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2009 edition Foreword
The Philippines has long opened its doors to embrace global economic interconnectedness. As the world economy shrinks, that is to say cross border transactions and investments have indeed resulted in close trade relationship among countries, the need for a global network which will provide consistent advice has never been more apparent. RSM International makes a difference worldwide as it is a global network composed of independently owned and managed professional service firms, united by a common desire to provide the highest quality service to their clients. Alas, Oplas and Co. CPAs, an independent member firm of RSM International, came up with this publication to give its clients, prospective investors, and the general public broad insights about the Philippines. It contains general information about laws, legislations, and tax guidelines governing local business. Its main goal is to provide significant yet concise information about the potential opportunities on the different sectors of the Philippine economy and to provide investors with the general guidelines of starting a business locally.
General Types of Business Entities Foreign Exchange Controls Taxation 18 Employment Accounting Intellectual Property Rights (IPR) Asset Valuation Investing in the Philippines Listing Rules in the Philippines Relevant Websites 89 About RSM International About Alas, Oplas & Co., CPAs 92 91 58 68 70 73 74 80 4 8 14
4 % Muslim Malay. A home to 2. 1.000 square kilometers and the three biggest islands commonly inhabited by people are Luzon. Filipinos use the two official languages. 100 islands boast of beautiful beaches and breathtaking sceneries offer leisure and relaxation spots for vacationists and tourists.5%. There are three pronounced seasons: (1) the wet or rainy season from June to October. dry season from March to May. 300 kilometers. From 2000 to 2007. Filipino is the native language used nationally as a language of 4 . Its archipelagic nature makes the world’s 5th longest coastline. from land to marine to mineral resources.5% Chinese. Visayas. or an absolute increase of around 1. It is also the biggest copper producer in Southeast Asia and producer of gold in the world. One advantage of the Philippines being an archipelago is that it offers diverse natural resources.” It is an archipelago composed of 7. The projected Philippine population as of August 1. Filipino and English.General The Philippines is one of the countries in Southeast Asia which is located in the “Pacific Rim of Fire. and the Celebes Sea on the south. dry season from November to February. and others belong to the remaining 3%. 145 fish species and its 7. 2007 was 88. people created their racial identity through ethnic groups. it has a growth rate of 2. The country has a total land area of 30 million hectares or 300. Filipinos are divided geographically and culturally into regions. and Mindanao. The Philippines has a tropical climate with relatively abundant rainfall and gentle winds. Three prominent bodies of water surrounded the archipelago: the Pacific Ocean on the east.81 million per year. and each regional group is recognizable by distinct traits and dialects.04 percent per year. the South China Sea on the west. (3) and the hot. net of death and migration.100 islands and islets. The biggest ethnic group is Chinese Malay which comprises 91.57 million. As the country is physically divided. it has a coastline of about 36. (2) the cool.
and related materials (15.6%). and college education. Pampango. and textile yarn. Vizayas. waterways. It is highly accessible to the world by air. the three main islands of the country. Meanwhile.6%). transportation. business and economic infrastructure that makes it an ideal destination for operations of global business. and Mindanao. woodcrafts and furniture (2 %). and related products (2.9%). The remaining 10 percent belongs to other religious groups.9%). and cyberspace. The country has eight (8) international airports and over 200 airports that connect destination across islands. fabrics. cathodes and sections of cathodes refined sugar (2. In key economic areas. According to the census conducted by the government in 2006.2%).4%). followed by articles of apparel and clothing accessories (5. lubricants. The Philippines has a well-developed communication. There are eight major dialects spoken by majority of the Filipinos: Tagalog. electronic products still accounted for the majority of the export products (62. Furthermore. made up articles. iron and steel (2. and petroleum products (1. six years of primary education.2%). are made accessible by roads.6%). and airports. and Pangasinense. Despite more modest infrastructure capabilities.communication among ethnic groups while English is also widely used as a medium of instruction in higher education and in business trades. and Middle East. the Philippines assures investors of efficiently communicating their business 5 . four years of secondary education. water. the top products imported by the country are also the electronic products (47. Hiligaynon or Ilonggo. Ilocano. Eighty-five percent of the Filipino is predominantly Catholic while the Muslims constitute of about 5 percent of the population. Waray. some of Philippine harbors have already been developed into modern ports and container terminal that play host to national and international trade. Most major airlines have multi-weekly flights in and out of Metro Manila. Luzon. Bicolano. The Philippine education system is patterned after the American education system and follows four stages of formal education: preprimary level. industry machinery and equipment (3. Cebuano. followed by mineral fuel. and to key cities in United States.8 %).3%). transport equipment (3. Europe.
and the impact of transport fare reductions. and tourism are the positive prospects that could help the economy to remain resilient and prepare for eventual economic rebound. based on the Inflation Report of Bangko Sentral ng Pilipinas (BSP). healthcare/medical tourism.2%) of foreign and Filipino 6 .3% in 2007.1 billion approved in 2007. a high quality.7 % than the Php214. The employment created was based on services which served as the country’s primary growth driver. the country’s real GDP increased by 4. The country’s communication infrastructure is welldeveloped and expanding.2% to Php21. over the air TV and radio. Based on the NSO Labor Force Survey in 2008. the full year economic growth increased labor employment by 530. total approved Foreign Direct Investments (FDI) declined significantly by 79.message to the rest of the world through world-class transmission facilities.6 billion in the same quarter a year ago.5 percent. agriculture. Retreating prices and commodities and the recent string of low inflation numbers should relieve inflationary pressures and keep the public inflation’s expectations at bay. cable TV. In response to the global economic crisis. driven mainly by the expected easing of world oil prices. Further.4 billion in the fourth quarter of 2008 from a higher level of Php102. low cost bandwidth domestic network. Almost all (99. business process outsourcing. cellular. which means it may feature both capitalism and socialism.000. inflation outlook is much more favorable as the emerging forecasts showed a downward shift in the inflation path to settle the target ranges for both 2009 and 2010. even though inflation decelerated further in the 4th quarter of 2008. with six available platforms: fixed line. the lower-than-expected inflation outturn for Q4 2008. and the VSAT system. As of 4th quarter of 2008. On the other hand. lower by 14. Ownership of dwellings and real estate. For 2008. The country is considered by International Monetary Fund (IMF) as a fastest growing economy is Southeast Asia as the country posted a real GDP growth of 7.7 billion. the government is partnering with private sector for infrastructure projects. Economy The Philippine economy is considered a mixed economic system. the 2008 annual FDI reached Php182.
and (3) the Judiciary.497 municipalities. and several ad-hoc task forces and commissions. Vice President. As defined. and about 30 elected by party-list system for the marginalized sectors and small political parties. The upper chamber is composed of 24 Senators elected nationwide and have a term of 6 years with one term for reelection. 1. Each of these units has its own local policymaking councils. 131 cities. about 3 or 4 dozen Presidential advisers and consultants. Cabinet officials of the 21 departments. The Legislative is composed of the Senate and the House of Representatives. the Judiciary interprets the law (if consistent with the Constitution). administrative orders (AOs). 7 . and the Executive implements the law. (2) the Legislative. The Judiciary is composed of the Supreme Court. The Executive is composed of the Office of the President (OP). Local government units (LGUs) are currently composed of 81 provinces. The President makes Executive Orders (EOs). and other ordinances. about 230 elected in various legislative districts. The 21 departments and its attached agencies create and issue its own AOs. the Legislature makes the law. Memorandum Circulars (MCs) and related ordinances. and almost 42.000 barangays or villages. The lower chamber is composed of more than 260 Congressmen/women. Appellate courts and lower courts. The Philippine Constitution is the fundamental law of the state. Administration The 1987 Constitution provides a presidential system of government with bicameral parliament and three equal branches: (1) the Executive.investments approved during the quarter were coursed through BOI and PEZA.
and savings bank from 9 a.m. to 3 p. to 5p. however.m. There are eleven (11) regular holidays and (3) special non-working holidays. anytime between 8 a. commercial banks transact from 9 a. Several private offices are open on Saturday. to 1 p..m. from Monday to Friday.Local Customs The regular working day is consisted of eight (8) hours.m.m.m. to 5 p. These holidays are shown further on this reading. 8 .m. the time should not be lesser than six (6) hours a day. Banking institutions can be flexible with their own business hours. Government and private offices are open from 8 a. Generally.m.m. to 5 p.m. with one hour lunch break from 12 p.
Foreign Investment Entities 9 . Partnership Type of business organization in which two or more individuals pool money.000. there are three forms of business organization in the Philippines. This means that the owner has unlimited liability. To form a sole proprietorship. having the right of succession and the powers. Sole Proprietorship Type of business entity which there is only one owner and he has the final word taking all decisions by himself. you must register with the Securities and Exchange Commission (SEC). and other resources. All debts of the business are debts of the owner and must pay from his personal possessions. and share profit and loss in accordance with terms of the partnership agreement. skills. there is a need to apply for a business name and register at the Department of Trade and Industry (DTI). In forming the latter with 3.Types of Business Entities Generally.00 Philippine pesos or more in capital. Corporation A corporation is an artificial being created by operation of law. attributes and properties expressly authorized by law or incident to its existence.
or renders services to the domestic market entirely or if exporting a portion of its output fails to consistently export at least sixty percent (60%) or more of such purchases. The same shall register with the Board of Investment (BOI) and submit the reports that may be required to ensure continuing compliance of the export enterprise. the BOI shall advise the Security and Exchange Commission (SEC) and Bureau of Trade Regulation and Consumer Protection (BTRCP). The enterprise whose products and services do not fall within List A and B of Foreign Investment Negative List is allowed up to one hundred percent (100%) ownership. Non-Philippine nationals may own up to one hundred percent (100%) of domestic enterprises unless foreign ownership is 10 .These are equity investments made by non. processor or service (including tourism) enterprises exports sixty percent (60%) or more of its output. Failure to comply with such order without justifiable reason may subject the enterprise in cancellation of SEC or BTRCP registration and other appropriate penalties. In case when the export enterprises fail to meet the export ratio requirement. Thus. or where in a trader purchases products domestically and exports sixty percent (60%) or more of such purchases. both agencies shall order the non-complying export enterprises to reduce its sales to the domestic market to not more than forty percent (40%) of its total production.Philippine nationals in the form of foreign exchange and/ or other assets actually transferred to the Philippines and duly registered with the Central Bank which shall assess and appraise the value of such assets other than foreign exchange. Foreign Investments Enterprises in Domestic Market Enterprises which produces goods for sale. They are allowed to set up the following form of business entities: Foreign Investment in Export Enterprise An enterprises wherein a manufacturer.
Audit Requirements A statutory audit is required for all corporations with authorized capital stock or paid-up capital exceeding P50. Registration with the SEC and other government agencies usually takes six to eight weeks in total to complete. However. Moreover. as it places constraints on foreign ownership in enterprises engaged in certain activities. Incorporation of Business EntitiesApproval & Registration Corporation Formation procedures The formation of corporations is governed by the Corporation Code. before a corporation may commence operations in the Philippines. 11 . and the local government unit where its principal office will be located. the former consistently exports sixty percent (60%) or more of its output each year.prohibited or limited by the Constitution and existing law or the Foreign Investment List. the Home Development Mutual Fund (HDMF). It is also required for any corporation whose gross sales or earnings exceed P150. However. Registration Requirements Corporate existence and juridical personality commences from the date the Securities and Exchange Commission (SEC) issues a certificate of incorporation. if foreign investors are to own shares in a corporation. it must also register with the Bureau of Internal Revenue (BIR). the Social Security System (SSS). including branches of foreign corporations. 000 in any quarter. the Philippine Health Insurance Corporation (PhilHealth). 000. a domestic market enterprise may change its status to export enterprise if over a three-year period. the Foreign Investments Act of 1991 will also be relevant.
However. providing information on the corporation's general profile. The corporation will still need to retain at least five shareholders. The statements must also be accompanied by a statement by management that it takes responsibility for the information and representations in the financial statements.2% of the authorized capital stock for the corporation. In addition. the incorporators may sell their shares. At least 25% of the authorized capital stock must be subscribed at the time of incorporation. They must each own or subscribe to at least one share. corporations are required to file annual information sheets with the SEC. such as the names of directors and officers. the subscriptions must be paid in full. each of whom must hold at least one share. 12 . There are also charges for the other government agencies. while nominal filing fees will also be payable to the relevant local government unit. Public Disclosure of Information Requirements The SEC requires the submission of audited financial statements by stock corporations with paid-up capital of at least P50. and the treasurer's affidavit indicating that the necessary capital has been subscribed and paid up. by-laws. Filing fees with the SEC are 0. but the amounts involved are minimal. and at least 25% of that subscribed stock must be paid.5% of the par value of the shares. The original issue of shares of stock is also subject to a documentary stamp tax equivalent to 0.To establish a corporation. 000. between five to 15 individuals must act as incorporators. Once incorporation formalities are completed. when the capital stock consists of no-par value shares. as it must have at least five directors. Among the more important documents required to be filed with the SEC on applying for incorporation are the articles of incorporation. Formation Costs The cost of registering a corporation will depend on its capital structure. and a majority of them must be residents of the Philippines.
they are treated as any other partnership. they are referred to as "general professional partnerships. investments. rather than as corporations as is the case for other partnerships. In general.2% of the partnership capital. A partnership can also become a partner in another partnership. 000 in capital must register with the SEC. A partnership with more than P3. All information filed by corporations is available at the SEC for public inspection. Partnership A partnership has a separate legal personality from that of each of the partners. Partnerships are not commonly used as business entities. The corporation must also be permitted to enter into a partnership by its articles of incorporation. and dividends." and are taxed as conduit vehicles. treasury shares. other than by professional firms. A partnership is general when all the partners are personally liable for the contracts of the partnership once its assets are exhausted. retained earnings. A partnership is the legal entity commonly used by professionals seeking to exercise their common profession. A partnership will be either general or limited. Under the Civil Code. at least one partner has unlimited personal liability. a corporation may not be a partner in a partnership. 000 or 0. For tax purposes. As a matter of public policy. In a limited partnership. however. Registration follows the pattern outlined above for corporations. The filing fee for the articles of partnership is the greater of P1. However. the SEC may allow a corporation to become a partner in a partnership where the contract of partnership provides that it is to be managed jointly by all the partners and that the partners are to be collectively liable to partnership creditors. depending on the liability of the partners. any person who can enter into contractual relations may become a partner. such as accountants and lawyers. but the liability of other partners is limited to the amount of their capital contributions. 13 . either with natural persons or with other partnerships.stockholders and capital composition.
