Tag Archives: Philippines

Philippines Corporate Taxation

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

BOI - Board of Investments Tax Incentives

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A corporation investing in the Philippines may avail of tax breaks and incentives by registering with the BOI - Board of Investments. The company must operate a business which has been recognized as a preferred area of investment in the Philippines Investment Priority Plan (IPP). For business activities not covered by the IPP incentives may still be available if:

1. at least 50% of production / service is for exports, if Filipino-owned enterprise,; and

2. at least 70% of production / service is for exports, if majority foreign-owned enterprise (more than 40% foreign equity),

Fiscal incentives includes the following:

* Income Tax Holiday
* Exemption From Taxes And Duties On Imported Spare Parts
* Exemption From Wharfage Dues And Export Tax, Duty, Impost And Fees
* Tax Exemption On BreedingStocks And Genetic Materials
* Tax Credits
* Additional Deductions from Taxable Income.

Income Tax Holiday (ITH) Advantages

Companies registered with the BOI are eligible for income tax holidays which range form 3 - 8 years. 4 years for new projects without pioneer status and 6 years for projects with pioneer status.

A 100% foreign owned corporation may be entitled to incentives if their business has been categorized as a pioneer project and at least 70% of production / service is exported or the project is in one of the less-developed areas mentioned in the IPP. Companies not exporting 100% of their production / services are obliged to have 60% Filipino ownership within a period of 30 years from time of registration with the BOI. Foreign ownership of corporations in non-pioneer projects is limited to 40% except if the company exports more than 70% of its production / service.

How to apply for Board of Investment incentives:

Submission of a notarized application specifying the nature of the projects, its inclusion in the IPP or not, percentage of production for export, the investors details and a 5 year feasibility study.

PEZA offers other tax breaks.

Email or call us Tel.: 63 2 474-2732 for a consultation

Marriage Annulment & Divorce in the Philippines

1 – My wife and I are Filipino citizens living overseas can we obtain a divorce in our country of residence?

Divorce is not acknowledged under the laws of the Philippines. Filipino citizens, no matter what their country of residence must follow the procedure indicated in the Family Code of the Philippines to have their marriage nullified or voided by filing a Petition of Annulment of Marriage before the pertinent Office of the Executive Clerk of Court of the Regional Court.

2- I am Filipina married to an American citizen. My husband obtained a divorce in the USA, am I now allowed to remarry?

No, divorce is not recognized in the Philippines. But this is a special circumstance which is covered by the Family Code of the Philippines:

ART. 26. All marriages solemnized outside the Philippines in accordance with the laws in force in the country where they were solemnized, and valid there as such, shall also be valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law.

Based on this the Filipino Citizen may now apply to have the foreign divorce validated by the courts of the Philippines and may marry again. To do this, the petitioner must show that the divorce was obtained in conformity of the foreign laws of the country of the foreign citizen.

Philippine Representative Office

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The procedure for obtaining a license from the SEC to operate a Foreign Company Representative Office in the Philippines is similar to that of the Foreign Company Branch Office.

The required minimal inward remittance of funds for a Foreign Representative Office as working capital is US$ 30,000.00 as opposed to the minimum paid up capital of US$200,000.00 of a Foreign Branch Office as mandated by the SEC regulations. Every year the parent company must remit at least US$ 30,000.00 to cover operating expenses.

A Representative Office of a foreign corporation is not allowed to derive income from its operations in the Philippines. All of its expenses must be covered by remittances from the parent company. Usual activities allowed are dissemination of information, promotion of company products and quality control of products for export. It is not allowed to offer services to 3rd parties.

A Representative Office is not subject to income taxes as none of its income is derived from the Philippines and is not qualified to register with the BOI or PEZA authorities.

BC Philippines Lawyers will assist you with the procedure and registration of your business with the pertinent government agencies for a quick opening of a representative office in Philippines.

Philippine Economic Zone Authority Tax Incentives

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Philippines PEZA – Philippine Economic Zone Authority

Companies that register and locate within an area that is under the Philippine Economic Zone Authority (PEZA) are entitled to various tax incentives and other advantages.

Usually enterprises located in a PEZA approved ecozone are required to export 100% of their production.

Incentives for Ecozone and IT Locators

100% foreign ownership allowed except in activities which are limited by the Foreign Investment Negative List

Income Tax Holiday (ITH) or exemption from corporate income tax for 4 years, extendable to a maximum of 8 years; after which a special 5% tax on gross income (sales less direct costs) shall be paid in lieu of all national and local taxes. The income tax holiday is not available for locators in the Subic Bay Metropolitan Authority (SBMA) and Clark Freeport Zone, they are entitled to the special 5% tax on gross income as described above.

Exemption from duties and taxes on imported capital equipment, spare parts, supplies, raw materials. Tax credits will issued on breeding stocks or genetic materials when they are sourced locally.

PEZA may grant the right to the locator on a case to case basis the sale of up to 30% of production to the domestic market.

Exemption from wharfage dues and export taxes, imposts and fees.

Permanent resident status for foreign investors and immediate family members.

Employment of foreign nationals.

Simplified import and export procedures.

Other incentives under Executive Order 226 (Omnibus Investment Code of 1987), as may be determined by the Philippine Economic Zone Authority Board.

For companies that will not avail of PEZA incentives see the rules on foreign ownership of Philippine companies

Tax incentives by the Philippines Board of Investments