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To tax (from the Latin taxare: to estimate, which in turn is from tangere: to touch) is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state.
Taxes are also imposed by many subnational entities. Taxes consist of direct tax or indirect tax, and may be paid in money or as its labour equivalent (often but not always unpaid). A tax may be defined as a "pecuniary burden laid upon individuals or property to support the government […] a payment exacted by legislative authority."[1] A tax "is not a voluntary payment or donation, but an enforced contribution, exacted pursuant to legislative authority" and is "any contribution imposed by government […] whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, supply, or other name."[1]
In modern taxation systems, taxes are levied in money, but in-kind and corvée taxation are characteristic of traditional or pre-capitalist states and their functional equivalents. The method of taxation and the government expenditure of taxes raised is often highly debated in politics and economics. Tax collection is performed by a government agency such as Canada Revenue Agency, the Internal Revenue Service (IRS) in the United States, or Her Majesty's Revenue and Customs (HMRC) in the UK. When taxes are not fully paid, civil penalties (such as fines or forfeiture) or criminal penalties (such as incarceration)[2] may be imposed on the non-paying entity or individual.
[edit] Purposes and effects
Funds provided by taxation have been used by states and their functional equivalents throughout history to carry out many functions. Some of these include expenditures on war, the enforcement of law and public order, protection of property, economic infrastructure (roads, legal tender, enforcement of contracts, etc.), public works, social engineering, and the operation of government itself. Most modern governments also use taxes to fund welfare and public services. These services can include education systems, health care systems, pensions for the elderly, unemployment benefits, and public transportation. Energy, water and waste management systems are also common public utilities. Colonial and modernizing states have also used cash taxes to draw or force reluctant subsistence producers into cash economies.
Governments use different kinds of taxes and vary the tax rates. This is done to distribute the tax burden among individuals or classes of the population involved in taxable activities, such as business, or to redistribute resources between individuals or classes in the population. Historically, the nobility were supported by taxes on the poor; modern social security systems are intended to support the poor, the disabled, or the retired by taxes on those who are still working. In addition, taxes are applied to fund foreign and military aid, to influence the macroeconomic performance of the economy (the government's strategy for doing this is called its fiscal policy - see also tax exemption), or to modify patterns of consumption or employment within an economy, by making some classes of transaction more or less attractive
A nation's tax system is often a reflection of its communal values or the values of those in power. To create a system of taxation, a nation must make choices regarding the distribution of the tax burden—who will pay taxes and how much they will pay—and how the taxes collected will be spent. In democratic nations where the public elects those in charge of establishing the tax system, these choices reflect the type of community which the public wishes to create. In countries where the public does not have a significant amount of influence over the system of taxation, that system may be more of a reflection on the values of those in power.
The resource collected from the public through taxation is always greater than the amount which can be used by the government. The difference is called compliance cost, and includes for example the labour cost and other expenses incurred in complying with tax laws and rules. The collection of a tax in order to spend it on a specified purpose, for example collecting a tax on alcohol to pay directly for alcoholism rehabilitation centres, is called hypothecation. This practice is often disliked by finance ministers, since it reduces their freedom of action. Some economic theorists consider the concept to be intellectually dishonest since (in reality) money is fungible. Furthermore, it often happens that taxes or excises initially levied to fund some specific government programs are then later diverted to the government general fund. In some cases, such taxes are collected in fundamentally inefficient ways, for example highway tolls.
Some economists, especially neo-classical economists, argue that all taxation creates market distortion and results in economic inefficiency. They have therefore sought to identify the kind of tax system that would minimize this distortion. Also, one of every government's most fundamental duties is to administer possession and use of land in the geographic area over which it is sovereign, and it is considered economically efficient for government to recover for public purposes the additional value it creates by providing this unique service.
Since governments also resolve commercial disputes, especially in countries with common law, similar arguments are sometimes used to justify a sales tax or value added tax. Others (e.g. libertarians) argue that most or all forms of taxes are immoral due to their involuntary (and therefore eventually coercive/violent) nature. The most extreme anti-tax view is anarcho-capitalism, in which the provision of all social services should be voluntarily bought by the person(s) using them.
[edit] The Four "R"s
Taxation has four main purposes or effects: Revenue, Redistribution, Repricing, and Representation.[3]
The main purpose is revenue: taxes raise money to spend on roads, schools and hospitals, and on more indirect government functions like market regulation or legal systems. This is the most widely known function.[3]
A second is redistribution. Normally, this means transferring wealth from the richer sections of society to poorer sections.
A third purpose of taxation is repricing. Taxes are levied to address externalities: tobacco is taxed, for example, to discourage smoking, and many people advocate policies such as implementing a carbon tax.[3]
A fourth, consequential effect of taxation in its historical setting has been representation.[3] The American revolutionary slogan "no taxation without representation" implied this: rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Several studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects.[4][5]

