Accounting and legal

Accounting and tax

    Philippines tax
  1. Companies registered in the Philippines are subject to Philippines corporate income tax on both locally and foreign-sourced income, at a standard rate of 30%. All companies are required to file their tax returns with the Philippines tax authority within 4 months after the end of their financial year, usually starting in January;
  2. Companies accumulating reserves above “reasonable” levels can be subject to additional scrutiny from the tax authorities and be subject to an additional tax of 10% on the reserve amounts, if the tax authorities consider the accumulation of reserves is explained by an intention to reduce taxable income of the shareholders;
  3. Philippines also implements a minimum tax system, under which companies are required to pay corporate income tax equivalent to 2% of their annual turnover if i) they are not generating any income or ii) the amount due on their earnings is lower than the amount due under the minimum tax system. This however applies only from the 4th year after company formation;
  4. Philippines businesses are allowed to carry forward their losses for up to 3 years. Carryback is however not allowed;
  5. 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;
  6. All foreign-owned companies are required to have their accounts audited each year. There is no audit exemption for foreign-invested businesses in the Philippines;
  7. All companies with sales exceeding US$40,000 (PHP 2 million) are required to register for VAT. They are then required to charge VAT at a 12% rate on all their local sales and submit monthly or quarterly VAT returns to the tax office;
  8. Dividends paid to non-resident corporations and individuals are subject to a 30% withholding tax rate, unless reduced by a double taxation avoidance agreement (DTAA). Dividends remitted to jurisdictions where either no tax credit is available or is set a rate below to 15% may however benefit from a reduced withholding tax rate of 15%;
  9. Interest paid to non-resident corporations and individuals are subject to a 20% withholding tax rate, unless reduced by a DTAA;
  10. Branches are subject to a 15% branch tax on their earnings remitted to their head office;
  11. Philippines companies paying fees to a non-resident entity must withhold corporate income tax at a 30% rate on the payment and remit the equivalent to the tax authority. VAT can also be withheld, according to the nature of the services rendered;
  12. Philippines has signed double taxation avoidance treaties with forty countries including: i) Australia ii) Canada iii) China iv) Singapore v) the United Kingdom and vi) the United States of America to reduce withholding tax on payments abroad;
  13. 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.

Contact us

For additional information on our accounting and legal services in Philippines, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi