philippnes tp

7/24/2019 Philippnes Tp

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PhilippinesTax Profile

Produced in conjunction with the KPMG Asia Pacific Tax Centre

Updated: September !"#


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Contents

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Corporate (ncome Tax

(ncome Tax Treaties for the A)oidance of *ouble Taxation

(ndirect Tax

Personal Taxation

+ther Taxes

,ree Trade A-reements

Tax Authorit.

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1 !"# KPMG (nternational Cooperati)e 23KPMG (nternational456 a Swiss entit.7 Member firms of the KPMG networ8 o f independent firms are affiliated with KPMG (nternational7

KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor doesKPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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Tax rate

Corporate (ncome Tax

Corporate income tax


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(nternational withholdin- taxrates

The followin- items are subject to withholdin- tax at #! percent:

(nterest


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9et capital -ains realiBed durin- the taxable .ear from the sale6 exchan-e or other disposition of shares of stoc8 in an.domestic corporation 2not sold throu-h the stoc8 exchan-e5 are taxed at the followin- rates:

,irst P=P"!!6!!! taxed at fi)e percent

(n excess of P=P"!!6!!" taxed at ten percent

osses from sales or exchan-es of capital assets shall be allowed onl. to the extent of the -ains from such sales orexchan-es7

A final tax of six percent 2on the hi-her of the -ross sellin- price or fair mar8et )alue5 is imposed on the -ain of adomestic corporation presumed to ha)e been realiBed on its sale6 exchan-e or disposition of land and@or buildin-s that arenot actuall. used in business and are treated as capital assets7

(ncome from the sale of capital assets other than shares of stoc8s6 land and buildin-s not used in the course of businessare treated as an ordinar. income and subject to the normal corporate income tax7

Tax losses +peratin- losses incurred in a tax .ear ma. be carried o)er as a deduction from -ross income for three consecuti)e .earsimmediatel. followin- the .ear of such loss6 pro)ided that there is no substantial chan-e in the ownership of thebusiness or enterprise7 Such losses shall not be allowed as a deduction in a taxable .ear in which the taxpa.er wasexempt from income tax7

,or mines6 other than oil and -as wells6 the net operatin- loss without the benefit of incenti)es incurred in an. of the firstten .ears of operation ma. be carried o)er as a deduction from taxable income for the next fi)e .ears immediatel.followin- the .ear of such loss6 and an. portion of such loss which exceeds the taxable income of such first .ear shall bededucted in li8e manner from the taxable income of the next remainin- four .ears7

Tax consolidation @ -rouprelief

Transfer of shares

There are no -roup relief pro)isions for losses in the Philippines7 ?ach compan. within a corporate -roup is taxed as aseparate entit.7

Transfer of shares not listed and traded in the local stoc8 exchan-e shall be subject to capital -ains tax at the rate of fi)epercent for the first P=P"!!6!!! and ten percent in excess thereof7

Stamp dut. will also appl. at a rate of P=P!7'% on each P=P!!6 or fractional part thereof6 of the par )alue of such stoc87

Transfer of shares throu-h the local stoc8 exchan-e is subject to stoc8 transaction tax at the rate of !7% percent7


KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does#KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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Transfer of assets Sale of real propert. is subject to capital -ains tax at the rate of six percent 2on the hi-her of the -ross sellin- price or fairmar8et )alue57

Stamp dut. of P=P"% for e)er. P=P"6!!! will appl. to the transfer of real propert.7

C,C rules

Transfer pricin-

9o C,C re-ime exists in the Philippines7

The tax authorit. has the power to allocate income and expenses between or amon- related parties6 in order to pre)entthe e)asion of taxes or to clearl. reflect the income amon- related parties7 The 3armDs len-th4 test is used to e)aluatetransactions between related taxpa.ers and the -uidelines follow +?C* -uidelines7

Transfer pricin- -uidelines were issued b. the Philippine tax authorities earl. in !"#7 To date6 howe)er6 theimplementin- rules for the -uidelines ha)e not been issued7

Thin capitalisation The Philippines has no formal thin capitaliBation laws or re-ulations7 =owe)er6 the tax authorit. has issued -uidelineswhich identif. thin capitaliBation and earnin- strippin- as amon- the tax a)oidance schemes between related companies7

The Etax arbitra-e ruleD reduces the allowable deduction for interest expenses b. ## percent of the interest incomesubjected to final tax7

General antia)oidance The Philippines does not ha)e a -eneral antia)oidance clause within its tax code7 =owe)er6 an. person who wilfull.attempts in an. manner to e)ade or defeat an. tax imposed under the Tax Code shall6 in addition to other penaltiespro)ided b. law6 upon con)iction thereof6 be punished b. a fine of not less than P=P#!6!!! but not more thanP=P"!!6!!! and suffer imprisonment of not less than two .ears but not more than four .ears 2Sec7 %$6 Tax Code57