The Philippine Government's Comprehensive Tax Reform Program (CTRP) was one of the important requirements for departure from IMF supervision. The program was first proposed in 1996, but it was not until December 1997 that the final component of the CTRP was passed.

Tax reform was seen as necessary for the expansion of the country's tax base thereby increasing revenue and permitting expansion of infrastructure spending and national savings. ln short, tax reform was seen as critical for maintaining the healthy fiscal standing of the Government.

The passage of the CTRP was fraught with delay. At times the CTRP was criticized by the IMF as being a watered-down version of the initial proposals. The Tax Reform Act of 1997 (TRA), the result of nearly two years of discussion and debate, was finally passed on December 11, 1997 and became effective January 1, 1998.

The following discussion outlines the provisions on corporate and individual taxation under the TRA.
Corporate Taxation
Scope For tax purposes, corporations are classified as domestic or foreign depending on the place of incorporation or organization. A foreign corporation is either resident or nonresident.

A domestic corporation is a corporation organized under Philippine laws. A foreign corporation is considered a resident of the Philippines if it is engaged in trade or business in the Philippines (e.g., through a branch).
Taxes on Corporation Income Domestic Corporations and Resident Foreign Corporations
Rates

The regular corporate income tax rate, which applies to both domestic and resident foreign corporations, is 34%. Effective January 1, 1999, this rate will be decreased to 33%; and on January 1, 2000 and onwards to 32%. Preferential rates are shown in Tables 13 and 14. For domestic corporations, the tax base is net world-wide income while for resident foreign corporations, the tax base is net Philippine-source income.
Minimum Corporate IncomeTax (MCIT)

Beginning on the fourth taxable year from the time a corporation commences its business operations, an MCIT of 2% of the gross income as of the end of the taxable year shall be imposed, if the MCIT is greater than the regular corporate income tax. Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal income tax for the three immediately succeeding taxable years.

Capital Gains

For domestic and resident foreign corporations, capital gains are generally subject to the regular corporate income tax rate of 34% beginning 1998; 33% beginning 1999; and 32% beginning 2000 and onwards. However, net capital gains from the sale or exchange of shares of stock not Iisted and traded in the local stock exchange are subject to a capital gains tax or 5% on net capital gains not exceeding P 100,000 and 10% on the excess. If the shares sold are listed and traded through the stock exchange, the tax shall be 1/2 of 1% of the gross selling price.

On sale or exchange of land or buildings not actually used in business and treated as capital asset, the capital gains tax is 6% of the gross selling price or fair market value, whichever is higher.

Fringe Benefits Tax

Fringe benefits granted to supervisory and managerial employees are subject to a tax of 34% (33% effective January 1, 1999; and 32% effective January 1, 2000) of the grossed-up monetary value of the fringe benefit. The grossed-up monetary value of the fringe benefit is determined by dividing the actual monetary value of the fringe benefit by 66% (67% effective January 1, 1999; and 68% effective January 1, 2000).

Fringe benefits given by OBUs, regional or area headquarters, regional operating headquarters of multinational companies, petroleum contractors and subcontractors are taxed at 15% of the grossed-up monetary value of the fringe benefit, which is determined by dividing the actual monetary value of the fringe benefit by 85%.

The fringe benefits tax is payable by the employer. However, fringe benefits which are required by the nature of, or which are necessary to, the trade, business, or profession of the employer or which are for the convenience of the employer are not taxable.

Branch Profits

Any profit remitted by a branch (except those activities registered with the Philippine Economic Zone Authority [PEZA]) to its head office is subject to a tax of 15%. The tax is based on the total profits applied or earmarked for remittance without any deduction for the tax component thereof.