They are not usually subject to the regulations and requirements governing corporations and partnerships in the operation of their business. judicial or extra-judicial Corporate assets may be liquidated by the corporation itself through the board of directors and creditors. by receivership. Liquidation/Receivership Corporations may be dissolved for any of the following causes: • Expiration of the period provided for in the articles of incorporation Enactment of a special law requiring dissolution A judicial decree of forfeiture Failure to organize and commence business within two years from the date of incorporation Inoperative operations for five years after it has commenced • • • • • Voluntary dissolution. Sole Proprietorship Sole proprietors must register with the Bureau of Trade Regulations and Consumer Protection of the Department of Trade and Industry. registration of an alien individual will not be allowed. principally to protect the corporation's creditors.Partnerships are subject to the same record keeping and statutory audit requirements as corporations. Upon dissolution. impairment of capital is prohibited. Liquidation through the board of directors takes three years from corporate dissolution. the right of 14 . However. as well as the appropriate local government unit. Liquidation by receivership and trusteeship may extend beyond three years. Under the trust-fund doctrine. if the activity involves the practice of a profession included in the Foreign Investments Negative List (FINL). or by trusteeship.
The Court will then. As an alternative to dissolution. by contrast. or creditor(s) holding at least 25% of the company's total liabilities. Holders of stocks preferred as to assets must be paid before holders of common stock and holders of stocks preferred as to dividends. 15 . Thus court proceedings can be tedious and lengthy. in the absence of any contrary provision in the articles of incorporation and in the certificates of stock. most secured creditors would prefer to ensure timely recovery by enforcing their rights over the collateral through the foreclosure of mortgages. and do not guarantee recovery. The interests of the shareholders in the remaining assets are in proportion to their shareholdings. appoint a rehabilitation receiver. a financially distressed company. Because of these shortcomings. suspend the enforcement of claims against the company and forbid the company from making any payment of its outstanding obligations until the court can review the petition. Unsecured creditors. may appeal to the Regional Trial Court to place the company under corporate rehabilitation. tend to pursue informal "workout agreements" with the company. within five days.shareholders to the distribution of corporate assets is subordinated to the rights of the creditors.
foreign exchange surrender requirements were removed. and limitations on the quantitative restrictions on current account transactions deleted. the BSP does not set foreign exchange rate but instead allows the value of the peso to be determined by the supply and demand of the foreign exchange. and the Bangko Sentral ng Pilipinas (BSP) has the sole power and authority to issue the currency within the territory of the Philippines.Foreign Exchange Controls (ForEx) The Philippines’ official currency is Philippine Peso (Php). the country’s exchange rate policy supports a freely floating exchange rate system whereby the BSP leaves the determination of the exchange rate to market forces. The BSP issues notes and coins for circulation in the Philippines. Foreign Exchange Policy (Bangko Sentral ng Pilipinas) At present. Trading Foreign Exchange in the Market 16 . Reformatory measures to deregulate the Philippine foreign exchange system were implemented sometime in 1992. It also issues legal tender commemorative notes and coins. Consequently. access to foreign currency deposit facilities was liberalized. restrictions on the repatriation of foreign investments and/or profit remittances were lifted. Under a market-determined exchange rate framework.
The Philippines have different banks: there are universal and commercial banks (including international banks with officers in the country). manager’s check. It is also important to keep in mind that foreigners involved in Philippine banking are subject to government restrictions on foreign investment. or certified check depending on the request of the applicant. The streamlining of the 17 . foreign investors and business people need to research banking practices thoroughly before they begin. rural banks. Foreign Exchange Measures As a continuation of the foreign exchange liberalization program. or the remittances of funds from one bank to another. peso-dollar trading among Bankers Association of the Philippines (BAP) member-banks and between these banks and the BSP are done through the Philippine Dealing System (PDS). offering personal. In the Philippines. the Monetary Board (MB) approved on 23 April 2009 the streamlining of the documentation requirements and other reforms on the sale of the foreign exchange by foreign exchange dealers/money changers (FXDs/MCs). The third phase of foreign exchange regulatory reforms also includes all the provisions that are intended to improve the monitoring of foreign exchange flows and to formalize/clarify existing practices. in local or foreign currencies. Funds transfers. and corporate banking services through a wide variety of means. Meanwhile. Moreover. Many rural banks of the Philippines function on the basis of mobile phone technology. urban Philippine banks function similarly to major banks all over the world. business. Banking in the Philippines varies greatly between urban and rural environments. can be recognized through teletransmission. which include the liberalization/streamlining of the rules on foreign borrowings of private banks for relending purposes and the registration of inward foreign portfolio investments. the BSP approved on 15 January 2009 the third phase of reforms. and credit unions covering a wide range of banking needs. As such. draft. either locally or internationally.One’s county’s banking system plays a major role on foreign investment. Most of the BAP-member banks which participate in the peso-dollar trading use an electronic platform that allows nearly instantaneous transmission of price and trade confirmation.
BSP approval and registration are required in case of outward investments of residents in an amount in excess of US$6. if the loan is approved/registered with the BSP or the investment is register. Further. to the following: [a] Written notarized application and supporting documents from the foreign exchange purchaser if the amount exceeds US$25. the purchaser shall be required by the authorized agent bank to present proof of BSP approval and/or registration for each loan or investment. The law allows the deposit in foreign currency accounts of any foreign exchange received in the Philippines or abroad. The only restriction on foreign exchange transaction pertains to the payment of foreign loans and/or foreign investments. 18 . in case of sales of foreign exchange for payment of foreign obligations [foreign loan or foreign investment].Bangko Sentral ng Pilipinas [BSP] . It also allows the selling and acquisition of foreign exchange outside of the Philippine banking system. such may only be serviced with foreign exchange purchased through authorized agent banks. Registration of Investments with BSP Foreign Registration with the central monetary authority . however.00.00. Thus. in which case.000.000.000. Foreign borrowings by the public sector should also be approved by the BSP. per investor per year should the funds therefore be sourced from the banking system. authorized agent banks may sell foreign exchange to residents without need of prior BSP approval subject.of loans and investments accounts was lifted except in cases where funding will be made through the banking system of transactions like repatriation of capital and remittances of dividends and profits. In case of purchase of foreign exchange for any non-trade purposes. as well as foreign exchange requirement for future debt.documentation requirements will make it possible for residents that chose not to seek BSP approval and/or registration of the loans/investments to source their foreign exchange requirements without necessarily compromising compliance with anti-money laundering regulations.
the law does not prescribe any particular currency requirements. Second. as a general rule. there must be an inward remittance of FX (Foreign Exchange).00. there must be evidence of receipts of the funds/assets by the local investee/beneficiary/seller of the investment instruments such as Sworn Certification of such receipt or issuance of shares (for investment in stock corporations). a combined total amount exceeding US$25. whether an individual or corporate. without need to secure BSP approval. which should be sold for pesos through an AAB (Authorized Agent Banks) as evidenced by duly accomplished BSPprescribed Certificate of Inward Remittance of Foreign Exchange (for cash investments) or. This limitation on non-trade purchase cannot be circumvented by splitting the foreign exchange purchase into separate smaller amounts. The maintenance of foreign currency deposit accounts with local banks by residents and nonresidents alike is not subject to any further restrictions.[b] Simple written application if the amount does not exceed US$25. stockholder’s purchase invoice or subscription agreement (for PSE-listed shares). all foreign exchange proceeds from exports and invisibles should be procured through specified currencies numbering more than twenty .00 within a period of fifteen (15) banking days.000. Basic Requirements Registration of Investments for BSP Foreign First. Philippine-peso denominated bank accounts may be opened by nonresidents.000. In cases of outward payments. However. proof of transfer of the assets invested to the investee/beneficiary firm in the Philippines (for investment kind). accredited dealer’s 19 . Splitting of purchase of foreign exchange is presumed if the bank sells to any purchaser. Non-resident depositors may freely withdraw their accounts but non-resident bank accounts may only be credited with the proceeds from inward foreign exchange remittance or with income earned in the Philippines.
BSP registration of foreign investments is necessary only in cases where the foreign exchange required to service the repatriation of capital and remittance of profits. royalties. Certificate of Time Deposit (for peso time deposits with tenor of 90 days or longer).Confirmation of Sales (for government securities). it bears to emphasize that investments in government or listed securities or money market instruments or bank deposits need not be registered with the BSP or with the designated custodian bank of the investor concerned. loan payments or liquidation proceeds will be sourced from the banking system. loan payments and liquidation. and contract/certificate of investment (for money market instruments). dividends. royalties. Repatriation of Profit There are no existing restrictive regulations on the repatriation of funds related to BSP-registered foreign investments such as sales or divestment proceeds. Further. 20 . dividends. profits.
whereas. and taxpayer assistance. The taxpayers are required to have their books of account. The taxpayer’s book of accounts must be kept in its premise at all times and shall be kept in a native language. The BIR is headed by a Commissioner who has exclusive and original jurisdiction to interpret the provisions of the Code and other tax laws. which is under the Department of Finance (DOF). collection. a non-resident alien engaged on trade or business or a non-resident alien not-engaged in trade or business. Its main functions consist of assessment. a resident alien.TAXATION Overview of Philippine Taxation and Philippine Tax Regulation The National Internal Revenue Code (NIRC) of 1997 contains the laws governing taxation in the Philippines. promulgates its own local tax code applicable only in its jurisdiction. processing. TYPES OF TAXES Individual Income Tax Individual citizen residing in the Philippines is taxable on its income earned from all sources within and outside the Philippines. 21 . Individual taxpayer. or Spanish. is taxable on its income earned from all sources within the Philippines. local government units (LGUs). is subject to the graduated rates of 5% to 32%. either manual books of accounts. or computerized accounting system. loose leaf. English. The Bureau of Internal Revenue (BIR). except nonresident alien not engaged in trade or business in the Philippines. administers taxation. a non-resident citizen. be registered with the BIR. Aside from national taxes.
000 Over P70.500 + 25% of the excess over P140.500 + 15% of the excess over P30.000 but not over P 140. 22 .000 is allowed as a deduction to taxable income of individual taxpayer regardless if he/she is single or married. A nonresident alien engaged in trade or business shall be allowed personal exemption subject to reciprocity rule.000 P8.000 P2. or employed.000 Over P500.000 but not over P500.000 P22. only one spouse may claim additional exemptions for qualified dependent child.000 but not over P250. In case of married individuals.000 + 32% of the excess over P500.Personal exemption of Php 50. Rates of Income Tax on Citizens and Resident Aliens* (In PhP) Amount Subject to Tax Not over P10. Individual.500 + 20% of the excess over P 70.000 Applicable Rate 5% P500 + 10% of the excess over P10. shall be allowed a personal exemption of Php 25. provided that the total number of dependent for which additional exemptions may be claimed shall not exceed four (4) dependents.000 Over P140. whether single or married.000 for each qualified dependent child.000 P125.000 but not over P70.000 *Applicable to resident citizens and resident aliens whether engaged in trade or business.000 + 30% of the excess over P250.000 P50.000 Over P30.000 but not over P30.000 Over P10. practicing profession.000 Over P250.
they are taxed on the basis of graduated rates. prizes. Royalties on books. Interest from any peso bank deposit. 3. Resident Alien Individual. representative offices. 1. Otherwise. are subject to income tax at 15% of their gross income from such employers (e.g. 4. honoraria. petroleum service contractors and subcontractors. royalties.5%. Cash and/or property dividends actually or constructively received from a domestic corporation. and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements. 2. Foreign nationals who are employed by regional area or regional operating headquarters of multinational corporations. annuities. offshore banking units. insurance or mutual fund companies or on the share of an individual partner in the distributable net income after tax of a partnership (except general professional partnership) or on the share of individual in the net income after tax of an association. Tax Rates on Certain Passive Income Received by a Citizen. Interest income received by a resident individual taxpayer from a depository bank under Foreign Currency Deposit System is taxed at a rate of 7. a joint account or a joint venture or 23 . and allowances). salaries.• • Non-resident aliens are taxed at a rate of 25% of gross income from sources within the Philippines if their stay within the country does not exceed 180 days in a calendar year. as well as other literary works and musical compositions is taxed at a rate of 10%. and Non-Resident Alien Engaged in Trade or Business. and other winnings derived from sources within the Philippines shall be tax at a rate of 20%. Interest income from long term deposit which was preterminated by the holder before the fifth (5th) year shall be taxed at a rates herein to be deducted and withheld from the proceeds based on the length of time the instrument was held by the taxpayer: Holding Period Four (4) years to less than five (5) years Three (3) years to less than four (4) years Less than three (3) years Rate 5% 12% 20% 5. joint stock company.
a non-resident foreign corporation shall be taxed at a rate of 30% on its gross income received during the year from all sources within the Philippines. resident foreign corporation and other entities treated as a domestic corporation for tax purposes. Tax Rates for Certain Corporate Taxpayers Domestic and Resident Foreign 1. MCIT is imposed on a corporation beginning the fourth taxable year immediately following the year in which such corporation commenced its business operations. Proprietary Educational Institutions and Hospitals shall be taxed at a rate of ten percent 10% on its taxable income. and Capital gains in sale of stocks. Corporate Taxes A domestic corporation. 7. whereas. Minimum Corporate Income Tax (MCIT) on Domestic Corporations and Resident Foreign Corporations. When the minimum income tax is greater than the tax computed at the regular 30% corporate tax rate. 24 . International Carriers doing business in the Philippines is taxable at a rate of two and one-half percent (2 1/2%) on in Gross Philippine Billings. whichever is higher. A carry forward of excess minimum tax is allowed wherein any excess of the minimum corporate income tax over the regular income tax shall be carried forward and credited against the regular income tax rate of the three (3) immediately succeeding taxable years. consortium of which he is a member or a co-venturer shall be taxed at a rate of 10% except for non-resident alien engaged in trade or business which is taxed at a rate of 20%. the minimum corporate income tax (MCIT) of two percent (2%) of the gross income is levied at the end of the taxable year. Capital gains on sale of real property are taxed at 6% of gross selling price or fair market value. shall be taxed at a rate of 30% on its taxable income starting January 2009. 2.6.
6. Tax Rates on Passive Income of Domestic/Resident Corporation Passive Income Dividends received from domestic corporations Interest on any currency bank deposit and yield or other monetary benefit from deposit substitutes and from trust fund and similar arrangements Interest from foreign currency deposits with foreign currency deposit units (FCDUs) Capital gains from the sale of shares of stock not traded in the stock exchange is subject to final tax rates Capital Gains Realized from Sale.3. 5. Regional or Area Headquarter shall not be subject to income tax. Exchange or Disposition of Lands and / or Buildings. Not over P100. 4. Regional or Area Operating Headquarters shall be taxed at a rate of ten percent (10%) of their taxable income. Tax rates Not subject to tax 20% of final tax 7 1/2% of final tax a. Offshore Banking Units shall be subject to final tax at a rate of ten percent (10%). Amount in excess of P100.000 5% b.000 10% 6% 25 . An enterprise registered with Philippine Economic Zone Authority and registered under Bases Development Act shall be taxed at a rate of five percent (5%) on its gross income for its registered activities.
and other equipment Rents of charter fees paid to non-resident corporate owners of vessels chartered by Philippine Nationals Fees paid to non-resident cinematographic film owners or lessors 7 1/2% on gross rentals or fees 4 1/2% on gross rentals or fees 25% on gross income 26 .000 10% Rents and other fees paid to non resident corporate lessors of aircraft.000 5% b. machinery.Preferential Tax Rates for Non-Resident Corporations Tax Rates Interest on foreign loans Dividends received form domestic corporations Income derived form any foreign currency transaction with FCDUs and OBUs Capital gains from the sale of shares of stock not traded in the stock exchange is subject to final tax rates 20% 30% Exempt a. Amount in excess of P100. Not over P100.