9one

9one

Taxpa.ers ma. see8 clarification with the tax authorit. b. submittin- a letterre>uest for rulin- containin- full disclosure

of all material facts6 includin- the documents needed for substantiation7 +nce issued6 this rulin- is applicable to all futuretransactions referred to in the rulin-7 uir.7

Antitreat. shoppin-

+ther specific antia)oidancerules


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(ntellectual propert.incenti)es


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(n ,orce

(ncome Tax Treaties for the A)oidance of *ouble Taxation

Australia

Austria

Fahrain

Fan-ladesh

Fel-ium

FraBil

Canada

China

CBech


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# (ndirect Tax

alue Added Tax 2AT5

The standard rate of AT is " percent which is imposed on the sale6 in the course of trade@business6 of -oods6 ser)icesand propert. in the Philippines as well as the importation of -oods to the Philippines7

Certain sales or ser)ices are subject to Bero percent AT7

(ndirect tax

Standard rate

,urther information ,or more detailed indirect tax information6 refer to:

KPMGLs AT@GST ?ssentials


KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does'KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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$

Top rate

Personal Taxation

(ndi)idual income tax

(ndi)iduals6 dependin- on the tax status6 are subject to pro-ressi)e tax rates7 The maximum rate is # percent7

?)er. emplo.er is re>uired to deduct an amount from the salar. of each emplo.ee premium contributions remitable to asocial securit. fund and medicare s.stem to finance the retirement6 sic8ness6 disabilit.6 health and other social securit.benefits of the emplo.ee7

The emplo.er is also re>uired to remit a counterpart contribution for the emplo.ee7 The amount of premium contributionsb. the emplo.er and emplo.ee depends on the salar. brac8et of each emplo.ee6 based on a precalculated table ofcontributions7

(ncome tax

Social securit.

(nternational social securit.a-reements

Austria

Fel-ium

Canada

,rance

Greece (srael 2under ne-otiation5

Korea

9etherlands

Portu-al 2for ratification5

Huebec

Spain

SwitBerland

United Kin-dom 9orthern (reland

,urther information ,or more detailed personal taxation information6 refer to:

KPMGDs Thin8in- Fe.ond Forders


KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does/KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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% +ther Taxes

Generall.6 customs duties are le)ied on all articles imported into the Philippines7 The rates )ar. dependin- on theclassification and countr. of ori-in of the imported -oods7 (f it ori-inates from a countr. which is a member of the GATTor AS?A96 the -oods ma. be subject to preferential tariff treatment under the GeneraliBed S.stem of Preference or the

AS?A9 Common ?ffecti)e Preferential Tariff7

Customs duties are pa.able at the time of release or withdrawal of the -oods from the customs house or bondedwarehouse7

Customs dut.

?xcise dut. ?xcise tax is le)ied on certain -oods locall. manufactured or produced in the Philippines for domestic sale orconsumption or for an. other disposition6 and on certain -oods imported to the Philippines 2in addition to AT andcustoms duties57

Generall.6 the excise tax is pa.able before products are remo)ed from the place of production7 ,or imported items6 thetax is pa.able before the release of articles from customs warehouse7

(tems subject to excise tax include 2amon-st others5 alcohol6 tobacco products6 petroleum6 mineral products and

miscellaneous articles such as firewor8s6 certain cinemato-raphic films6 certain nonessential -oods and motor )ehicles7

Stamp dut. The Edocumentar. stamp dut.D is an excise tax and is imposed on documents6 instruments6 loan a-reements andacceptances6 assi-nments6 sales or transfers of obli-ations6 ri-hts or propert. and other business instruments7 The rateof tax depends on the nature of the document and transaction7

*ocumentar. stamp dut. applies to transactions effected and consummated outside the Philippines and documentssi-ned abroad where the obli-ation or ri-ht arises from Philippine sources or the propert. is located within thePhilippines7

Propert. taxes Propert. taxes imposed b. the local -o)ernment units include:

Transfer tax on real propert. ownership and


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(nheritance tax ?state tax is imposed upon the transfer of the net estate of e)er. decedent7 The tax is computed on the -raduated ratesfrom % percent to ! percent7 The first P=P!!6!!! of the net estate is exempt from tax and the maximum rate isapplicable to the net estate in excess of P=P"! million7

Gift tax is le)ied on the transfer b. an. person 2resident or nonresident5 of propert. b. donation and is imposed e)en ifthe transfer is in trust or otherwise 2direct or indirect56 and the propert. is real or personal6 tan-ible or intan-ible7