Improperly Accumulated Earnings

The TRA imposes a tax of 10% on the improperly accumulated earnings of a corporation, except in the case of publicly held corporations, banks and other non-bank financial intermediaries and insurance companies. The fact that earnings or profits of a corporation are permitted to accumulate beyond the reasonable needs of a corporation shall be considered for the purpose of avoidance of tax on shareholders, unless proven to the contrary.

Nonresident Corporations

Rates

Generally, Philippine-source income of nonresident foreign corporations such as dividends, rents, royalties, compensation, remuneration for technical services, and capital gains are subject to a tax of 34% beginning 1998, 13% beginning 1999, 32% beginning 2000 and onwards on the gross amount. This tax is withheld at source. Preferential rates are shown in Table 15.

Capital Gains

Capital gains realized by a nonresident foreign corporation from the sale of shares of stock in a domestic corporation are taxed in the same manner and at the same rate as domestic and resident foreign corporations.

Tax-Year/Timing of Tax Payment

Corporate taxpayers may use the calendar year ending on December 31 as their taxable year. However, fiscal years may also be adopted.

All corporations subject to income tax must file quarterly income tax returns on a cumulative basis for the preceding quarter/s upon which their income tax is paid. The quarterly return for the first three quarters must be filed and the tax thereon must be paid not later than 60 days after the close of each quarter. A final adjustment return covering the total net taxable income must be filed on or before the fifteenth day of the fourth month following the close of the fiscal year.
Table13 Preferential Income Tax Rates on Passive Income of Domestic/Resident Foreign Corporations
Dividends received by a domestic or resident foreign corporation from another domestic corporation Not subject to tax
Interest on any currency bank deposit and yield or other monetary benefit from deposit substitutes and from trust fund and similar arrangements 20% final tax
Interest from depository bank under expanded foreign currency deposit (FCD) system 7-1/2% final tax
Royalties 20% final tax
Table 14 Preferential Income Tax Rates for Certain Domestic/Resident Foreign Corporations
International carriers 2-1/2% final tax on gross Philippine billings (in addition, there is a 3% common carrier's tax on the same tax base)
Proprietary educational institutions and nonprofit hospitals 10%
Income derived by a depository bank, under the expanded FCD system, foreign currency deposit units (FCDUs), and offshore banking units (OBUs) 10% final tax on income from foreign currency transactions with local commercial banks including branches of foreign banks authorized by the Bangko Sentral ng Pilipinas to transact business with FCDUs and other depository banks under the FCD system, including interest on foreign currency loans granted under the expanded FCD system to residents
Regional/area headquarters Exempt
Regional operating headquarters 10% of taxable income
Taxable Fringe Benefits
• Housing
• Expense account
• Vehicle of any kind
• Household personnel such as maid, driver, and others
• Interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted
• Membership fees, dues, and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations
• Expenses for foreign travel Holiday and vacation expenses
• Educational assistance to the employee or his dependents
• Life or health insurance and other non-life insurance premiums or similar amounts in excess of what the law allows
Nontaxable Fringe Benefits
• Fringe benefits which are authorized and exempted from tax under special laws
• Contributions of the employer for the benefit of the employee to retirement, insurance, and hospitalization benefit plans
• Benefits given to rank and file employees, whether granted under a collective bargaining agreement or not
• De minimis benefits defined under rules and regulations to be promulgated by the Secretary of Finance, upon the recommendation of the BIR Commissioner

Table 15 Preferential Income Tax Rates for Nonresident Corporations
Interest on foreign loans 20%
Dividends received from domestic corporations





Regular corporate income tax rate. This is reduced to 15% if the recipient foreign corporation is a resident of a country
which:
i) does not impose any tax on dividends received from foreign sources; or
ii) allows a credit against the tax due from the nonresident foreign corporation taxes deemed to have been paid in the Philippines equivalent to 19% for 1998, 18% for 1999, and 17% for 2000 and onwards. These represent the difference between the regular corporate income tax for such years and the 15% tax on dividends.
Income derived from any foreign currency transactions with depository banks under
the expanded FCD system, FCDUs, and OBUs Exempt


Rents and other fees paid to nonresident corporate lessors of aircraft, machinery, and other equipment 7-1/2% on gross rentals or fees

Rents or charter fees paid to nonresident corporate owners of vessels chartered by Philippine nationals 4-1/2% on gross rentals or fees

Fees paid to nonresident cinematographic film owners or lessors 25% on gross income
Gross income of subcontractors of petroleum service contractors 8% in lieu of all other taxes


Calculation of Taxable Income Itemized Deductions

Domestic and resident foreign corporations are allowed to claim various itemized deductions from their gross income, including ordinary and necessary business expenses.