Documentary Stamp Tax Documentary Stamp Tax is a tax on documents. accepted. and papers and upon acceptance. business or exercise of a profession. signing. assignment. or transferring the same whether the document is made. management. instruments. issued. A reasonable allowance for salaries. wages. issuing. Tax Incentives Deductibility of Expenses There shall be allowed as deduction from gross income all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on or which are directly attributable to. Branch Profit Remittance Tax A branch office of a Foreign Company shall be subject to fifteen percent (15%) tax on any profit remitted by a branch to its head office which shall be based on the total profits applied or earmarked for remittance without any deduction for the tax component. signed. loan agreements. accepting. including: a. and transfer of the obligation. or transferred the obligation or right arises from the Philippine sources or the property is situated in the Philippines.Improperly Accumulated Earnings Tax A tax of ten percent (10%) shall be imposed to on the improperly accumulated earnings of a corporation. right and property and shall be imposed to the person making. and other forms of compensation for personal services actually 27 . operation and/or conduct of the trade. the development. sales. banks and other non-bank financial intermediaries and insurance companies when the corporations profit or earnings exceeds its paid-up capital accumulates beyond the reasonable needs of the business. except in the case of publicly held corporations.
Estate and donor's taxes. amusement and recreation expenses during the taxable year. trade or business shall be allowed as deduction from gross income.b. and Taxes assessed against local benefits of a kind tending to increase the value of the property assessed. shall be allowed as deduction. e. d. that are directly connected to the development. Interest. A reasonable allowance for entertainment. except: a. rendered. f. of property to which the taxpayer has not taken or is not taking title or in which he has no equity other than that of a lessee. management and operation of the trade. while away from home in the pursuit of trade. business or exercise of a profession not to exceed such ceilings. b. however. A reasonable allowance for travel expenses. business or profession. The amount of interest paid or incurred within a taxable year on indebtedness in connection with the taxpayer's profession. Credit against Tax for Taxes of Foreign Countries. here and abroad. including fringe benefit furnished or granted by the employer to the employee: wherein the final tax has been paid. Income taxes imposed by authority of any foreign country. c. c. the tax imposed shall be credited with: 28 . user or possessor. d. or that are directly related to or in furtherance of the conduct of his or its trade. for purposes of the trade. Taxes. trade or business. If the taxpayer signifies in his return his desire to have the benefits. A reasonable allowance for rentals and/or other payments which are required as a condition for the continued use or possession. business or profession. business or profession of the taxpayer. the taxpayer's otherwise allowable deduction for interest expense shall be reduced by an amount equal to the thirty three percentages of the interest income subjected to final tax. The income tax provided for under the Law. Taxes paid or incurred within the taxable year in connection with the taxpayer's profession.
b. or other casualties. Of property connected with the trade. which the taxpayer's taxable income from sources without the Philippines taxable bears to his entire taxable income for the same taxable year. Losses. b. or from robbery. The credits provided shall be allowed only if the taxpayer establishes the following: a. g. the tax paid or incurred to which is claimed as a credit. The amount of income derived from each country. Proof of Credits. b. No loss shall be allowed as a deduction under if at the time of the filing of the return. c.a. if the loss arises from fires. The amount of the credit in respect to the tax paid or incurred to any country shall not exceed the same proportion of the tax against which such credit is taken. Partnerships and Estates. Citizen and Domestic Corporation. Losses actually sustained during the taxable year and not compensated for by insurance or other forms of indemnity shall be allowed as deductions: a. which the taxpayer's taxable income from sources within such country bears to his entire taxable income for the same taxable year. The amount of the credit taken shall be subject to each of the following limitations: a. 29 . and All other information necessary for the verification and computation of such credits. profession or business. The total amount of income derived from sources without the Philippines. c. shipwreck. b. Limitations on Credit. theft or embezzlement. If incurred in trade. and The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken. such loss has been claimed as a deduction for estate tax purposes in the estate tax return. business or profession. storms.
the taxpayer has acquired (by purchase or by exchange upon which the entire amount of gain or loss was recognized by law). or has entered into a contact or option so to acquire. a.Net Operating Loss Carry-Over. Capital Losses. substantially identical stock or securities. The net operating loss of the business or enterprise for any taxable year immediately preceding the current taxable year. then the particular shares of stock or securities. If the amount of stock or securities acquired (or covered by the contract or option to acquire) is less than the amount of stock or securities sold or otherwise disposed of. b. The excess of the losses from sale or exchange of capital assets over the losses from such sales or exchange. a. Losses from Wash Sales of Stock or Securities. In the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that within a period beginning thirty (30) days before the date of such sale or disposition and ending thirty (30) days after such date. then no deduction for the loss shall be allowed. which had not been previously offset as deduction from gross income shall be carried over as a deduction from gross income for the next three (3) consecutive taxable years immediately following the year of such loss. unless the claim is made by a dealer in stock or securities and with respect to a transaction made in the ordinary course of the business of such dealer. the loss form the sale or other disposition of which is not deductible. b. A net operating loss carry-over shall be allowed only if there has been no substantial change in the ownership of the business or enterprise. Loss from sales or Exchanges of capital assets shall be allowed only to the extent of the gains from such sales or exchange. shall be determined under rules and regulations prescribed by the Secretary of 30 . Securities becoming worthless.
or if such equipment or facility is restored into service. Abandonment Losses.Finance. c.Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions. all accumulated exploration and development expenditures pertaining thereto shall be allowed as a deduction: the accumulated expenditures incurred in that area prior to January 1. If the amount of stock or securities acquired (or covered by the contract or option to acquire which) resulted in the non-deductibility of the loss. In the event a contract area where petroleum operations are undertaken is partially or wholly abandoned. Bad Debts. upon recommendation of the Commissioner. shall be allowed as a deduction in the year such well. as the case may be. Debts due to the taxpayer actually ascertained to be worthless and charged off within the taxable year except those not connected with profession. Wagering Losses. 31 . a. upon recommendation of the Commissioner. as well as the undepreciated costs of equipment directly used therein . b. trade or business and those sustained in a transaction entered into between related parties. the unamortized costs thereof. h. shall be determined under rules and regulations prescribed by the Secretary of Finance. equipment or facility is abandoned by the contractor: if such abandoned well is reentered and production is resumed. . 1979 shall be allowed as a deduction only from any income derived from the same contract area. the said costs shall be included as part of gross income in the year of resumption or restoration and shall be amortized or depreciated. In case a producing well is subsequently abandoned.
youth and sports development. charitable. or for the use of the Government of the Philippines or any of its agencies or any political subdivision thereof exclusively for public purposes.i. a. The straight-line method. The amount of any charitable contribution of property other than money shall be based on the acquisition cost of said property. d. b. c. 32 . Declining-balance method The sum-of-the-years-digit method. or to accredited domestic corporation or associations organized and operated exclusively for religious. Depreciation. and five percent (5 %) in the case of a corporation. scientific. or to social welfare institutions. Contributions or gifts actually paid or made within the taxable year to. or to non-government organizations. Certain Methods use in computing reasonable allowance of depreciation. no part of the net income of which inures to the benefit of any private stockholder or individual in an amount not in excess of ten percent (10%) in the case of an individual. business or profession. in accordance with rules and regulations promulgated by the Secretary of finance. A taxpayer shall be allowed depreciation as a deduction for reasonable allowance for the exhaustion. Contributions or gifts shall be allowable as deductions only if verified under the rules and regulations prescribed by the Secretary of Finance. of the taxpayer's taxable income derived from trade. upon recommendation of the Commissioner. Charitable and Other Contributions. Any other method which may be prescribed by the Secretary of Finance upon recommendation of the Commissioner. upon recommendation of the Commissioner. Proof of Deductions. Valuation. wear and tear (including reasonable allowance for obsolescence) of property used in the trade or business. cultural or educational purposes or for the rehabilitation of veterans. j.
Research and Development – A taxpayer may treat research or development expenditures which are paid or incurred by him during the taxable year in connection with his trade. The expenditures so treated shall be allowed as deduction during the taxable year when paid or incurred. or for the improvement of property to be used in connection with research and development of a character which is subject to depreciation and depletion. the taxpayer may opt to use Optional Standard Deduction at a rate of forty percent (40%). An employer establishing or maintaining a pension trust to provide for the payment of reasonable pensions to his employees shall be allowed as a deduction (in addition to the contributions to such trust during the taxable year to cover the pension liability accruing during the year. b. k. Any expenditure for the acquisition or improvement of land. Optional Standard Deduction (OSD). business or profession as ordinary and necessary expenses which are not chargeable to capital account.l. but only if such amount (1) has not been allowed as a deduction. extent. For corporate taxpayer. and (2) is apportioned in equal parts over a period of ten (10) consecutive years beginning with the year in which the transfer or payment is made. OSD shall be allowed to: 33 . Pension Trusts. allowed as a deduction a reasonable amount transferred or paid into such trust during the taxable year in excess of such contributions. For individual taxpayers. location. . the basis in computing the OSD shall be the gross revenue or receipts for the taxable year. j.In lieu of the expenses allowed as deduction in computing taxable for individual and corporate taxpayers. and Any expenditure paid or incurred for the purpose of ascertaining the existence. or quality of any deposit of ore or other mineral. It shall not apply to: a. including oil or gas. the optional standard deduction is based on the gross income.
3. convention. with foreign tourists as primary clientele 34 . These ECOZONES or SEZ are established in selected areas with highly developed or which have the potential to be developed into agroindustrial. Activities Eligible for PEZA Registration and Incentives 1. An ECOZONE may contain any or all of the following: Industrial Estates (IEs). the government created ECOZONES or Special Economic Zones (SEZ). Corporate Taxpayer 1.a. Entities registered with Economic Zones shall be entitled to certain benefits. banking. and Tourist/Recreational Centers. of which 70% of total revenues is derived from clients abroad 3. 4. Domestic Corporation Resident Foreign Corporation Special Zones and Areas To attract foreign investments in the Philippines. Export Processing Zones (EPZs).IT service activities. Export Manufacturing . 2. Free Trade Zones. assembly or processing activity resulting in the exportation of at least 70% of production 2. 2. investment and financial centers. Individual Taxpayer 1. and cultural facilities and their special interest attraction activities / establishments.manufacturing. Industrial tourist/recreational. commercial. Tourism – establishment and operation within PEZA Tourism Special Economic Zones of sports and recreation centers. accommodation. Resident Citizen Non-resident Citizen Resident Alien Taxable Estate or Trust b. IT (Information Technology) Service Export .
paved road network. b. inclusive of the required infrastructure. Economic Zone Development and Operation: a. Agro-industrial Export Manufacturing – processing and or manufacturing of agricultural products resulting in the exportation of its production 6. facilities and utilities such as light and power system.4. semi-finished goods for resale to . pollution control devices. IT Park Development / Operation – development. administration building. Agro-industrial Bio-Fuel Manufacturing – specialized manufacturing of agricultural crops and eventual commercial processing which shall result in the production of clean energy such as bio-fuels and the like 7. Manufacturing Economic Zone Development / Operation .development. sewerage and drainage system. Medical Tourism – medical health services.or for packing / covering (including marking / labeling) cutting or altering to customers’ specification. operation and maintenance of an area as a complex 35 . water supply and distribution system.(a) operation of a warehouse facility for the storage. safekeeping of goods for PEZA-registered Economic Zone Export Manufacturing Enterprises. Logistics and Warehousing Services . deposit. and or (b) importation or local sourcing of raw materials. or for consignment to PEZA-registered Export Manufacturing Enterprises and eventual export. endorsed by the Department of Health. mounting and/ or packaging into kits or marketable lots for subsequent sale to . or for direct export.PEZA-registered Export Manufacturing Enterprises for use in their export manufacturing activities. with foreign as primary clientele 5. operation and maintenance of an economic zone for export manufacturing enterprises. 8. communication facilities.
planned and designed in accordance with the accreditation standards of the Philippine Retirement Authority. with prescribed carrying capacities of tourist facilities and activities. Retirement Economic Zone Development /Operation – development. Tourism Economic Zone Development / Operation – development. 36 . sports and recreation centers. or easy access to such amenities. Operation. and provided with roads. and provided with the required infrastructure facilities and utilities. operation and maintenance of a Medical Tourism Park or Medical Tourism Center which are planned and designed in accordance with the standards of the Department of Health and the Department of Tourism to have support facilities and services required for health and wellness. c. e. power distribution facilities. commercial establishments and other special interest and attraction activities / establishments. operation and maintenance of an integrated resort complex. and maintenance of a Retirement Economic Zone Park or Center. Medical Tourism Economic Zone Development / Operation – development. water supply facilities. accommodations. f. Agro-Industrial Economic Zone Development / Operation – development operation and maintenance of an agro-industrial economic zone planned and designed to have support facilities and services required for processing and agro-based manufacturing facilities. d. food and beverage outlets. as well as amenities required by professionals and workers involved in IT Enterprise. drainage and sewage systems and other necessary infrastructure and public utilities. and provided with the required infrastructure facilities and utilities. convention and cultural facilities. such as but not limited to.capable of providing infrastructures and other support facilities required by IT Enterprises. and provided with required infrastructure facilities and utilities.
with foreign retirees as primary clientele.9. and located in a Retirement Economic Zone. Facilities for IT Enterprises – construction as owner/operator of buildings and other facilities inside IT Parks which are leased to PEZA-registered IT Enterprises. c. Economic Zone Export Manufacturing Enterprise • Income Tax Holiday (ITH) – 100% exemption corporate income tax o 4 years ITH for Non-pioneer Project o 6 years ITH for Pioneer Project from ITH Extension years may be granted if the project complies with the following criteria. The average net foreign exchange earnings of the project for the first three (3) years of operations is at least US$500. provided that the total ITH entitlement period shall not exceed eight (8) years: a. 37 . Retirement Facilities – establishment. Facilities Providers: a. water supply and distribution systems inside Special Economic Zones. operation and maintenance of light and power systems. b.00 and. Utilities – establishment. Fiscal Incentives to PEZA-Registered Economic Zone Enterprises 1. 10.000. (one criterion is equivalent to one ITH extension year). duly endorsed by the Philippine Retirement Authority. operation and management of retirement facilities and other related activities. Facilities for Manufacturing Enterprises construction as owner /operator of factory buildings inside a PEZA Special Economic Zone for lease to PEZA-registered Export Manufacturing Enterprises.
