Tax Services in the Philippines

All businesses must pay taxes on their income. The form of business you operate determines the kind of tax you need to pay. Every country has its own type of taxation system. When moving to the Philippines, especially when you are going to work or establish a business, you will probably have many questions regarding the local tax system. Indeed, as in most countries, you are likely to pay income tax, as well as other types of taxation in the Philippines. However, the tax is deducted under several conditions and at varied rates for different categories of foreigners. It is best to have awareness of these factors so that you will not end up paying more or fewer taxes.

Tax System in the Philippines | A Comprehensive Overview

Expatriates living in the Philippines who are not yet the citizens of the country are considered as resident aliens and the foreigners who do not live in the Philippines are considered as non-aliens. These terms are generally important for individual taxation. When it comes to business taxation, there are two important facts that you must know under the Philippine taxation system. They are:

1. Domestic corporations (created within the Philippines) are taxable on all income within and outside the country
2. Foreign corporations, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the country

Tax in the Philippines varies from 0% to 35% depending upon the income of an individual or a business.

Corporate Tax

The corporate tax rate in the Philippines for domestic and resident foreign corporations is 30% for Domestic Companies and 35% for Foreign Companies based on the net taxable income. Also, note that, the foreign corporations whether resident or non-resident, are taxed only on income derived from a source within the Philippines. However, preferential rates and exemptions apply. Preferential rates generally range from 2% to 20%.

Withholding Tax

A withholding tax in the Philippines is divided as follows:

Any other taxable income incurred by domestic and the foreign corporation is subjected to the standard withholding tax of 20%.

Fringe Benefit Tax

It is the final tax payable on a calendar quarterly basis by the employer and is deductible as a part of fringe benefit expense. The fringe benefits are taxable to Managerial and Supervisory-level employees by the employer and are subject to a rate of 35%. These benefits are not included in employees’ taxable Income.

Value Added Tax in the Philippines

The Philippines tax rate for Value Added Tax (VAT) is 12% of the gross selling price and is imposed to all imported goods, sale, barter, exchange, or lease of goods or properties and sale of services. The term 'Gross Selling Price' means the total amount of money or its equivalent that the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the Value Added Tax.

On failure to file the VAT in the Philippines on the prescribed date, the Company is liable to pay a penalty of P 1,000 unless it is shown that such failure is due to reasonable causes and not due to willful neglect.

Computing Income Tax in the Philippines is different for an Individual and Corporations. A taxable corporation is taxed using a fixed income tax rate. While if you are a self-employed professional or an owner of a single proprietorship business then your income is taxed using a Graduated Tax Rate.

Our Offerings

We at Business Setup Worldwide utilize our knowledge to provide companies with a range of effective solution. Our tax services in the Philippines include:

• Identifying tax risks
• Corporate tax planning and preparation
• Preparing and filing tax returns
• Tax compliance
• Bureau of Internal Revenue (BIR) audit assistance
• Tax consulting and auditing

Tax management is a challenge to many businesses, which is why we at Business Setup Worldwide offer our assistance to the business owners and relieve them from worry related to tax-compliances. Our teams of professionals are experts in this field and regularly keep themselves updated on the changing tax laws, rules and regulations that impact your return and will handle taxes with utmost accuracy and care. Contact us to know more.