Foreign Income

The foreign income of a domestic corporation is taxable. Double taxation is avoided through the tax credit of foreign taxes paid. The availability of tax credits is, however, subject to the per country and overall limitations. Alternatively, taxpayers may elect to claim the foreign tax as a deduction from taxable income.

Losses/Group Relief

Business-related losses during the taxable year which have not been compensated for by insurance or other forms of indemnity are allowed to be taken as deductions.

No deduction is allowed for losses from transactions between certain related parties. The Commissioner of Internal Revenue has the power to allocate and adjust certain items of income and deduction among related taxpayers. Transfer prices between related parties are carefully examined to make sure that these are at arm's length and reasonable under the circumstances.

Subject to certain conditions, net operating loss in a taxable year is allowed to be carried over to the next three succeeding years following the year of loss.
Capital Gains/Loss

Capital gains are gains arising from the sale or exchange of capital assets. Losses from the sale or exchange of capital assests are deductible but only to the extent of capital gains.
Withholding Tax Wages

The tax due on compensation income received by individuals must be withheld by every employer. Individuals are allowed to claim certain personal and additional exemptions on their status and number of dependents.
Expanded Withholding Tax (EWT) System - Resident Recipient

A creditable tax must be withheld under the EWT system on specified income payments to residents of the Philippines. The tax withheld is creditable against the income tax liability of the recipient of the income. Some payments subject to EWT are show it in Table 16.
Nonresident Recipient/Foreign Corporations Withholding Tax

All remittances of interest, dividends, rents, royalties, premiums, compensation, remuneration for technical services, or other fixed or determinable annual, periodic, or casual gains and income, including capital gains from sources within the Philippines, are subject to withholding tax on the gross amount.
Table 16 Payments Subject to EWT
• payments to individuals practicing profession (10%); payments to contractors (1%); professional fees and other remuneration to juridical persons other than general professional partnerships (5%);
• Rentals of real property (5%); and
• Gross selling price on the sales of real property (subject to the 2-1/2%, 5%, or 7- 1/2% EWT depending on the business of the seller)
Repatriation of Profit Restrictions

Full and immediate repatriation and remittance of investmerits and profits without prior BSP approval is allowed. However, capital and profits on foreign investment registered with the BSP are allowed to be repatriated using foreign currency purchased from the banking system.

Remittance of Royalties, Technical Services, Management Fees

Royalties technical service fees and management fees may be remitted without prior approval of the BSP.
Tax Incentives Companies engaged in preferred areas of activities and registered with the Board of Investments (BOI) in accordance with the provisions of the Omnibus Investments Code are entitled to certain tax and non-tax incentives.

Among the tax incentives are income tax holiday and tax credit for taxes and duties on raw materials used in the production of goods for export.

Regional or area headquarters, regional operating headquarters, their expatriate employees, and their Filipino employees holding the same positions as the expatriate employees enjoy certain incentives.
Indirect Taxes Value-Added Tax (VAT)

In general, the 10% VAT is imposed on the sale of goods and other properties and services in the Philippines. The importation of goods to the Philippines is also subject to VAT. The VAT is 0% on certain transactions such as export sales of goods and sales of services to nonresidents paid for in foreign currency and accounted for in accordance with the rules and regulations of the BSP.

VAT is imposed on the gross selling price (in case of sale of goods) and gross receipts (in case of sale of services). For importation, the tax is based on the total value used by the Bureau of Customs in determining tariff and customs duties. VAT paid by a VAT-registered person on his purchase or importation of goods or services (input tax) is creditable against the tax due on his own sale of goods and services (output tax).