but machineries installed and operated in the economic zone for manufacturing. licenses or taxes. fees.5% Special Tax on Gross Income and exemption from all national and local taxes Tax and duty free importation of raw materials.b. Exemption from wharfage dues and export tax. o 3 years ITH for Expansion project (ITH applies to incremental sales) • • • • • Upon expiry of the Income Tax Holiday . impost or fees VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements Exemption from payment of any and all local government imposts. while under Income Tax Holiday.000. However.00 to 1 for the year immediately preceding the ITH extension year being applied for. c. Information Technology Enterprise: • Income Tax Holiday (ITH) – 100% exemption corporate income tax: o 4 years ITH for Non-pioneer project o 6 years ITH for Pioneer project from ITH Extension year may be granted if Project complies with the following criteria (one criterion is equivalent to one ITH extension 38 . processing or for industrial purposes shall be exempt from real estate taxes for the first three (3) years of operation of such machineries. Production equipment not attached to real estate shall be exempt from real property taxes Exemption from expanded withholding tax • 2. The capital equipment to labor ratio of the project does not exceed US$10. machineries and spare parts. The average cost of indigenous raw materials used in the manufacture of the registered product is at least fifty per cent (50%) of the total cost of raw materials for the preceding years prior to the ITH extension year. no exemption from real estate tax. capital equipment.
including land-based telecommunications.000. but machineries installed and operated in the economic zone for manufacturing. • • • • 3. water bills. no exemption from real estate tax. > The capital equipment to labor ratio of the project does not exceed US$10. Tax and duty free importation of equipment and parts.00 and.00 to 1 for the year immediately preceding the ITH extension year being applied for. VAT zero-rating of local purchases of goods and services. electrical power. fees. processing or for industrial purposes shall not be subject to payment of real estate taxes for the first three (3) years of operation of such machineries. licenses or taxes. Production equipment not attached to the real estate shall be exempt from real property taxes. o 3 years ITH for Expansion project (ITH applies to incremental sales) • Upon expiry of the Income Tax Holiday . while under Income Tax Holiday.000.year).5% Special Tax on Gross Income and exemption from all national and local taxes. and lease on the building. Exemption from wharfage dues on import shipments of equipment. provided that the total ITH entitlement period shall not exceed eight (8) years: > The average net foreign exchange earnings of the project for the first three (3) years of operations is at least US$500. Exemption from expanded withholding tax. subject to compliance with Bureau of Internal Revenues and PEZA requirements Exemption from payment of any and all local government imposts. However. Tourism Economic Zone Locator Enterprise • Four (4) years of Income Tax Holiday ITH (as qualified under the National Investment Priorities Plan) 39 .
electric power. electric power. farm implements including spare parts and supplies of the equipment and machineries Exemption from export taxes. Medical Tourism Enterprise • • • Four (4) years of Income Tax Holiday on income solely from servicing foreign patients Upon expiry of the Income Tax Holiday .• • • • Upon expiry of the Income Tax Holiday . wharfage dues. including land-based telecommunications.5% Special Tax on Gross Income and exemption from all national and local taxes Tax and duty-free importation of capital equipment VAT Zero Rating on local purchases of goods and services. breeding stocks. and water bills Exemption from expanded withholding tax • • 5. and water bills • • 40 . Agro-Industrial Economic Zone Enterprise • • • Four (4) years of Income Tax Holiday Upon expiry of the Income Tax Holiday . required for the technical viability and operation of the registered activity/ies of the enterprise VAT Zero Rating on local purchases of goods and services. including land-based telecommunications. impost and fees VAT Zero Rating on local purchases of goods and services. including land-based telecommunications. Tax and duty free importation of production equipment and machineries. electric power. and water bills Exemption from expanded withholding tax 4.5% Special tax on Gross Income upon in lieu of all national and local taxes Tax and duty-free importation of medical equipment. including spare parts and equipment supplies.5% Special tax on Gross Income and exemption from all national and local taxes.
Manufacturing Economic Zone Developer / Operator • • • Special 5% Tax on Gross Income and exemption from all national and local taxes. except real property tax on land owned by the IT Park Developer VAT Zero rating of local purchases Exemption from expanded withholding tax c. VAT Zero rating of local purchases Exemption from expanded withholding tax b.• Exemption from payment of local government fees such as Mayor’s Permit. packing. Health Certificate Fee. Economic Zone Logistics Services Enterprise • Exemption from duties and taxes on raw materials. permit on the Exercise of profession/Occupation/Calling. except real property tax on land owned by the Economic Zone Developer. • 7. and Garbage Fee 6. visual inspection. cutting. Economic Zone Developer / Operator a. Tourism Economic Zone Developer / Operator • • Special 5% Tax on Gross Income and exemption from all national and local taxes. altering for subsequent sale to PEZA-registered Export Manufacturing Enterprises. storage and shipping to be sourced locally. VAT Zero Rating on raw materials for checking.or for packing/covering. Sanitary Inspection Fee. for direct export or for consignment to PEZA-registered export enterprise. except real property tax on land owned by the Tourism Economic Zone Developer VAT Zero rating of local purchases 41 . Business Permit. semifinished goods for re-sale to . IT Park Developer / Operator • • • Special 5% Tax on Gross Income and exemption from all national and local taxes.
except real property tax on land owned by the Agro-Industrial Economic Zone Developer VAT Zero rating of local purchases Exemption from expanded withholding tax f. except real property tax on land owned by the Retirement Economic Zone Developer VAT Zero rating of local purchases Exemption from expanded withholding tax 8.• Exemption from expanded withholding tax d. except real property tax on land owned by developers VAT Zero rating of local purchases Exemption from expanded withholding tax 42 . Agro-Industrial Economic Zone Developer / Operator • • • Special 5% Tax on Gross Income and exemption from all national and local taxes. except real property tax on land owned by Medical Tourism Zone Developer VAT Zero rating of local purchases Exemption from expanded withholding tax e. Medical Tourism Economic Zone Developer / Operator • • • Special 5% Tax on Gross Income and exemption from all national and local taxes. Facilities Enterprises a. Retirement Economic Zone Developer / Operator • • • Special 5% Tax on Gross Income and exemption from all national and local taxes. Economic Zone Facilities Enterprise • • • Special 5% Tax on Gross Income and exemption from all national and local taxes.
Retirement Economic Zone Facilities Enterprise • • • Special 5% Tax on Gross Income and exemption from all national and local taxes. wages and other taxable benefits received as remuneration for the services rendered by employees for his employer under employeremployee relationship. 43 . The employer is required to deduct the applicable taxes on the income received by the employee and remit the same with the BIR. except real property tax on land owned by developers VAT Zero rating of local purchases Exemption from expanded withholding tax c. VAT Zero rating of local purchases Exemption from expanded withholding tax WITHHOLDING TAXES Compensation Withholding tax on compensation is imposed on the salaries.b. except real property tax on land owned by developers. Economic Zone Utilities Enterprise • • • Special 5% Tax on Gross Income and exemption from all national and local taxes. except real property tax on land owned by developers. VAT Zero rating of local purchases Exemption from expanded withholding tax 9. IT Park Facilities Enterprise • • • Special 5% Tax on Gross Income and exemption from all national and local taxes.
night shift differential pay and hazard pay received by MWE is also exempted from income tax. and iv. ii. are not exempted from income tax on their entire income earned during the taxable year.Employees receiving purely compensation income of Minimum Wage Earners (MWE) who work in private sector and being paid the Statutory Minimum Wage (SMW) as fixed by the Regional Wage Tripartite and Productivity Board (RWTPB) and National Wages and Productivity Commission (NWPC) applicable to the place where they are assigned shall be exempted from income tax. The plan must be reasonable. MWE receiving other income. except income subject to final tax. Retirement benefits received under Republic Act under 7641 and those received by officials and employees of private firm. The following income payments are exempted requirement of withholding tax on compensation: 1. The benefit plan must be approved by the Bureau. Any amount received by an official or employee or by his heir from the employer due to death. under a reasonable benefit plan maintained by the employer which meet the following requirements: i. sickness or other physical disability of for any cause beyond the control of the said official or b. from the Remuneration received as an incident of employment. The retiring official or employee must have been in the service of the same employer for at least ten (10) years and is not less than fifty (50) years of age at the time of retirement. The retiring official or employee should not have previously availed of the privilege under the retirement benefit plan of the same or another employer. such as income from conduct of trade and business. overtime pay. practice or profession. Holiday pay. 44 . whether individual or corporate. as follows: a. iii.
Compensation for injuries or sickness 10. 3. 2. 7. e. f. 6. 4. d. or cessation of business. redundancy. Remuneration paid for agriculture Remuneration for domestic services Remuneration for casual labor not in the course of an employer’s trade or business Compensation for services received by a citizen or resident of the Philippines for a foreign government or an international organization Damages Life Insurance Amount received by the insured as a return of premium 8. Payments of benefits made under the social Security Systems Act of 1954 as amended. SSS. contentment or efficiency of the his employees that will not be considered as compensation subject to withholding tax both managerial and rank and file employees.c. such as follows: 45 . 9. Social security benefits. such as retrenchment. employee. goodwill. 5. Medicare and Other contributions De Minimis Benefits “De minimis” benefits is a privilege of relatively of small value that are offered or furnished by the employer’s to its employees merely as means of promoting the health. Benefits received from GSIS Act of 1937 as amended.000 12. Income exempt under treaty 11. pensions and other similar benefits received by resident or non-resident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions private or public. retirement gratuities. GSIS. and the retirement gratuity received by government officials and employees. Payments of benefits due or to become due to any person residing in the Philippines under the law of United States administered by the United States Veterans Administrations. Thirteenth (13th) month pay and other benefits not exceeding Php 30.
Uniform and clothing allowance not exceeding P 4.00 received by the employee under an established plan which does not discriminate in favor of highly paid employees. 8.500. 6. rice per month amounting to not more than P 1. Gifts given during Christmas and major anniversary celebrations not exceeding P 5. Actual yearly medical benefits not exceeding P 10. Any excess of the de minimis benefits over their respective ceilings shall be considered part of the other benefits and the employee receiving it will be subject to tax only on the excess amount over P 30. 3. with annual monetary value not exceeding P 10.000.000. Rice subsidy of P 1.00 per annum.00 per annum. 4. 9. The amount of “de minimis” benefits within the limit shall not be considered in determining the P 30. 7. or similar items given to employees under special circumstances. fruits. and 10.500. books.00. Laundry allowance not exceeding P 300.000. 5.1.000.00 per month. Flower.00 or one (1) sack of 50kg.00 ceiling of other benefits excluded from gross income. Medical cash allowance to dependents of employees not exceeding P 750. Failure to deduct and remit the said tax will result to disallowance of the said expenses in 46 .00 per employee per semester or P 125.000. Daily meal allowance for overtime work not exceeding twenty five percent (25%) of his basic minimum wage.00 EXPANDED WITHHOLDING TAX There are certain types of income payment made by taxpayer that are subject to expanded withholding tax.00 per employee per annum.00 per month. Employee achievement awards which must be in form of tangible personal property other than cash or gift certificate.000. Monetized unused vacation leave credits of employees not exceeding ten (10) days during the year and the monetized value of leave credits paid to government officials and employees. 2.
real estate. fees of director who are not employee of the company Rentals Prime contractors/sub-contractors Gross commission or service fees of customs. CPAs.000 corporation Supplier 1% Supplier 2% Income payment made by top 5. insurance. whichever comes first.000 5% 2% 10% goods of services of goods of services 47 .000 10% If the income 15% current year’s gross exceed 720. etc) except payment to General Professional Partnership. stocks. The taxpayer is required to withhold these taxes and remit the same with the BIR at the time it was paid or becomes payable. management and technical consultants.computing the taxable income of the taxpayers. business and bookkeeping agent and agencies. engineer.000 individual taxpayer Supplier 1% Supplier 2% of Applicable Tax Rates If the current year’s gross income does not exceed 720. Types of Income payment and its applicable tax rates: Income Payment Professional and talents fees paid to juridical person (lawyers. immigration and commercial brokers and fees of agents of professional entertainers Income payment made by to 20.
dues and other expense borne by the employer for the employee in social and athletic clubs or other similar organizations Expense for foreign travel Holiday and vacation expenses Education assistance to the employee of his dependents e.Commission. including provincial. city or municipal government. service. in addition to basic salaries to managerial or supervisory employees and not rank and file employee such as but not limited to the following. rebates. c. medical/technical and sales representative and marketing agents and sub-agents of multi-level marketing companies 10% Exemption from Expanded Withholding Tax a. Housing Expense Account Vehicle of any kind Household Personnel Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted Membership fees. 48 . FRINGE BENEFIT TAX Fringe Benefit or any goods. a. discounts and other similar considerations paid and granted to independent and exclusive distributors. i. b. Persons enjoying tax exemption from payment of income taxes pursuant to the provision of any law. d. or other benefit furnished or granted by the employer in cash or in kind. g. h. b. f. National government and its instrumentalities.
the monetary value of the fringe benefit shall be divided by seventy five percent (75%). properties. Life or health insurance and other non-life insurance premium or similar amounts in excess of what the law allows The Fringe Benefit Tax shall be thirty two percent (32%) of the gross-up monetary of the benefits received. transferee or lessee of the goods. For employees in special economic zones. The said tax base shall be computed by dividing the monetary value of the fringe benefit by (85%). Twelve percent (12%) 49 . In computing for the grossed-up monetary value. The gross-up monetary value shall be computed by dividing the monetary value of the fringe benefit by sixty eight percent (68%). The VAT is an indirect tax and the amount of tax may be shifted or passed on to the buyer. or by an alien employed by offshore banking unit of a foreign bank established in the Philippines. BUSINESS TAX VALUE ADDED TAX Value Added Tax (VAT). In the fringe benefit is received by an alien individual employed by regional or area headquarters of a multinational company or by regional operating headquarters of a multinational company. it shall be covered by the normal rate of fringe benefit tax or the special rate of twenty five percent (25%) or fifteen percent (15%). a fringe benefit tax of twenty five percent (25%) shall be imposed on the grossed-up monetary value of the fringe benefit. or services. If the fringe benefit is received by a non-resident alien individual who is not engaged in trade or business in the Philippines.j. or by an alien individual employed by a service contractor or by a foreign service subcontractor engaged in petroleum operations in the Philippines and any of their Filipino individual employees who are employed and occupying the same position shall be subject to fifteen percent (15%) of the gross-up monetary value.
and 6. but shall not result in any output tax.000. otherwise known a s Omnibus Investments Code of 1987. 5. The sale of goods. The sale and actual shipment of goods from the Philippines to a foreign country paid for in foreign currency or its equivalent in goods or services. A taxpayer shall be required to be registered as VAT taxpayer if its sale or receipts with in the year or previous year exceed P 1. However.00 or a taxpayer opted to be a VAT taxpayer even if its sales or receipt did not exceed P 1. Zero-Rated Sale of Goods. 3. Sale of Goods subject to zero percent (0%) rate: a. 226. and under special laws. Transactions considered export sales under Executive Order No. The sale of raw material or packaging materials to an export-oriented enterprise whose export sales exceeds seventy percent (70%) of total annual production. The sale of raw material or packaging material to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing. Export sales 1.00. and accounted for with the rules and regulations of Bangko Sentral ng Pilipinas (BSP). properties or services.000. Sale of gold to BSP. shall be available as tax credit or refund which should be applied within two (2) years after the close of the taxable quarter when such sales were made.of the gross selling price or gross value in money is usually levied to the goods or properties sold. the input tax on purchase of goods. related to such zero-rated sale.500. supplies. properties or services is a taxable transaction for VAT purposes.500. packing or repacking in the Philippines of the said buyer’s goods. bartered or exchanged. 4. processing. equipment and fuel to persons engaged in international 50 . 2.
which are subsequently exported and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. VAT Exempt Transactions are sale of goods of properties and or services and use or lease of properties that is not subject to VAT (output tax) and the seller is not allowed any credit of VAT (input tax) on purchases. c. b. converting. d. Sales to a person or entities deemed tax-exempt under Special Law or International Agreement. Services rendered to a person or entities whose exemption under special laws or international agreement to which the Philippines is a signatory. manufacturing or repacking goods for other person doing business outside the Philippines. manufacturing or repacking rendered to a person engaged in business conducted outside the Philippines or to a non-resident person not engaged in trade or business who is outside the Philippines when the services are performed and paid in foreign currency and accounted for in accordance with the rules and regulations of BSP. assembled or manufactured in the Philippines for delivery to a resident in the Philippines paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. Sale of services subject to zero percent (0%) rate: a. Services rendered to a persons engaged in international shipping or air transport operation. Services performed by subcontractors and/or contractors in processing. Foreign Currency Denominated Sale to a nonresident of goods. or manufacturing goods for an enterprise whose export sales exceeds seventy percent (70%) of the total annual production. f. Sale of power or fuel generated through renewable sources of energy. Processing. e. Services other than processing. g. Transport of passenger and cargo by domestic air or sea carriers from the Philippines to a foreign country. international air transport b. And the person making the exempt sale of goods 51 .shipping or operations. including lease or property used thereof. c.
