Accounting and tax
Corporate income tax considerations
- Companies registered in the Philippines are subject to a corporate income tax at a standard rate of 30%;
- Capital gains are subject to standard corporate income tax. Capital gains derived from the sales of shares of unlisted companies are also subject to withholding tax of i) 5% on the first US$22,000 earnt (PHP 100,000) and ii) 10% thereafter;
- A 12% Value Added Tax (VAT) is applicable on the sale and importation of certain goods and services;
- A 30% withholding tax is applicable on dividends, royalties and technical services fees paid to non-resident companies, unless reduced where a country provides a tax credit;
- Interest paid to a non-resident entity is subject to a 20% withholding tax unless reduced under a tax treaty, subject to approval by the BIR;
- A 15% branch remittance tax is applicable on the after-tax profits remitted by a branch office to its parent company.
- Manufacturing companies with bonded warehouses enjoy complete exemption from customs duty on importation of required goods and spare parts;
- Companies setting up regional operating headquarters in the Philippines are subject to a reduced corporate tax rate of 10%;
- Employing entities are eligible for a 50% deduction for the labour expenses for up to 5years for new projects exceeding a certain ratio of capital equipment to their employees;
- Pioneer and non-pioneer companies are eligible for income tax holidays from 3 to 8 years for new and expansion projects and projects in remote regions;
- Philippines businesses are permitted to carry forward their losses for up to 3 years. Carryback is however not allowed.
- All companies must file their tax returns with the Philippines Bureau of Internal Revenue within 4 months following end of their financial year;
- VAT returns must be filed either i) monthly, before 20th day following close of the month or ii) quarterly, by the 25th day following end of taxable quarter;
- Late payment of income tax will be subject to a penalty of 15% of the total amount due in taxes;
- All foreign-owned entities or companies with foreign investments are required to have their accounts audited each year.
- An alternative minimum tax (MCIT) of 2% is applicable on companies not generating income by the fourth year of operation;
- Employers are required to submit monthly social security contributions of up to US$25 on salaries of covered employees;
- Philippines has signed double taxation avoidance treaties with 41 countries including Australia, Canada, China, Singapore, the United Kingdom and the USA to reduce withholding tax on payments abroad;
- Healy Consultants’ Philippines tax planning services are tailored to meet the precise needs of international entrepreneurs. Unlike many corporate services providers, we take a global approach to our tax planning services, thinking ‘outside the box’ to provide a creative solution which fits your needs;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
Healy Consultants Compliance Department assists our global Clients efficiently and completely discharge their Philippines legal and compliance obligations when establishing and doing business in the Philippines.
Company compliance considerations
- All companies registered in the Philippines must prepare annual financial statements which must be audited by an external independent CPA;
- Every registered company must maintain and keep at its principal office, all minutes of all shareholder meetings and records of all business transactions;
- Before commencement of business, every Philippines company must obtain a license from its registered city Business Permits and Licensing Office;
- Companies looking to trade actively and issue receipts and invoices must first obtain authority to print receipts and invoice from the Bureau of Internal Revenue;
- All foreign entities conducting business in Philippines must appoint and maintain a resident agent in the Philippines.
Employer and other considerations
- The maximum working hours per day in the Philippines must not exceed 8 hours for all employees for five days per week;
- Every employee must be paid regular daily wage during the regular official public holidays with exemption to service and retail industries regularly employing less than 10 workers;
- An employer may only terminate an employee if there is legal cause for termination and has followed the required procedures for termination;
- An employee may however terminate their employment by issuing a written notice to the employer in advance of one month;
- Under the 1987 Philippines Constitution, employees have the right to form, join and participate in labour unions;
- Every employer and employee in the Philippines is required to be a member of, and make monthly contributions to the Social Security System (SSS), Home Development Mutual Fund (Pag-IBIG Fund) and Philippine Health Insurance Corporation (PhilHealth).