Excise Taxes

Excise taxes are imposed on certain goods (such as cigarettes, liquor, and motor vehicles) manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition. Excise taxes are also imposed on certain imported goods, in addition to the VAT and customs duties.
Percentage Tax on Business

Persons or entities subject to percentage taxes include domestic common carriers of passengers, international carriers, and those in the banking and finance, life insurance and amusement business (see samples in Table 17). This tax is imposed on gross receipts or gross income.
A percentage tax of 3% is imposed on non-VAT registered persons whose gross sales or gross receipts do not exceed P550,000.
Table 17 Selected Percentage Tax Rates
Types of Business Percentage Tax Rate
Banks - income from lending and financial easing activities 1%, 3%, or 5% of gross receipts depending on the maturity date of the instruments; tax-exempt if maturity period is over seven years
Life insurance companies doing business in the Philippines 5% of the total premiums collected
Electric, water, and gas utilities 2% of gross receipts
Domestic common carriers of passengers 3% of gross receipts
International carriers 3% of gross receipts
Finance companies - income from lending and financial leasing activities 1%, 3%, or 5% of gross receipts depending on the maturity date of the instruments; tax-exempt if maturity period is over seven years
Stock Transaction Tax

A stock transaction tax (STT) of 1/2 of 1% of gross selling price is imposed on the sale, barter, exchange, or other disposition of shares through the facilities of the stock exchange. The STT is also imposed on the sale, barter, exchange, or other disposition of shares of stock in closely held corporations through initial public offering (IPO). A closely held corporation is any corporation in which at least 50% in value of the outstanding capital stock or at least 50% of the total combined voting power of all classes of stock entitled to vote is owned directly or indirectly by or for not more than 20 individuals.
The tax shall be at the following rates in accordance with the proportion of the shares sold, bartered, exchanged, or otherwise disposed of to the total outstanding shares of stock after the Iisting in the local stock exchange:
Up to 25% - 4%
Over 25% but not over 33-1/3% - 2%
Over 33-1/3% - 1%
The tax base shalI be the gross selIing price or gross value in money of the shares of stock sold, bartered, exchanged, or otherwise disposed of.

Documentary Stamp Tax

The documentary stamp tax is an excise tax on documents, instruments, loan agreements and commercial papers, and on acceptances, assignments, sales and transfers of the obligation, right, or property incident thereto. This tax is imposed on the maker, signor, issuer, acceptor, or transferor. Table18 shows some of the documents requiring payment of documentary stamp tax.
Table18 Documents Requiring Documentary Stamps
Bank checks P1.50 for each check regardless of amount
Debentures and certificates of indebtedness P1.50 for every P200 of the face value
Certificates of stock P2.00 for every P200 of the par value on original issue. In case of transfers, the tax is P1.50 for every P200 of the par value
Deeds of sale and conveyances of real property P15.00 if the consideration does not exceed P1,000; additional P15.00 for every P1,000 in excess of P1,000 of the consideration
Bonds, loan agreements, promissory notes, bills of exchange, drafts, instruments and securities issued by the Government P0.30 for every P200 of the face value
Customs Duo

Goods are subject to customs duties upon importation except as otherwise specifically provided for under the Tariff and Customs Code or special laws. Under the flexible tariff clause of the Philippine Constitution, the President may be authorized by law to fix, within specified limits, tariff rates and other duties, within the framework of the national development program of the Government.

Local Taxes

Under the Local Government Code, local government units (LGUs) are given the authority to tax all activities except those expressly prohibited by the Code or other laws. Among the taxes which cannot be levied by LGUs are income tax, customs duties, documentary stamp tax, and estate and gift taxes.
Tax Treaties The Philippines has entered into treaties with various countries for the avoidance of double taxation and prevention of fiscal evasion. Tax treaties with the following countries have been ratified and are currently in force: Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Indonesia, India, Israel, Italy, Japan, Korea, Malaysia, the Netherlands, New Zealand, Norway, Pakistan, Singapore, Spain, Sweden, Thailand, United Kingdom, and the United States.
Taxation of Individuals
Classification of Taxpayers For tax purposes, individuals are classified into:
• Resident citizens;
• Nonresident citizens;
• Resident aliens;
• Nonresident aliens engaged in trade or business; and
• Nonresident aliens not engaged in trade or business.
The residence of an alien is determined by his intentions and by the length and nature of his stay. An alien who comes to the Philippines for a definite purpose that may be accomplished promptly is a nonresident. However he may be considered a resident if the planned duration of his stay is indefinite. The circumstances of each case are considered in every question involving residency.