Sale or importation of agricultural and marine food products in their original state. Commission on Higher Education (CHED) and Technical Education and Skills Development Authority (TESDA) and those rendered by government educational institutions. j. Educational services rendered by private educational institutions duly accredited by the Department of Education (DepED). Importation of personal and household effects belonging to residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines provided that it is exempt under Tariff and Customs Code of the Philippines. aquarium fish. b. or yielding or producing foods for human consumption and breeding stock and genetic material. including ingredients. fish prawn. barter or exchange. livestock and poultry feeds. and other animals considered as pets. whether locally produces or imported used in manufacture of finished feeds except specialty feed used for race horses.or services shall not bill any output tax to his customers because the said transactions is not subject to VAT. g. wearing apparel. h. c. Importation of professional instruments and implements. for their own use and not for sale. livestock and poultry of a kind generally used as. Services by agricultural contract growers and milling for others of palay into rice. Sale or importation of fertilizers. e. domestic animals. f. hospitals and veterinary services except those rendered by professionals. fighting cocks. corn into grits and sugar cane into raw sugar. Services rendered by individuals pursuant to an employeremployee relationship. d. Sales of goods or services that are exempted from VAT are as follows: a. Services subject to percentage tax under the Code. and personal household effects belonging to person coming to settle in the Philippines. seeds seedlings and fingerlings. dental. 52 . Medical. Services rendered by regional or area headquarters established in the Philippines by multinational companies i.
regardless of the amount of aggregate rental received by the lessor during the year. and The following sales of real property are exempt from VAT: 2. 4. as well as sale of their produce. m. Sales by non-agricultural. Sale of real property utilized for low-cost housing.00). review or bulletin which appears at regular intervals with fixed prices for subscription and sale and which is not 53 . subsidiaries or branches in the Asia Pacific Region and do not earn or derive income from the Philippines.k. Sale of residential lot valued at One million five hundred thousand pesos and below or house and lot and other residential dwellings valued at two million five hundred thousand pesos and below. Sale of real property utilized for socialized housing. Transactions which are exempt under international agreement to which the Philippines is a signatory or under special laws. n. Sale. p. Lease of residential units with monthly rental per unit not exceeding ten thousand pesos (P 10. 1. Gross receipts from lending activities by credit or multipurpose cooperatives duly registered and in good standing with the CDA. 6. printing or publication of books and any newspaper. including spare parts thereof.000. to be used directly and exclusively in the production and/or processing of their produce. l. importation. non-electric and non-credit cooperatives duly registered with and in good standing with the CDA. Export sales by persons who are not VAT-registered. Sale of real property not primarily held for sale to customer or held for lease in ordinary course of trade or business. communication and coordinating centers for their affiliates. 3. which acts as supervisory. their importation of direct farm inputs. whether in its original state or processed form to nonmember. Sales by agricultural cooperatives duly registered and in good standing with the Cooperative Development Authority (CDA) to their members. 5. o. machineries and equipment. magazine.
barter exchange of services. the name. Computation of Output Tax 54 . the gross annual sales or receipts do not exceed the amount of one million five hundred thousand (P1. including engine equipment and spare parts thereof for domestic and international transport operation. 9. 000) or more where the sale or transfer is made to a VATregistered person. such as money changers and pawnshops. shall indicate in addition to the information required. Services of banks. 2. devoted principally to the publication of paid advertisements. customer or client.000. and Sale or lese of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs. properties and for every sale. A VAT official receipt for every lease of goods.00).500. 10. if any. 2. A VAT invoice for every sale goods or properties. Sale. address TIN of the purchaser. 8. Total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes VAT 3. non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries subject to percentage tax. Invoicing Requirements A VAT-registered person shall issue: 1. business style. VAT/ taxpayer identification number (TIN) of the seller.7. goods and supplies by person engaged in international shipping or air transport operations. Information contained in VAT invoice or VAT receipt: 1. Importation of fuel. In the case of sales in the amount of one thousand pesos (P1. importation or lease of passenger or cargo vessels and aircraft.
such as purchase returns or allowances. Creditable Input Tax The amount of input taxes available for used during a month or quarter shall be the total input taxes arising from purchase of goods or services during the month or quarter plus any excess input from the preceding month or quarter reduced by the amount of claim for VAT refund or tax credit certificate and other adjustments.Sale of goods and properties . If the estimated useful life of capital goods is five (5) years or more. a. the input tax shall be spread evenly over a period of sixty (60) months. b. the input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. If the estimated useful life of capital goods is less than five (5) years. b. Discounts Sales returns and allowances Sale of services .000).output tax is computed by multiplying the gross receipts by the rate of twelve percent.000. Allowable Deductions from Gross Selling Price a. input tax attributable to exempt sales and input tax attributable to sales subject to Final VAT withholding. regardless of acquisition cost of each capital goods shall be claimed as credit against output tax in the following manner.output tax is computed by multiplying the gross selling price by the rate of twelve percent (12%). Claim for Input Tax on Depreciable Goods – Purchase or importation of capital goods with an aggregate amount of more than one million pesos (P 1. PERCENTAGE TAX Percentage Tax shall be imposed to person whose sales or receipts are exempt from the payment of value-added tax and who is not a VAT-registered person shall pay a tax equivalent to three percent (3%) of his gross quarterly sales or receipts except those that are 55 .
a tax of ten percent (10%) on the amount paid for such services. 56 .500.exempted from value added tax even if its revenue exceeds P 1. telegraph.000. Domestic Carriers and Keepers of Garages . assessed and collected in respect to all franchises on radio and/or television broadcasting companies whose annual gross receipts of the preceding year does not exceed Ten million pesos (P10. wireless and other communication equipment service.shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts. message or conversation transmitted from the Philippines by telephone. Government Diplomatic Services b. The tax imposed shall be payable by the person paying for the services rendered and shall be paid to the person rendering the services who is required to collect and pay the tax within twenty (20) days after the end of each quarter. Other taxpayer subject to percentage tax and its applicable rates: a. once the option is exercised. Tax on Overseas Dispatch. Tax on Franchises . it shall not be revoked. c. The tax imposed shall not apply to: 1. telewriter exchange. Radio and television broadcasting companies referred to in this Section shall have an option to be registered as a value-added taxpayer and pay the tax due thereon.00. Message or Conversation Originating from the Philippines Person’s Liable. 2. International shipping carriers doing business in the Philippines shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts.000. International air carriers doing business in the Philippines shall pay a tax of three percent (3%) of their quarterly gross receipts. 2.000). d.there shall be levied. There shall be collected upon every overseas dispatch. International Carriers 1.
profits. then the maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction as short.There shall be collected a tax of five percent (5%) on the gross receipts derived by all finance companies. rentals of property. International Organizations News Services Tax on Banks and Non-bank Financial Intermediaries . medium or long-term and the correct rate of tax shall be applied accordingly. e. real or personal. on the basis of remaining maturities of instruments from which such receipts are derived On dividends On royalties. f. as well as by other financial intermediaries not performing quasi-banking functions 57 . Tax on Finance Companies . 4.3.There shall be a collected tax on gross receipts derived from sources within the Philippines by all banks and nonbank financial intermediaries in accordance with the following schedule: Short-term maturity (non in excess of two (2) years) 5% Medium-term maturity (over two (2) years but not exceeding four (4) years) 3% Long-term maturity (1) Over four (4) years but not exceeding seven (7) years 1% (2) Over seven years 0% On interest. from exchange and all other items treated as gross income 0% 5% In case the maturity period referred to in paragraph (a) is shortened thru pretermination. commissions and discounts from lending activities as well as income from financial leasing.
in case of personal insurance. nor shall any tax be paid upon reinsurance by a company that has already paid the tax. Tax on Life Insurance Premiums . in excess of 58 . nor upon that portion of the premiums collected or received by the insurance companies on variable contracts. commissions and discounts from lending activities. if any tax on such premium is imposed by the foreign country where the branch is established nor upon premiums collected or received on account of any reinsurance . company or corporation (except purely cooperative companies or associations) doing life insurance business of any sort in the Philippines a tax of five percent (5%) of the total premium collected.dong business in the Philippines. as well as income from financial leasing. if any tax on such premiums is imposed by the foreign country where the original insurance has been issued or perfected. notes. if the insured. discounts and all other items treated as gross . in accordance with the following schedule: Duration Short-term maturity (non in excess of two (2) years) Medium-term maturity (over two (2) years but not exceeding four (4) years) Long-term maturity (1) Over four (4) years exceeding seven (7) years (2) Over seven (7) years but not Tax Rate 5% 3% 1% % 0 g. nor upon doing business outside the Philippines on account of any life insurance of the insured who is a nonresident. from interest. credits or any substitute for money. Interests. resides outside the Philippines. shall be taxed on the basis of the remaining maturities of the instruments from which such receipts are derived. whether such premiums are paid in money.There shall be collected from every person. but premiums refunded within six (6) months after payment on account of rejection of risk or returned for other reason to a person insured shall not be included in the taxable receipts.
cabarets. night or day clubs Boxing exhibition Professional basketball games Jai-alai.There shall be collected from the proprietor. boxing exhibitions.Every person who wins in horse races shall pay a tax equivalent to ten percent (10%) of his winnings or 'dividends'. lessee or operator of cockpits. cabarets. Amusement Taxes . professional basketball games. Amusement Cockpits. company or corporation residing or doing business in the Philippines. night or day clubs. a tax equivalent to the following: Tax rates 18% 10% 15% 30% i. In all cases where owners of property obtain insurance directly with foreign companies. forecast/quinella and trifecta bets. race tracks j.the amounts necessary to insure the lives of the variable contract workers. the tax to be based on the actual amount paid to him for every winning ticket after deducting the cost of the ticket. marine or miscellaneous insurance agent authorized under the Insurance Code to procure policies of insurance as he may have previously been legally authorized to transact on risks located in the Philippines for companies not authorized to transact business in the Philippines shall pay a tax equal to twice the tax imposed to life insurance premiums. the tax shall be four percent (4%). It shall not apply to reinsurance and shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign companies in cases where said owner does not make use of the services of any agent. Tax on Agents of Foreign Insurance Companies Every fire. Tax on Winnings . it shall be the duty of said owners to report to the Insurance Commissioner and to the Commissioner each case where insurance has been so effected. and shall pay the tax of five percent (5%) on premiums paid. Jai-Alai and racetracks. In the case of owners of winning 59 . h. In the case of winnings from double.
assessed and collected on every sale. a tax at the rates provided hereunder based on the gross selling price or gross value in money of the shares of stock sold. Tax Up to twenty-five percent (25%) Over twenty-five percent (25%) but not over thirty-three and one third percent (33 1/3%) 2% Over thirty-three and one third percent (33 1/3%) 60 . the tax shall be ten percent (10%) of the prizes. a tax at the rate of one-half of one percent (1/2 of 1%) of the gross selling price or gross value in money of the shares of stock sold.There shall be levied. Tax on Sale. assessed and collected on every sale. Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange . exchanged or otherwise disposed to the total outstanding shares of stock after the listing in the local stock exchange: Percentage Rate 4% b. Tax on Sale. bartered. exchange. or other disposition of shares of stock listed and traded through the local stock exchange other than the sale by a dealer in securities. exchange or other disposition through initial public offering of shares of stock in closely held corporations. k.There shall be levied. exchanged or otherwise disposed in accordance with the proportion of shares of stock sold. on Shares of Stock Sold or Exchanged Through Initial Public Offering . exchanged or otherwise disposed which shall be paid by the seller or transferor. barter. barter. Barter or Exchange of Shares of Stock Listed and Traded through the Local Stock Exchange or through Initial Public Offering a. bartered. bartered.race horses. as defined herein.
2. Return on Public Offerings of Share Stock In case of primary offering. Return on Capital Gains Realized from Sale of Shares of Stock Listed and Traded in the Local Stock Exchange . 1. the corporate issuer shall file the return and pay the corresponding tax within thirty (30) days from the date of listing of the shares of stock in the local stock exchange. of which he is a member.It shall be the duty of every stock broker who effected the sale subject to the tax imposed herein to collect the tax and remit the same to the Bureau of Internal Revenue within five (5) banking days from the date of collection thereof and to submit on Mondays of each week to the secretary of the stock exchange.1% The tax herein imposed shall be paid by the issuing corporation in primary offering or by the seller in secondary offering. Return on Capital Gains Realized from Sale of Shares of Stocks. a true and complete return which shall contain a declaration of all the transactions effected through him during the preceding week and of taxes collected by him and turned over to the Bureau Of Internal Revenue. c. Tax Treaties The Philippines has entered into a tax treaty to avoid of double taxation and prevention of fiscal evasion with the following countries: 61 .
and preferential tax treaty rate as covered by any provision of tax treaty. In the previous rulings of the BIR. They are yet to release 62 . particularly in conducting examination which involves related party transactions. the BIR advice its revenue officer to refer to Organization for Economic Co-operation and Development (OECD)transfer pricing model in determining if the transactions clearly reflect the proper income of the company. it is required to file with the International Tax Affairs Division a request for tax treaty relief including claims or request for tax exemption. TRANSFER PRICING Currently. the Philippines does not have any rules or regulations pertaining to transfer pricing.Australia Austria Bahrain Bangladesh Belgium Brazil Canada Czech Republic China Denmark Finland France Germany Hungary India Indonesia Israel Italy Japan South Korea Malaysia Netherlands New Zealand Pakistan Poland Romania Russia Singapore Spain Sweden Swiss Switzerland Thailand United Arab Emirates United Kingdom United States Vietnam If the taxpayer opted to use the provision of the tax treaties.
