TAX RATES

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 and became
effective on 01 January 1998. The law was aimed at the expanding the country's tax base and maintaining the healthy fiscal
standing of the government.
1.1 Corporate Income Taxes
Domestic/Resident Foreign Corporations 32% of net taxable income
Regular Income Tax Rate
Non-Resident Corporation Regular Income Tax 32% of the gross amount of Philippine-source income such as dividend,
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 other monetary 20% of final tax
benefit from deposit substitutes and from trust fund and similar
arrangements
Interest from foreign currency deposits with foreign currency deposit 7 1/2% of final tax
units (FCDUs)
gains from sale or exchange of shares of stock not listed and traded 5% capital gains tax (CGT) on net gains not exceeding P 100,00 and
in the local stock exchange 10% on the excess.
Gains from sale or exchange of land or buildings not actually used in 6% CGT on gross selling price or fair market value, whichever is higher
business and treated as capital issue
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 whose regular
corporate income tax liability is less than the MCIT beginning the fourth taxable year following the year they commenced business operation.
Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal tax for the three (3) immediately
succeeding taxable years.

Fringe Benefits Tax - Fringe benefits granted to supervisory and managerial employees are subject to 32% tax on the grossed-up monetary
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, except in 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 to avoid 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 foreign
corporation is resident of a country which:

• Does not impose any tax on dividends received from

foreign sources, or

• Allows a credit against the tax due from the nonresident

foreign corporation taxes deemed to have been paid in the
Philippines equivalent to 17%
Income derived form any foreign currency transaction with FCDUs and Exempt
OBUs
Gains from sale of unlisted shares of stock in a domestic corporation 5% capital gains tax (CGT) on net gains not exceeding P100,000 and
10% on the excess
Rents and other fees paid to nonresident corporate lessors of aircraft, 7 1/2% on gross rentals or fees
machinery and other equipment
Rents of charter fees paid to non-resident corporate owners of vessels 4 1/2% on gross rentals or fees
chartered by Philippine Nationals
Fees paid to non-resident cinematographic film owners or lessors 25% on gross income
1.5 Individual Taxation
Non-resident aliens not engage in trade and business flat income tax 25%
rate
Resident citizens/aliens (gainfully employed) Graduated income tax 0%-35%
rates
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 has been
correctly withheld;
3. An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino employee occupying the same
position as that of the alien employee of regional or area headquarters and regional operating headquarters of multinational companies,
petroleum service contractors and sub-contractors, and offshore banking units, non-resident alien not engaged 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 their individual
income tax based on their respective taxable income. Where it is impracticable for the spouses to file one return, each spouse 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%
P500+10% of the excess over P22,500+25% of the excess over
Over P10,000 but not over P30,000 Over P140,000 but not over P250,000
P10,000 P140,000
P2,500+15% of the excess over P50,000+30% of the excess over
Over P30,000 but not over P70,000 Over P250,000 but not over P500,000
P30,000 P250,000
P8,500+20% of the excess over P125,000+34% of the excess
Over P70,000 but not over P140,000 Over 500,000
P70,000 over 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 the 10% 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 stock exchange.
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 financial leasing 1%, 3%, or 5% of gross receipts depending on the maturity date of the
activities instruments, 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) Gross income from Philippine sources
325 (2000)
Non-resident owner or lessor of aircraft, 7.5% Gross retails or fees
machinery and other equipment
Offshore banking units (OBUs) and foreign 10% Income from foreign currency transactions with local commercial
currency deposit units (FCDUs) authorized by banks, including branches of foreign banks that maybe authorized by
the BSP the BSP to transact business with OBUs and FCDUs, including any
interest income from foreign currency loans granted to residents.
Subcontractors engaged in Petroleum 8% final tax Gross income from service contract
operations, Subcontractors engaged in
Petroleum operations
Regional operating headquarters 10% Taxable income from authorized incentives
SOURCE: How to invest in the Philippines, 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: Philea rates depend on the location or site of the industrial land
2. 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
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