The rates of tax are pro-ressi)e from percent to "% percent based on the net -ifts7 The first P=P"!!6!!! of the net-ifts is exempt from tax and the maximum rate is applicable on the net -ifts in excess of P=P"! million7 Nhen the doneeis a stran-er6 the tax pa.able b. the donor is #! percent of the net -ifts7 The #! percent -ift dut. rate also applies tocorporations7

Certain -ifts are exempt from tax7

Gift tax

Percenta-e tax Percenta-e tax is a business tax that is based on -ross sales or receipts of the taxpa.er7 The tax rate depends on thet.pe of establishment or business7 A person who is exempt from AT and is not a ATre-istered person or entit. issubject to percenta-e tax of # percent7 =owe)er6 the person ma. appl. for optional re-istration as a AT re-isteredperson and shall be liable to the AT7 This includes persons whose annual sales or receipts do not exceed P=P"60"06%!!and ha)e not elected to re-ister for AT7

A stoc8 transaction tax of !7% percent on -ross sellin- price is imposed on the sale6 barter6 exchan-e or other dispositionof shares throu-h the stoc8 exchan-e7 A tax is also imposed on the sale6 barter6 exchan-e6 or other disposition of sharesof stoc8 in closel. held corporations throu-h (P+7

=ome *e)elopment Mutual ,und 9ational =ealth (nsurance ocal taxes7

Stoc8 transaction tax

+ther taxes


KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does"!KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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(n force

,ree Trade A-reements

AS?A9 ,ree Trade A-reement

AS?A9China ,ree Trade Area

JapanPhilippines ?conomic Partnership A-reement

AS?A9Korea ,ree Trade A-reement

AS?A9Australia@9ew ealand ,ree Trade A-reement

Concluded @ si-ned 2pendin-domestic ratification5

(n ne-otiation

9one

AS?A9(ndia ,ree Trade A-reement

AS?A9?uropean Union ,ree Trade A-reement


KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does""KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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' Tax Authorit.

Fureau of (nternal


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Appeals (f a ,inal Assessment 9otice is not acceptable to a taxpa.er6 a protest must be filed within #! da.s from the date ofreceipt of the assessment notice6 otherwise the assessment becomes final6 executor. and demandable7

Nithin &! da.s from filin- of the protest6 all rele)ant supportin- documents should be submitted otherwise6 theassessment shall become final7

(f the protest to the ,A9 is denied in whole or in part6 the taxpa.er must then appeal to the Court of Tax Appeals within

#! da.s from receipt of the said decision6 otherwise the decision becomes final6 executor. and demandable7

Tax -o)ernance KPMG ad)ocates strict compliance with tax laws and re-ulations7 Proper documentation is li8ewise necessar. for thepurposes of substantiation of an. tax position filed7

The F(< does not currentl. offer an. specific incenti)es or schemes to encoura-e -ood tax -o)ernance b. taxpa.ers7=owe)er all businesses are ad)ised to establish policies and controls in relation to their )arious tax complianceobli-ations6 as appropriate to their business siBe and complexit.7


KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does"#KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7


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Contact us:

=ermini-ildo G7 Mura8amiPrincipalT O//%'!!! ext7 $"/T O//%!""'? hmura8ami8pm-7com

Mar. Karen ?7 HuiBonSenior Mana-erT O//%'!!! ext7 #%"? m>uiBon8pm-7com

Christ. (rene *7 ?nrileAssistant Mana-erT O//%'!!! ext7 $%&? cenrile8pm-7com

www78pm-7com@tax

This profile was pro)ided b. professionals from KPMGDs member firm in The Philippines7

The information contained herein is of a -eneral nature and is not intended to address the circumstances of an. particular indi)idual or entit.7 Althou-h we endea)our

to pro)ide accurate and timel. information6 there can be no -uarantee that such information is accurate as of the date it is recei)ed or that it will continue to beaccurate in the future7 9o one should act o n such information without appropriate professional ad)ice after a thorou-h examination of the particular situation7

1 !"# KPMG (nternational Cooperati)e 23KPMG (nternational456 a Swiss entit.7 Member firms of the KPMG networ8 of independent firms are affiliated with KPMG

(nternational7 KPMG (nternational pro)ides no client ser)ices7 9o member firm has an. authorit. to obli-ate or bind KPMG (nternational or an. other member firm )is;)is third parties6 nor does KPMG (nternational ha)e an. such authorit. to obli-ate or bind an. member firm7 All ri-hts reser)ed7

The KPMG name6 lo-o and 3cuttin- throu-h complexit.4 are re-istered trademar8s or trademar8s of KPMG (nternational7

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