On or before the sixtieth day of the month following the close of the quarter. On or before the sixtieth day of the month following the close of the quarter. Tax Filling and Payment Deadlines Tax Type Annual Income Tax Individual Taxpayer/Corporate Taxpayer Quarterly Income Tax Individual Taxpayer Corporate Taxpayer Date of Filling/Payment On or before the fifteenth day of the fourth month following the close of the taxable year. On or before the tenth (10) day following the close of the month. (except for the month of December which is due on or before January 15) On or before the tenth (10) day following the close of the month On or before the tenth (10) day following the close of the month On or before the first day after the close of the month Value Added Tax Quarterly Value Added Tax Monthly Value Added Tax Percentage Tax Monthly /Quarterly Withholding tax Compensation/Expanded Final Tax Fringe Benefit Tax Documentary Stamp Tax 63 .their own rules and regulations in determining the arms length transaction of related companies. On or before the twenty-fifth (25) day following the close of the month. On or before the twentieth (20) day following the close of the month. On or before the twentieth (20) day following the close of the month.
Regional Director. Who are the foreign nationals required to apply for an AEP? 1. What is an Alien Employment Permit (AEP)? An Alien Employment Permit is a document issued by the Secretary of Labor and employment through the DOLE . and 3. visitors need to register. Validity and procedure of filing 64 . Foreign nationals seeking employment in the Philippines whether they are non-residents or refugees. Holders of Special Investors Resident Visa (SIRV). authorizing the foreign national to work in the Philippines. whether residents or nonresidents. Special Retirees Resident Visa (SRRV). 2. WORK PERMIT Foreign nationals seeking employment in the Philippines. 408 allows foreign nationals. Treaty Traders Visa (9d) or Special Non-Immigrant Visa (47(a)2) for as long as they occupy any executive. advisory. To extend their stay. secure an extension of stay and pay corresponding immigration fees to the Bureau of Immigration or with the office of the municipal or city treasurer in areas outside Metro Manila. to stay in the Philippines for up to 21 days without a visa. except some specifically restricted nationalities. supervisory. must secure alien employment permits (AEP) from the Department of Labor and Employment (DOLE). or technical position in any establishment. who has jurisdiction over the intended place of work of the foreign national. Foreign professionals who are allowed to practice their profession in the Philippines under reciprocity and other international agreements and in consultancy services.EMPLOYMENT FOREIGN VISA Foreign nationals may come and visit to the Philippines for business and tourism purposes with a temporary visitor’s visa that allows stays for period of 59 days extendable to six months. Executive Order No.
the Labor Code of the Philippines. PHILIPPINE LABOR LAW Individual employee rights are governed by the Labor Code of the Philippines. branch offices and joint ventures and those assigned in the headquarters with oversight function in any of the branch offices. on the other hand. other related laws and statutes. It shall be the duty of every employer to give his employees not less than sixty (60) minutes time-off of for their regular meals. Below are some of the key articles of the Labor Code: Hours of work: The normal hours of work of any employee shall not exceed eight (8) hours a day. The AEP shall be valid for one (1) year or co-terminus with the duration of employment. as well as international covenants entered into by the Philippines. Weekly rest day: It shall be the duty of every employer. In case of assignment in the company's subsidiaries. 3. Rest periods of short duration during working hours shall be counted as hours worked thus should be compensable. 2. In case of foreign nationals to be assigned in subsidiaries. and those assigned in the headquarters with oversight functions in any of the branch offices. to provide each of his employees a rest period of not less than twenty-four (24) 65 . operation or projects in the country. whether operating for profit or not. consultancy services or other modes of employment or term of office. one (1) AEP shall be required and valid for all the said assignments irrespective of their place/s. are found mainly in the 1987 Constitution. branch offices and joint ventures. 4. they may file their application in any of the DOLE Regional Offices nearest their place of work. operations or projects in the country. Night shift differential: Every employee shall be paid a night shift differential of not less than ten percent (10%) of his regular wage for each hour of work performed between ten o’clock in the evening and six o’clock in the morning. An application for AEP shall be filed personally or through their respective employer with the DOLE Regional Office having jurisdiction over the intended place of work.1. The country’s policies on foreign workers. Said AEP is valid for the position/s and company for which it was issued.
o Special Holidays in the country include: August 21 November 1 December 31 Ninoy Aquino Day All Saints Day Last Day of the year Minimum wage – It refers to the lowest wage rate fixed by law that an employer can pay his employees. No employer shall be allowed to pay less than the minimum wage. Overtime work: Work may be performed beyond eight (8) hours a day provided that the employee is paid for the overtime work. the employer shall respect the preference of employees as to their weekly rest day when such preference is based on religious grounds. the daily minimum wage is P382.consecutive hours after every six (6) consecutive normal work days. Work performed beyond eight hours on a holiday or rest day shall be paid an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus at least thirty percent (30%) thereof. When the nature of the work of the employee is such that he has no regular workdays and no regular rest days can be scheduled.00 13th Month Pay – all employers are required to pay all their employees receiving a basic salary of not more that 66 . Sunday or holiday work: Where an employee is made or permitted to work on his scheduled rest day. At present. an additional compensation equivalent to his regular wage plus at least twenty-five percent (25%) thereof. An employee shall be entitled to such additional compensation for work performed on Sunday only when it is his established rest day. It should be scheduled upon consultation with the employees. Compensation for rest day. Work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%) of the regular wage of the employee. Where such holiday work falls on the employee’s scheduled rest day. however. he shall be paid an additional compensation of at least thirty percent (30%) of his regular wage. he shall be entitled to an additional compensation of at least fifty per cent (50%) of his regular wage. he shall be paid an additional compensation of at least thirty percent (30%) of his regular wage for work performed on Sundays and holidays.
It is computed pro-rata for employees who worked for only a portion of the year. a 13th month pay not later than December 24 of every year.00 a month. It refers to the one-twelfth of the total basic salary earned by an employee within the calendar year. except in retail and service establishments regularly employing less than ten (10) workers. 67 . regardless of the nature of their employment. if the holiday falls on a Sunday. o Regular Holidays in the Philippines include: o January 1 Movable Date Movable Date April 9 Day May 1 June 12 New Year’s Day Maundy Thursday Good Friday Bataan & Corregidor Labor Day Independence Day National Heroes Last Sunday of August Day November 30 December 25 December 30 Movable Date Bonifacio Day Christmas Day Rizal Day Eid’l Fitr (End of Ramadan) By virtue of Republic Act 9492. on the other hand. holiday falling on a Wednesday will be observed on the Monday of the week. an act rationalizing the celebration of national holidays in the country. The employer may require an employee to work on any holiday but such employee shall be paid a compensation equivalent to twice his regular rate.P1000. Right to holiday pay: Every worker shall be paid his regular daily wage during regular holidays. the holiday will be observed on the Monday that follows.
No employer shall make payment with less frequency than once a month. and study and scholarship grants. Service charges. Employers are required to provide welfare facilities at the workplace such as seats. the share of the covered employees shall be considered integrated in their wages. In the absence of collective bargaining agreement or any related company policy. or any object other than legal tender. chits. training opportunities. separate toilet rooms and lavatories from men. There is also prohibition against discrimination with respect to pay. Wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days. 68 . vouchers. The share of the employees shall be equally distributed among them. Every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay. Employment of Women. maternity leave of at least two (2) weeks prior to the expected date of delivery and another four (4) weeks after normal delivery or abortion with full pay based on her regular or average weekly wages. restaurants and similar establishments shall be distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen percent (15%) for management. No employer shall pay the wages of an employee by means of promissory notes. Forms of Wage payment. tokens. Right to service incentive leave. (60 days in case of normal delivery. tickets. All service charges collected by hotels. even when expressly requested by the employee. promotion. Time of Wage payment. In case the service charge is abolished. Maternity leave benefits: Every employer shall grant to any pregnant woman employee who has rendered an aggregate service of at least six (6) months for the last twelve (12) months. and 78 days in case of Caesarean delivery). coupons.
unless it is covered by an apprenticeship agreement stipulating a longer period. the employer shall not terminate the services of an employee except for a just cause. He has applied for paternity leave 4. No person below 18 can be employed in hazardous or deleterious undertaking as determined by the Secretary of Labor and Employment. Security of tenure: In cases of regular employment. His wife has given birth or suffered a miscarriage. Minimum employable age: No child below fifteen (15) years of age shall be employed. Wife refers to the lawful wife which means the woman who is legally married to the male employee concerned. and his employment does not in any way interfere with his schooling. and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full back wages. The claimant. He is cohabiting with his spouse at the time she gives birth or suffers a miscarriage 3. Probationary employment: Probationary employment shall not exceed six (6) months from the date the employee started working. Any person between fifteen (15) and eighteen (18) years of age may be employed for such number of hours and such periods of the day as determined by the Secretary of Labor and Employment in appropriate regulations. a married male employee. Paternity Benefit. on the condition that his spouse has delivered a child or suffered miscarriage for purposes of enabling him to effectively lend support to his wife in her period of recovery and/or in the nursing of the newly-born child. The conditions to entitlement are: 1. The 69 . inclusive of allowances. It refers to the benefit granted to a married male employee allowing him not to report for work for seven (7) days (for each delivery for the first 4 deliveries) but continues to earn the compensation therefore. except when he works directly under the sole responsibility of his parents or guardian. 2. is employed at the time of delivery of his child.
Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives. redundancy. Termination by employer. 70 . An employer may terminate an employment for any of the following causes: o o o o Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work. Gross and habitual neglect by the employee of his duties. Inhuman and unbearable treatment accorded the employee by the employer or his representative. An employee may put an end to the relationship without serving any notice on the employer for any of the following just causes: o o Serious insult by the employer or his representative on the honor and person of the employee. Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative. and Other causes analogous to the foregoing. Termination by employee: An employee may terminate without just cause the employee-employer relationship by serving a written notice on the employer at least one (1) month in advance. and retrenchment to prevent losses or the closing or cessation of operation of the establishment. The employer upon whom no such notice was served may hold the employee liable for damages. An employee who is allowed to work after a probationary period shall be considered a regular employee.services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. o Closure of establishment and reduction of personnel: The employer may also terminate the employment of any employee due to the installation of labor-saving devices.
and Other causes analogous to any of the foregoing. but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age. who has served at least five (5) years in the said establishment. an employee upon reaching the age of sixty (60) years or more. participate in policy and decision making processes affecting their rights and benefits.The Constitution and the Labor Code guarantee workers’ rights to self-organization and collective bargaining. Unions . a fraction of at least six (6) months being considered as one whole year. OTHER PRIVILEGE/S 71 . be engaged in peaceful concerted activities.o o Commission of a crime or offense by the employer or his representative against the person of the employee or any of the immediate members of his family. Retirement: In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment. Union membership is most common in the manufacturing sector. may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service.
72 . The Social Security System (SSS) was created to provide private-sector employees and their families with protection against the hazards of disability. and miscellaneous loans. old age and death. maternity and paternity leave. employees including resident foreign employees are mandated to be reported/registered to the following government agencies: Social Security System (SSS) and Philippine Health Insurance Corporation Compulsory coverage. 1999 are considered automatically registered and will only be required to update their records with Philippine Health Insurance Corporation (PhilHealth). and maintain industrial peace. retirement pension. sickness. funeral benefit. sickness allowance.Solo parent leave – under the SOLO PARENT WELFARE ACT of 2000 (RA 8972) a solo parent employee who has rendered service of at least one year is entitled to not more than seven working days of parental leave in addition to the leave privileges under existing laws. REGULATING BODY Department of Labor & Employment (DOLE). Private sector employers. Among its strategies are: • • • • • Support and employment generation Employment Facilitation Employment Preservation Employment Enhancement General administration and support services WELFARE BENEFITS Upon the start of employment. who have registered with the SSS prior to July 1. protect workers and promote their welfare. develop human resources. Standard social security benefits include disability pension. including those of household helps. The government agency that works to promote gainful employment opportunities.
The employer shall remit to the Social Security System a monthly contribution of Php10 for wages earners and 0. Employees Compensation Commission (ECC). 4. ECC is mandated by Philippine law to provide meaningful and appropriate compensation to workers. Home Development & Mutual Fund. 3. Provident Loan ii. Sickness Injury Disability Death The State Insurance Fund (SIF) is established to provide funding support to the Employees' Compensation Program. Also known as Pag-IBIG Fund. 2. overtime and allowance). HDMF offers the following programs and services: 1.00 and over. The commission implements the Employee's Compensation Program (ECP) which provides a package of benefits for public and private sector employees and their dependents in the event of work-connected contingencies such as: 1. Housing Loan The base amount for calculation of mandated contributions is the average monthly salary (before tax. It is generated from the employers' contributions collected by Social Security System. 2. 4.20% of the monthly salary credit (MSC) for employees with higher MSC of P15. 000. Below is the schedule of contributions: Agencies Employee Share 3 % of Monthly Employer Share Social Security System (SSS) 7 % of Monthly Salary Credit 73 . Iskolar ng Pag-ibig Program Provident Savings Benefit Pag-ibig Housing Bond Lending Program i. 3.
25% of Salary Base Php100 RECRUITMENT.20% of employees MSC 1.Salary Credit Employees Compensation Commission (ECC) Philippine Health Insurance Corporation Home Development Mutual Fund Php10 or 0. SELECTION AND PLACEMENT PROCEDURES 74 .25% of Salary Base Php100 None 1.
Accounting Philippine Standards Philippines Financial (PFRS) 75 Reporting in the .
3. Common Differences between IFRS and Philippine Accounting Regulations and Standards Impact of IAS on Rule 68 of the Rules and Regulations Implementing the SRC Rule 68 (special accounting rules) is the Implementing Rules and Regulations of the Securities Regulation Code (SRC) which deals with the form and the content of financial statements. The Financial Reporting Standard Council (FRSC) of the Philippines issues its Standards in a series of pronouncements called Philippine Financial Reporting Standards (PFRSs). The Bureau of Internal Revenue (BIR) issued Revenue Regulation (RR) 8-2007 on the additional compliance requirements of concerned taxpayers in the light of mandatory adoption of PFRS. 2.The Philippines is in full compliant with IFRS effective January 2005. The Philippines has introduced the Accountancy Act of 2004 and the Philippine Institute of Certified Public Accountants (PICPA) has been designated as the accredited professional association. (these also include interpretations developed by the PIC). The Securities and Exchange Commission (SEC) has provided a list of PFRS applicable to all corporations except Pre-need companies and those qualified as non-publicly accountable entities (NPAE). a process which started back in 1997 in moving from the US based GAAP to IFRS. Philippine Financial Reporting Standards (PFRSs) (these correspond to International Financial Reporting Standards (IFRS)). Rule 68 has 76 . Philippine Accounting Standards (PASs) (these correspond to the International Accounting Standards (IASs). These consist of: 1. and Philippine Interpretations (these correspond to Interpretations of the IFRIC and the Standing Interpretations Committee (SIC) of the IASC.