Whether a nonresident alien is engaged in trade or business in the Philippines is determined on the basis of the length of his stay in the Philippines. A nonresident alien is presumed not to be engaged in trade or business in the Philippines if his aggregate stay in the country during any calendar year does not exceed 180 days.
Table 19 Rates of Income Tax on Citizens and Resident Aliens*
(In Philippine pesos)
Amount Subject to Tax

Not over P10,000
Over P10,000 but not over P30.000
Over P30,000 but not over P70.000
Over P70,000 but not over P140,000
Over P140,000 but not over P250,000
Over P250,000 but not over P500,000
Over P500,000 Applicable Rate

5%
P500 + 10% of the excess over P10,000
P2,500 + 15% of the excess over P30,000
P8,500 + 20% of the excess over P70,000
P22,500 + 25% of the excess over P140,000
P50,000 + 30% of the excess over P250,000
P125,000 + 34% of the excess over P500,000 for 1998 (33% for 1999; 32% for 2000 and onwards)
*Applicable to resident citizens and resident aliens whether engaged in trade or business, practising profession, or employed.

Scope and Rates of Tax For tax purposes, individuals are classified into:
• Resident citizens;
• Nonresident citizens;
• Resident aliens;
• Nonresident aliens engaged in trade or business; and
• Nonresident aliens not engaged in trade or business.
The residence of an alien is determined by his intentions and by the length and nature of his stay. An alien who comes to the Philippines for a definite purpose that may be accomplished promptly is a nonresident. However he may be considered a resident if the planned duration of his stay is indefinite. The circumstances of each case are considered in every question involving residency.

Whether a nonresident alien is engaged in trade or business in the Philippines is determined on the basis of the length of his stay in the Philippines. A nonresident alien is presumed not to be engaged in trade or business in the Philippines if his aggregate stay in the country during any calendar year does not exceed 180 days.
Economic slowdown looms
Despite political scandals, coup d’etat rumours, and protests about government corruption, the Philippines has posted an average of 5.2% GDP growth rate from 2002 to 2006. The economy expanded 7.1% in 2007, the highest in more than two decades. Reforms such as the passage of the Expanded Value-added Tax Law and Dual Citizenship Law helped stabilize the economy.

Increased remittances from Overseas Filipinos also provided a significant boost to consumption and investment. Total remittances reached US$16.4 billion in 2008, around 9.7% of GDP. In 2008, remittances rose by 13.7% following 13.2% growth in 2007, 19.4% in 2006 and 25% in 2005.

However, GDP growth slowed down to 3.8% in 2008. This was mainly due to high food and fuel prices in the first half of 2008 combined with the global financial meltdown and economics slowdown in the second half.

The economy is on the brink of recession as the economy grew by a measly 0.4% in Q1 2009 from the previous year. Seasonally-adjusted, the economy contracted by 2.3%, the worst Q1 performance in 20 years. Several groups including the IMF, World Bank and credit-rating agencies expect the economy to contract by more than 1% in 2009.

Unemployment and underemployment remains a problem, while inflation is decelerating due to weak demand. The Bangko Sentral ng Pilipinas, the central bank, lowered key policy rates in 2009 to maintain its inflation targets. The overnight borrowing rate is down to 4.25% in May 2009, the lowest in 17 years.

The Philippines is an archipelago of 7,107 islands sitting off the coast of Southeast Asia. Most of the 83 million people live on the 11 biggest islands. Spanish, American, and Chinese influences are prominent. White, sandy beaches, century-old churches, and other natural and man-made wonders await tourists.
Last Updated: Jun 27, 2009
Philippine real estate market freezes due to the global crisis

The average price of a luxury three-bedroom condominium in the Makati Central Business District (CBD) at PHP101,000 in Q1 2009, relatively unchanged since Q3 2008 according to Colliers International. Compared to the previous quarter, the average price dropped by 0.7% (-0.6% in real terms).

The stagnant property prices come on the heels of the recovery from the Asian Crisis. Condo prices rose by an average of 11.3% (1.9% in real terms) in 2008, following a rise of 14.2% (11.2% in real terms) in 2007, and 9.3% (1.6% in real terms) in 2005, according to data from Colliers International.

Demand from overseas Filipinos is weakening due to the global financial meltdown and economic recession. The weak demand prompted the postponement or cancellation of several real estate projects, which mostly affected luxury condominium projects in the Makati CBD.

