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1. Graduated tax rate of 5% to 32% is imposed to income derived by resident citizens within and without the Philippines from employment, trade, business and exercise of profession which also includes profits, casual gains and prizes less than or equal to P10, 000 but not including items of income subject to final tax and special treatment. For taxable income more than Php 500, 000, the top rate of 32% is applied. For income derived from all sources within the Philippines, the same graduated tax rates are imposed to resident aliens and non-resident citizens.

2. 25% of gross income from sources within the Philippines is taxed to non-resident aliens. That is, if the length of their stay in the country is not more than 180 days within a calendar year. The graduated rate is imposed if the stay is more than 180 days.

3. 15% income tax of the gross income are imposed to aliens employed by regional or area or regional operating headquarters of multinational corporations, offshore banking units, petroleum service contractors and subcontractors and representative offices.

4. 5% tax rate are imposed to the first P100, 000 net capital gains achieved during each taxable year from the sales of domestic stocks shares not traded in the Philippine Stock Exchange (PSE). On the excess of P100, 000 the tax rate is 10%. One half of 1% of the gross selling price is the tax for domestic shares listed and traded in the PSE.

Depending on the proportion of the share of stock sold, exchanged or disposed the tax vary at the rates of 1%, 2% and 4%. While 6% tax imposed to capital gains on sale of real property.

5. Royalties, prizes, dividends and other passive income items are taxed at different rates.

Corporate taxpayers

1. 32% of annual taxable income is imposed to domestic corporations including the foreign-owned corporations. A 15% tax on gross income is optional subject to certain conditions.

2. The same rate of domestic corporation tax is imposed to a foreign corporation. For resident foreign corporation, the tax is based on their net income while non resident foreign corporation is taxed based on gross income.

3. Unless registered with PEZA, the tax rate for profit remitted by a branch to its home office is 15%. A domestic corporation which declares its dividend to its foreign parent is subject to 32% tax rate. On the other hand, the tax can be reduced to 15% if the recipient corporation’s home country allows an additional 17% credit as tax deemed paid in the Philippines.

A preferential tax of 10% on remittances of branch profit is approved under the Philippine tax treaties with Netherlands, Korea, Australia, Germany, and Japan. The tax on dividends is 15% unless the payer-subsidiary is registered with BOI or if the beneficial

owner of the dividends is a company that holds a certain percentage of the payer-subsidiary’s capital, the tax is cut down to 10%.
4. Similar as how individual tax payers are taxed, all corporations’ sale of shares of stock, may it be domestic or foreign corporation are subject to capital gains tax.

5. Any excess of the minimum income tax of a corporate which is 2% more than the normal income tax which is 32% shall be carried forward and credited against the normal income tax for the succeeding three taxable years.

6. Improperly accumulated taxable income is taxed at 10% each taxable year.

Businesses taxes are imposed by both national and local government.

National Tax
Taxes imposed by national government includes a 10% value added tax on goods’ importation and sale, barter, lease or exchange of goods, properties and services in the Philippines with certain exceptions; gross receipt tax on certain businesses; excise tax on alcohol, tobacco, petroleum and others.

Local Tax
Certain businesses are subject to local tax like banks and other financial institutions that ranges from .50% to .75% and wholesaler, exporter, manufacturer and contractors which are subject to graduated taxes.

The Philippines has other levied taxes like the real estate tax, stamp tax and community tax. To eliminate double taxation on foreign investors, the Philippine government has engaged with tax treaty with other countries.