Rule 68 disclosure requirements were applicable only to those listed corporations and public companies. The amendments resulted in additional disclosure requirements including the presentation of segment reporting. Before the adaptation of 2001 IAS. Intellectual Property Rights (IPR) The Philippine government had made it a State policy to protect and promote intellectual property rights. otherwise known as Intellectual Property Code of the Philippines was enacted to protect and secure the exclusive rights of the scientists. 77 .been amended to conform to the IAS. inventors. 8293. Thus. and particularly when beneficial to the people. and ensures market access for local products. statement of changes in equity. and other gifted citizens to their intellectual property and creations. 000. Republic Act No. which are prepared and presented in conformity with the generally accepted accounting principles. The State recognizes that an effective intellectual and industrial property system is vital to the development of the domestic and creative activity. for such periods as provided in this Act. and cash flow statement. facilitates transfer of technology. artists. except those whose paid-up capital is less than Php50. The amendment of Rule 68 expands the coverage to all corporations that file financial statements with the Commission. attracts foreign investments.
and/or a fine of not less than Php100. The right to patent belongs to the inventor. shall suffer imprisonment for the period of not less than six (6) months but mot more than three years. When two (2) or more persons have jointly made an invention. the court may award damages not exceeding three (3) times the amount of actual damages sustained. The criminal action for repetition of infringement is. and upon conviction. the right to a patent shall belong to them jointly. and to enhance the enforcement of intellectual property rights in the Philippines. trademarks and copyright. WIPO (Convention Establishing the World Intellectual Property Organization). In patent infringement. if the infringement is repeated by the infringer or by anyone in connivance with him after finality of the judgment of the court against the infringer. It may be. and other Intellectual Property Rights conventions and treaties. a product. Under the Republic Act 8293. to liberalize the registration on the transfer of technology.It is the policy of the State to streamline administrative procedures of registering patents. or process. If the damages cannot be readily ascertained. Some of the most common forms of IPR in the Philippines are discussed below: Law on Patents A patent is an exclusive right granted to any technical solution to a problem in any field of human activity which is new. the offenders shall. his heirs. a shift was made from “first-to-invent system” to “first-to-file system.” The period of grant was 20 years from the date of filing. or assigns. The criminal action herein provided shall 78 . at the discretion of the court. 000. or may relate to. the court may award damages equivalent to a reasonable royalty. and is industrially applicable. without prejudice. The Philippines is a member of IP-related treaties such as WTOTRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights). be criminally liable therefore. or an improvement of any. 000 but not more than Php300. involves an inventive step. to the institution of civil action for damages.
Law on Copyrights There is no registration requirement for copyrights. IP Philippines encourages the registrant to join the appropriate collecting society. the court may award damages equivalent to the reasonable profit. false designation of origin.” The registration is for a period of ten (10) years. Otherwise. or the profit which defendant actually made out on the infringement. Law on Trademarks “Marks” are visible signs capable of distinguishing the goods (trademarks) or services (service marks) of an enterprise. however. if one is a non-resident registrant. or other certification is required except when one claim to be a small entity (natural or juridical person whose asset are worth Php20 M and government offices) and wish to pay the filing on that basis. Damages may be doubled if there is actual intent to mislead the public or defraud complainant.prescribe in three (3) years from the date of the commission of the crime. Marked or stamped containers are also considered “marks. Further. and false description are a fine of Php50. legalization. The penalties for infringement. 000 and imprisonment from 2 to 5 years. unfair competition. a deposit is required in order to complete the collection of the National Library and the Library of the Supreme Court. 000 to Php200. renewable for the subsequent ten (10) periods as long a mark is being used in trade and commerce. the court may award damages equivalent to the percentage of the gross sales of the defendant. No attestation. Deposit with either library is sufficient under the law. In registering the trademark. notarization. In trademark infringement. the Intellectual Property has initiated several meeting 79 . the deposit is not required for the existence on one’s copyright because the copyright exists from the moment of creation. If damages cannot be readily ascertained. For copyrights and related rights. Starting in January 1998. all applicants are assumed to be big entities. the name and address of the resident agent is needed.
A valuation can often produce significant benefits in crucial negotiations or help a company realize the true value of an asset. including merger and acquisition activities. and broadcasters to educate them on collective administration as the most efficient means of enforcing their rights. administrative (filing at the Bureau of Legal Affairs of IP office). mortgage financing. or an entire business.with copyright owners. compensation. 000 to Php150. complaint from violation of laws involving IP. the Philippines is only the other Asian country that has formed the collecting society for performers. 000 and 1 year to 3 years imprisonment Second offense: Fine of Php150. the Intellectual Property Office of the Philippines was informed that aside from Japan. expropriations. a transaction.5 M and/or 6 to 9 months of imprisonment in case of insolvency • • ASSET VALUATION Companies and individuals seek valuations for a variety of reasons. 000 to Php1. value-based estate and gift planning. The legal remedies available are: judicial (filing of case with the Regional Trial Court). With the approval of this Act. 000 to Php500. The Real Estate Service Act of the Philippines was introduced to regulate and provide institutionalized government support to develop a corps of highly technical work which provides the basis for decisions on property sales. and assessment of taxes. or filing a case at the Department of Trade and Industry (DTI) regardless of the amount of damages or if no damages are claimed. the transition of transferring power and 80 . request for mediation involving author’s rights. and litigation support. 000 and 3 to 6 years of imprisonment Third and subsequent offense: Fine of Php500. Last January. The penalties for copyright’s infringement are: • First offense: Fine of Php50. as well as in the development of real estate industry in the country. performers.
responsible and respected professional real-estate service practitioners. including plants. equipment. 81 . or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values. the regulation of the real-estate practice is transferred from the Department of Trade and Industry (DTI) to the Professional Regulation Commission (PRC) which will create the Professional Regulatory Board of Real Estate Service. it is seen that the happy days of unscrupulous real-estate practitioners will be over as the real-estate practice will be regulated and confined to competent. Provider of Asset Valuation Services A real estate appraiser or assessor performs asset valuation. On the other hand. and machineries. performs or renders. A certificate of registration shall be issued to examinees that pass the national licensure examination for real estate service. 2009. Reliability of Asset Valuation in the Philippines Republic Act (RA) 9646 otherwise known as the Real Estate Service Act of the Philippines.responsibilities from Department of Trade and Industry (DTI) through the Bureau of Trade Regulation and Consumer Protection (BTRCP) to Professional Regulation Commission (PRC) to be exercised by the Professional Real Estate Service Board (PRESB) is now on going. for a professional fee. a real estate assessor is a duly registered and licensed natural person who works in a local government unit and performs appraisal and assessment of real properties. With the law. professionalizes the real-estate practice in the Philippines. compensation or other valuable consideration. With the passage of this RA 9646. A real estate appraiser is a duly registered and licensed natural person who. 2009 and effective July 30. such services of which shall be finally rendered by the preparation of the report in acceptable written form. essentially for taxation purposes. signed approved on June 29.
strategic business location. strategic business location. such as. land and property management. liberalized and business friendly economy. lower interest rates. the mix of real estate transactions by type has a bearing on the total price. and unlimited business opportunities. On an aggregate level. type. hospitable lifestyle. Other factors. and features of property. mortgages. and emergence of new housing and mortgage practices also contributed to the differences in prices. among others. Asset Valuation Costs The real estate prices in the Philippines (just like other countries) are very diverse owing to the factors such as location. the entry of foreign investors in the property market. The country has simple-quality manpower resources. urban development. Pro-business Environment 82 . liberalized and business friendly economy. Investing in the Philippines Overview It is advantageous to do business in the Philippines because of its quality manpower resources. taxation. hospitable lifestyle and unlimited business opportunities.Valuations of real properties are used for different purposes acquisition and disposal.
electricity and housing costs can go as low as a mere half of the costs in the U. The innovative Build-Operate-Transfer scheme has been adopted by the government. and 35 to 50% application systems and software development. enabling its manpower to have a unique edge over neighboring countries in terms of labor quality. its strategic location makes it a critical entry point to some 500 million people in the ASEAN market . the Philippines has a lot to offer as well in terms of natural resources. Foreign ownership of up to 100% is also allowed in almost all economic sectors. housing. Considering its strategic location. considering its cultural compatibility with expatriates. Its 7. and first-rate educational institutions. sporting and recreational facilities. quality healthcare.100 islands boast numerous white and black sand beaches. Being an archipelago.S. the cost of doing business in the Philippines is surprisingly low.The Philippines is the third-largest English speaking country in the world. unique edge as an English speaking country and rich natural resources. which are 83 . Its amazing marine biodiversity affords abundant species of flora and fauna. Foreign companies now outsourcing programming and business processes to the Philippines incur 30 to 40% business cost savings.offering vast trade opportunities . with wages down to less than one-fifth of that in the U. It has allowed more private sector participation in the development of infrastructure and services through privatization. it is also among the biggest producers of copper and gold in the world. Communication. Flanked by the Pacific Ocean and the South China Sea. Attractive incentives are offered in numerous Special Economic Zones and Industrial Estates. 15 to 30% call center services.and an ideal base for business. It is also the best Asian country in terms of overall quality of expatriate life. making it eminently attractive to vacationers and tourists.S. Land-wise. Business policies of the government tend to be investor-friendly.
implementing transfer of technology to Filipinos. expand the scope. generating more employment for the economy and enhancing skills of Filipino workers. electing Filipinos to the board of directors. promote the welfare of Filipino consumers. and governments. industrial. In domestic market enterprises. The Act also welcomes foreign investments as a supplement to Filipino capital and technology in those enterprises serving mainly the domestic market.being promoted as recreational hubs. foreigners can invest as much as one hundred percent [100%] equity except in areas included in the negative list. Republic Act No. promote. including their political subdivisions. quality and volume of exports and their access to foreign markets. partnerships. Foreign-owned firms catering mainly to the domestic market shall be encouraged to undertake measures that will gradually increase Filipino participation in their businesses by taking in Filipino partners. As a general rule. there are no restrictions on extent of foreign ownership of export enterprises. corporations. Key Features of the FIA • • Concept of a negative list Opened domestic market to 100% foreign investment except those in the Foreign Investment Negative List (FINL) 84 . in activities which significantly contribute to national industrialization and socio-economic development to the extent that foreign investment is allowed in such activity by the Constitution and relevant laws. commercial and Foreign Investments Act (FIA) of 1991 To attract.7042 was enacted in 1991. and/or transfer relevant technologies in agriculture. and welcome productive investments from foreign individuals. enhance economic value of farm products. This Act encourages foreign investments in the enterprises that significantly expand livelihood and employment opportunities for Filipinos. industry and support services. agricultural.
the required capital of US$200.000. which is a shortlist of investment areas or activities that may be opened to foreign investors/reserved to Filipino nationals.000. If the company is at least 60% Filipino .00 paid-in is not applicable.000. is more than 40% foreign-owned and will cater to the domestic market. List B .• • Redefined “export enterprise” to mean at least 60% for export Allowed 100% foreign ownership of business activities outside FINL but without incentives Under this law. Specific areas of equal investment rights for former Filipino nationals 85 .00. Classifications of the FINL • List A . or the company employs at least 50 direct employees. The capital may be lowered to US$100.40% foreign-owned and will cater to the domestic market. or a trader that purchases products domestically will export at least 60% of its purchases. foreign investors are allowed to invest 100% equity in companies engaged in almost all types of business activities subject to certain restrictions as prescribed in the FINL. if activity involves advance technology. the capital required is at least US$200. and small and medium-scale enterprises.consists of areas of activities reserved to Philippine nationals where foreign equity participation in any domestic or export enterprise engaged in any activity listed shall be limited to a maximum of 40% as prescribed by the Constitution and other specific laws.consists of areas of activities where foreign ownership is limited pursuant to law such as defense or law enforcement-related activities. • The FIA clearly states that if the activity to be engaged in is not included in the FINL.000. paid-in capital can be less than US$200. If the foreign company will export at least 60% of its output. which have negative implications on public health and morals.
The following is the 2008 approved IPP by the President: 86 . the Board of Investments (BOI) issues the Investment Priorities Plan (IPP). This means that their investments shall be treated as Filipino or will be considered as forming part of Filipino investments in activities closed or limited to foreign participation.000 square meters in the case of urban land or 3 hectares in the case of rural land to be used for business or other purposes. the amended FIA of 1991 lists the following types of businesses where natural-born Filipinos can enjoy the same investment rights as a Philippine citizen. Natural born Filipinos have also been given the right to be transferees of private land up to a maximum of 5. Investment Priorities Plan Annually. which is a list of promoted areas of investments eligible for government incentives. • • • • Cooperatives Thrift banks and private development bank Rural banks Financing companies Former natural born Filipinos can also engage in activities under List B of the FINL. Incentives The government has come up with a liberal program of fiscal and non-fiscal incentives to attract foreign capital and technology that complement local resources. The equal investment rights of former Filipino nationals do not extend to activities under List A of FINL.While most areas of businesses have limits for foreign investors. Different incentives schemes are available relative to the location and registration of the proposed business activity. which are reserved for Filipino citizens under the constitution.
storage. (5) ecological solid waste management. The list covers the priority activities in Autonomous Region for Muslim Mindanao (ARMM). Export Activities. (3) printing. Mandatory Inclusions. These cover (1) agriculture/agribusiness and fishery. (3) tourism. such as (1) export activities. and (7) ARMM priority and tourism areas. (6) engineering industries. quarrying. and content development of books and textbooks. (2) infrastructure. and distribution of petroleum products.• Preferred Activities. (5) engineered products. • • • Qualified projects are provided with the following incentives: • • • • • • • • • Income tax holidays Tax credits Tax and duty exemption for imported raw materials and equipment Hiring of foreign labor Exemption from contractors tax Simplified custom procedure Domestic Borrowings Export Assistance Other tax incentives Income Tax Holiday (ITH) Advantages 87 . and (6) strategic activities. and processing of minerals. marketing. These cover the production/manufacture of non-traditional export products and services. (2) exploration. and forestrybased industry. It covers the areas of (1) industrial tree plantation. ARMM List. mining. and (7) development and reliance of disabled persons. (4) refining. (4) consumer manufacturers. (2) agriculture. (4) research and development. food. (5) infrastructure and services. (6) clean air act. (3) basic industries. publication.
Companies registered with the BOI are eligible for income tax holidays which range form 3 to 8 years. 4 years for new projects without pioneer status and 6 years for projects with pioneer status. A 100% foreign owned corporation may be entitled to incentives if their business has been categorized as a pioneer project and at least 70% of production / service is exported or the project is in one of the less-developed areas mentioned in the IPP. Companies not exporting 100% of their production / services are obliged to have 60% Filipino ownership within a period of 30 years from time of registration with the BOI. Foreign ownership of corporations in nonpioneer projects is limited to 40% except if the company exports more than 70% of its production / service.
How to apply incentives:
Submission of a notarized application specifying the nature of the projects, its inclusion in the IPP or not, percentage of production for export, the investors details and a 5 year feasibility study. PEZA also offers other tax breaks.
