are available to investors who register with BOI or PEZA

Comments

WE are a foreign company about to sell equipemt to a philipino company. We do not have a local company or any interests in the Philippines. Our quotes price is inclusive of VAT ( 12%
) , Are we subjected to any corporate income tax or any other “witholding tax”

David, if you charge VAT you will have to remit it to the Bureau of Internal Revenue, on the other hand if your client is the importer you do not need to charge the VAT as the Bureau of Customs will charge the VAT to your client upon importation.

By Winna Lepalam on August 17th, 2010 at 2:31 am

We are a domestic corporation registered with peza doing back office/call center business and would like to sell 100% of our shares to a foreign company.

What are the legal processes and requirements involve in doing so? Are there any taxes to be paid?

Winna, you will need to prepare deeds of assignments for the sale of the share of the corporation. Yes, there are taxes to be paid based on an assessment done by the BIR.

By Joselito Dayoan on October 2nd, 2010 at 12:02 am

Am planning to put up a distributorship of water dispenser/purifier in the Philippines and manufactured in the U.S.A..
What are the tax implications?

Joselito, like any business you will have to pay VAT, income tax and local municipal taxes.

Hi , we have branch operations in cities other than the head office, are we required to fill up the tax declaration sheet for each of the branch for computaion of municipal fees-

Nan, yes each branch must file a tax declaration in the municipality where it is situated.

Is there a Limited Liability Company in the Philippines?

Jed, the closest we have to an LLC in the Philippines is a corporation.

By Mary Ann Tidon on July 18th, 2011 at 4:21 am

Just want to inquire if a BPO here in the Philippines receives the inward remittances is it subject to a 12% VAT? is it considered a sale? are they required to print receipts for the inward remittances received from their mother company in Australia?

Mary, BPO is considered export. There is no VAT on exports. Receipts are still needed. As the inward remittances are still considered revenue.

By Mary Joy Malinao on October 23rd, 2011 at 8:06 pm

Hi, if a back office is opened here in the Philippines, the inward remittance received from its parent company will be the revenue that is taxable and basis for for the income tax return?

Correct.

Hello, I hope you might be able to answer my VAT-related enquiry. Our UK-based company is looking to commission a Philippino company to do some design work. In the quote from the Philippino company VAT has been applied to the final total. Here in the UK we do not charge VAT on services to foreign (e.g. US-based) clients. Are the tax laws the same in the Philippines or are Philippino companies required to charge VAT to foreign clients? Many thanks for your help.

Ro Rai, companies in the Philippines are not required to charge for export of products or services.

 

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