Listing Rules Philippines
The Philippine Stock Exchange, Inc. (PSE or The Exchange) is a private organization that provides and ensures a fair, efficient, transparent, and orderly market for the buying and selling of securities. The Exchange was formed in December 23, 1992 through the union of the country’s two former bourses: Manila Stock Exchange (MSE) and Makati Stock Exchange (MkSE). At present, the PSE maintains two trading floors: one in Makati City and another in its head office in Pasay City. Even with two trading floors, the PSE maintains a ‘one price-one market’ exchange through the MakTrade System. This is a single-order-book book system that tallies all orders into one computer and ensures that these orders match with the best bid/best offer regardless of which floor the order were placed. MakTrade, likewise, allows PSE to facilitate the trading of securities in a broker-to-broker market through automatic order and trade routing and confirmation. It also keeps and eye on any irregularity in the transactions with its market regulation and surveillance databases. Companies are listed in the PSE on the First Board, Second Board, or the Small and Medium Enterprises Board. To help the investing public keep track faster of industry performance, listed companies are classified into the following sectors: Financial, Industrial, Holding Firms, Property, Services, and Mining and Oil. More importantly, PSE has adopted an online daily disclosure system to prove the transparency of listed companies and ensure full, fair, timely, and accurate disclosure of material information from all listed companies.
or Net tangible assets of P500 M. or A market capitalization of P500M. c. provided that it has a five-year operating history.GENERAL CRITERIA BASIC GUIDELINES FIRST BOARD SECOND BOARD a. b. The integrity and capability It must have an operating of the company’s history of at least one (1) management and its year prior to its listing. lack of existing material conflicts of interest. The company’s prospects of further growth and profitability. c. b. A track record of profitable operations for three (3) full fiscal years. and controlling stockholders. and The company’s d. SME BOARD a. a. At listing. the market capitalization of the company must be at least P250 M. The viability of the business and sustainability of the projected earning stream. c. 91 . b. The applicant company The applicant company shall be must demonstrate its evaluated based on the following: potential for superior growth to the Exchange. provided that it has a five-year operating history.
The applicant company SECOND BOARD None. but must demonstrate a potential for superior growth. through the submission of Statement of Active Business Pursuits and Objectives. nor shall it be reduced by non-recurring and extraordinary loss. taxes. pre-tax profit shall not include non-recurring and extraordinary income. SME BOARD The applicant company should have been operational for at least one (1) year with positive net operating income (income before interest. depreciation and amortization-EBITDA) during the last financial year. 92 . For purposes of this rule.TRACK RECORD REQUIREMENT FIRST BOARD A company must have a cumulative consolidated pre-tax profit of at least at least P50 Million and a minimum pre-tax profit of P10 Million for each of the three (3) full fiscal years immediately preceding the application for listing. Exceptions to the 3 year track record rule: a. The applicant must further be engaged in materially the same businesses and must have a proven track record of management throughout the last three (3) years prior to the filing of the application.
The applicant company is a newly formed holding company which uses the operational track record of its subsidiary(ies). excluding non-recurring and extraordinary income and/or loss. The company. for the last Three (3) fiscal years immediately preceding the application for listing. b. The applicant company shall have a cumulative pre-tax profit of at least P50 Million.has been operating for at least Ten (10) years prior to the filing of the application. is 93 . however. No net operating loss must have been registered in the fiscal year immediately preceding the filing of the application.
prohibited from divesting its shareholdings in the said subsidiary(ies) for a period of three (3) years from the listing of its securities. The prohibition shall not apply if a divestment plan is approved by majority of the applicant company’s stockholders. NUMERICAL CRITERIA 94 .
Authorized Capital Stock: MinimumP 20.000.000.000.P 100.00 P400. 95 . venture or business referred to in the business plan Subscription & Paid-up: Minimum- 25% of the ACS * The applicant company should have net tangible assets of at least Five Million Pesos (P 5.000.000.Authorized Capital Stock: Minimum.000.000.000.000.00 P 100.000.FIRST BOARD SECOND BOARD SME BOARD Authorized Capital Stock: Minimum.00 Subscription & Paid-up: MinimumP100. The net tangible assets requirement is not applicable to information technology companies.00 Condition on Paid-up: at least 75% of the paid-up must have already been disbursed to the project.00).000.000.000.00 Maximum .000.00 Subscription & Paid-up: MinimumP 25.
SECOND BOARD At least one (1) year prior to listing. SME BOARD At least one 96 .at least five (5) years.At least three (3) full fiscal years prior to the filing of the listing application if with track record For a market capitalization or net tangible assets of P500M .OPERATING HISTORY FIRST BOARD For a track record of profitable operations.
the minimum offering to the public for initial listing shall be based on the following schedule: MARKET CAPITALIZATION Not exceeding P400 M Over P400M to P1B Over P1B to P5B Over P5B to P10B Over P10B PUBLIC OFFER 33% 25% 20% 15% 10% or P50M whichever is higher or P100M whichever is higher of P250M whichever is higher or P750M whichever is higher or P1B whichever is higher The minimum offering to the public for initial listing shall be twenty percent (20%) of the authorized capital stock.REQUIREMENTS MINIMUM OFFERING FIRST BOARD SECOND BOARD SME BOARD Unless otherwise provided by law or government regulation. 97 . Provided. that the existing shareholders prior to listing of securities shall maintain fifty-one percent (51%) ownership within the next three years following listing date.
the company shall. subject to the approval of the Exchange MIN.OFFER PRICE FIRST BOARD Discretion of the applicant SECOND BOARD Discretion of the applicant SME BOARD Discretion of the company.000 stockholders or security holders SECOND BOARD The applicant company shall at all times have a minimum 7 directors. the applicant company shall have and maintain a minimum of 7 directors. The company shall likewise maintain at least 500 stockholders. maintain a minimum 7 directors and at least 50 98 . Each of these stockholders must hold at least one board lot of the SME BOARD After listing. at all times. maintain. at all times. The applicant company shall. at least 1. NUMBER OF DIRECTORS AND STOCKHOLDERS OR SECURITY HOLDERS FIRST BOARD Upon filing of the application.
SECOND BOARD The applicant company shall cause its existing security holders who own an equivalent of at least 10% of the issued and outstanding securities of the company to enter SME BOARD The company shall cause all its existing stockholders to enter into an agreement with the 99 . LOCK-UP FIRST BOARD The applicant company shall cause its existing stockholders or security holders who own an equivalent of at least 10% of the issued and outstanding shares not to sell. stockholders owning shares equivalent to at least one board lot. The company shall be held responsible for maintaining the designated number of stockholders owning shares of stock in the company.each owning shares or securities shares of the company. equivalent to at least one board lot upon listing in the Exchange.
Exchange not to sell. private placements.e. into an agreement with the Exchange not to sell.e. warrants or a similar instrument) done and fully paid for within Onehundred-eighty (180) 100 . assign.e. asset for shares swap transaction price is lower than that or a similar transaction) or of the offer price in the IPO. be subject to a lock-up period of at convertible bonds. encumber or in any manner dispose of their securities for a period of three hundred sixty-five If there is any issuance of shares or (365) calendar days after the securities or instruments which listing of such securities. warrants or a least 365 days from full payment similar instrument) done and fully of the aforesaid shares or paid for within One-hundred-eighty securities. and the placements. assign.e. (180) days prior to the start of the offering period. If there is any issuance of shares (i. convertible bonds. and the transaction price is lower than that of the offer price in the Initial Public Offering.. encumber or in any manner dispose of their securities for a period of two (2) years after the listing of such securities. asset for shares swap or a similar transaction) or instruments which leads to the issuance of shares (i.assign or in any manner dispose of their shares for a minimum period of 180 days after the listing of the said shares. all instruments which lead to issuance shares or securities availed of shall of shares or securities (i... private the offering period. all shares or securities availed of shall be subject to a lock-up period of at least three-hundred-sixty-five (365) days from full payment of the aforesaid shares or securities. lead to issuance of shares or securities done and fully paid for If there is any issuance of shares within 180 days prior to the start of or securities (i.
ISSUED AND OUTSTANDING SHARES FIRST BOARD SECOND BOARD SME BOARD 101 .days prior to the start of the offering period. and the transaction price is lower than that of the offer price in the Initial Public Offering. all persons who availed of the securities shall be subject to a lock-up period of Three-hundredsixty-five (365) consecutive calendar days from full payment of such securities.
All issued and outstanding securities of including treasury shares shall be applied for listing. LISTING DOCUMENTS FINANCIAL STATEMENTS FIRST BOARD Audited FS for the last three (3) full fiscal years of the company and its subsidiaries prepared by an independent auditor together with a schedule of the aging of its accounts receivable SECOND BOARD Audited FS for the last three (3) full fiscal years of the company and its subsidiaries prepared by an independent auditor. All issued and outstanding securities of the type and class applied for. SME BOARD When applicable. including treasury shares shall be applied for listing. audited FS for the last three (3) full fiscal years of the applicant company and its subsidiaries 102 . All issued and outstanding shares shall be applied for listing in the Exchange.
It shall describe the technical and commercial aspects of the applicant company’s business operations. Active business pursuits is defined as the activities undertaken and will be undertaken by the applicant company in order to advance its business.detailed report on its active business pursuits. but 103 . It shall describe the technical and commercial aspects of the applicant company’s business operations. Active business pursuits is defined as the activities undertaken and will be undertaken by the applicant company in order to advance its business. financial projections are not required. financial projections are not required. As a general rule. SECOND BOARD Statement of Active Business Pursuits and Objectives .detailed report on its active business pursuits. but SME BOARD Statement of Active Business Pursuits and Objectives . As a general rule.STATEMENT OF ACTIVE BUSINESS PURSUITS & OBJECTIVES FIRST BOARD Not required.
the discussion should cover the previous and current fiscal years and the next three (3) fiscal years. should there be references made in the Statement to future profits or losses. then the applicant company is required to include financial projections in the Statement duly reviewed by an independent accounting firm. With respect to listing applications received within the fourth quarter of the applicant company’s fiscal year. For listing applications received within the first three (3) quarters of the applicant company’s fiscal year. 104 . then the applicant company is required to include financial projections in the Statement duly reviewed by an independent accounting firm. For listing applications received within the first three (3) quarters of the applicant company’s fiscal year. With respect to listing applications received within the fourth quarter of the applicant company’s fiscal year.should there be references made in the Statement to future profits or losses. or any other item that would be construed to indicate forecasts. the period of discussion should cover the previous and current fiscal years and the next two (2) fiscal years. the discussion should cover the previous and current fiscal years and the next three (3) fiscal years. or any other item that would be construed to indicate forecasts. the period of discussion should cover the previous and current fiscal years and the next two (2) fiscal years.
ph Philippine Stock Exchange www.gov.gov.org.gov.bsp.ph Macroeconomics National Economic Development Authority National Statistics Office www.gov.gov.gov.peza.ph Finance Bangko Sentral ng Pilipinas www.gov.gov.ph www.dbm.ph www.iro.sec.gov.boi.gov.gov.Relevant Websites Further Reading for The following are relevant reference websites of several government offices and other related organizations that could guide investors who want to do business in the Philippines: Organization General Reference Republic of the Philippines Website www.ph Other Useful Information 106 .ph www.ph Bureau of Internal Revenue www.ph Investors Relations Office Philippine Economic Zone Authority www.ph Department of Budget and Management www.ph www.neda.census.dti.pse.ph Commerce and Investment Department of Trade and industry Board of Investments Securities and Exchange Commission www.bir.
ph Department of Labor and Employment www.dfa.ph 107 .gov.dole.picpa.ph Department of Tourism www.ipophil.ph Philippine Institute of Certified Public Accountants www.tourism.gov.Department of Foreign Affairs www.gov.gov.com.ph Intellectual Property Rights Office www.
and clear focus make our members valuable partners for varied client base worldwide.About RSM International RSM international is the 7th largest network of independent accounting and consulting firms worldwide. VIC 8007 Main: +61 3 9286 1800 Fax: +61 3 9286 1899 108 .stephens@rsmi. with over 730 offices in over 70 countries. Collins Street West. We exist to make a positive difference to their futures. High standards. 11 Old Jewry London EC2R 8DU Main: +44 (0) 20 7601 1080 Fax: +44 (0) 20 7601 1090 Website: www. Realto South Tower 525 Collins Street Melbourne VIC 3000 PO Box 248. 000 people on hand to serve its clients’ needs. united by a common desire to provide the highest quality of services to its clients. please get in touch with: RSM Office International Executive 2nd Floor. CEO DID: +44 (0) 20 7601 1080 Email: jean. Contact Details For more information.rsmi.com Jean Stephens.com RSM Asia Pacific Regional Office Level 8. and more than 30. common work ethic. RSM International is a global network of independently-owned and managed professional service firms.
com. through our membership with RSM International. CPAs was established in 1976 and worked its way to be one of the leading accounting and business consultancy firms for mid-tier market today. our accumulated experiences have given us expertise and helped us develop approaches tailor-fit to what our clients needs. please get in touch with: 109 . proper work ethics. Regional Co-ordinator (Asia Pacific) DID: +61 3 9286 1862 Email: lynette. We recognize that our clients deserve the best kind of services and highly-experienced professionals that would handle transactions.au About Alas. As we have been in the professional service for more than three decades.mcgowan@rsmi. We employ competent staff and continually seek for improvement of our capabilities through investing heavily on training and technology.au Lynette McGowan. Oplas & Co.au Neil Hough. we are using worldwide standards. Our high professional standards.Website: www. Contact Details For more information.. and clear focus make us valuable partner for varied client base of local and multinational companies. We forge a close and enduring relationship with our clients through quality services and commitment of our people. Thus.com.rsmi. CPAs Alas. Our Firm is composed of competent business advisors with local and international experiences and who share enthusiasm for growth.com. Oplas & Co. Regional Director DID: +61 3 9286 1862 Email: neil.hough@rsmi. and bring our capabilities through local approach.
. Oplas Managing Partner Tel: (02) 759-5090 Email: marycrisoplas@rsm-alasoplascpas. RSM international does not exist in any jurisdiction as a separate legal entity. Gil Puyat Avenue Makati City.com Disclaimer Text The aim of this publication is to provide general information about doing business in the Philippines and every effort has been made to ensure that the contents are accurate and current. Oplas & Co.com Contact Partners: Mr. However. and economic conditions referred to in this publication are only accurate at the time of writing. Copies of this booklet can be obtained from RSM International Executive Office or at Alas. Oplas & Co. tax rates. legislation. CPAs Makati Head Office 25th Floor. Donnies T.. Philippine AXA Life Centre 1286 Sen.com Ms. The network is administered by RSM 110 . RSM International is the name given to a network of independent accounting and consulting firms each of which practices on its own right. Marycris S. Philippines 1200 Telephone: (632) 759-5090 Fax: (632) 887-6180 Email: aocheadoffice@rsm-alasoplascpas.Alas. CPAs. Information in this publication is in no way intended to replace or supersede independent or other professional advice. Alas Chairman & CEO Tel: (02) 759-5090 Email: donniesalas@rsm-alasoplascpas.
© RSM International Association. Intellectual property rights used by members of the network including the trademark RSM International are owned by RSM International Association. an association governed by articles 60 et seq of the Civil Code of Switzerland whose set is in Geneva. London EC2R 8DU. 2009 111 . a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry.International Limited.