Local housing demand is also expected to remain weak with first-quarter economic performance suggesting the possibility of recession in 2009. The housing market is expected to stagnate as the economy’s performance is not expected to improve until at least next year.

Foreigners can buy condominiums as long as the foreign component of the building does not exceed 40%. Dual Citizens can buy up to 1,000 square metres (sq. m.) of urban residential land and 5,000 sq. m of urban commercial land. Foreigners can also lease land up to 75 years.

[April 02, 2007]
Philippines: Tax regulations
(EIU Viewswire Via Thomson Dialog NewsEdge) COUNTRY BRIEFING

FROM THE ECONOMIST INTELLIGENCE UNIT

The tax burden in the Philippines is moderate, despite a rise in the corporate tax rate to 35% (from32%) that took effect in November 2005.

Attractive tax incentives are available for qualified foreign investors, mainly for exporting businesses and for activities that qualify under the governments annual Investments Priorities Plan. An especially favourable regime is available to international firms that establish regional headquarters in thePhilippines.
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Since 2002 the countrys largest taxpayers have been able to pay taxes and file returns online, or through the websites of accredited commercial banks. But businesses still complain that complying with government requirements is often difficult, particularly in the following areas: getting permits to use computerised accounting systems; obtaining tax refunds and tax credits; enduring tax audits; and getting clearance to transfer real property. To comply with complicated regulations, businesses incur additional costs to hire extra compliance staff and to maintain external consultants.

Corruption in the governments two major revenue agencies, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BoC), has encouraged rampant evasion of personal and corporate income taxes. Corruption usually takes place during annual tax audits of companies by BIR examiners. The opportunities for corruption present themselves when companies are found to be cheating on taxes; some BIR examiners offer to settle for a lower tax assessment in exchange for a bribe.


Efforts to stamp out corruption in these agencies have had only limited success. For example, the Revenue Integrity Protection Service (RIPS) created in December 2003 to help prosecute corrupt BIR and BoC personnel ran out of steam when key officials backing the drive resigned during the second half of 2005. Similarly, the Run After Tax Evaders (RATE) programme has fizzled out; under the RATE programme, the government in 2005 filed tax-evasion and tax-fraud lawsuits against prominent individuals and businesses.

As a revenue-enhancement measure, the BIR launched a no-audit programme in January 2005 to encourage delinquent taxpayers to pay higher taxes. Under the programme, taxpayers who voluntarily raise their income tax payments by 25% from the previous year are spared the tax audits that the BIR routinely impose on businesses. The programme, which was outlined in Executive Order 399 and expanded in November 2005 (Revenue Regulation 18/2005), will run for five years, through 2010.

The countrys main income tax legislation is the Tax Reform Act of 1997 (Republic Act 8424, also known as the National Internal Revenue Code of 1997), which took effect on January1st 1998, and its amendments, including RA9337, which took effect on November1st 2005. The Tax Reform Act simplified the income tax system to encourage compliance and strengthen the capacity of the BIR to prosecute cases of tax fraud and tax evasion.

RA9337 has been important in the governments effort to wipe out the fiscal deficit by 2008. Apart from temporarily raising the corporate income tax rate, the law expanded the number of products and services subject to the value-added tax (VAT). RA9337 also authorised the president to increase the VAT rate to 12% (from 10%) on February1st 2006. RA9238, which amended the National Internal Revenue Code and took force in January 2004, lets financial institutions assess a gross receipts tax in lieu of VAT.

RA9294, enacted in April 2004, restored the exemption of offshore banking units (OBUs) and banks foreign-currency deposit units (FCDUs) from the gross receipts tax, documentary stamp taxes and the 15% branch profits remittance tax. But the OBUs and FCDUs will continue to pay a final tax of 10% on onshore income. RA9334, signed into law in December 2004, raised the excise taxes on alcohol and tobacco products.

For purposes of taxation, companies are differentiated into domestic resident corporations, resident foreign corporations or non-resident companies.

Under Republic Act (RA) 9337 enacted in May 2005 and implemented on November1st 2005, domestic companies are subject to a 35% tax rate on income derived from all sources inside and outside the Philippines. Resident foreign corporations, including branches, also are subject to a 35% tax rate but only on income derived from sources within the Philippines in the preceding taxable year. The new law will reduce the tax rate to 30% in January 2009.

For non-resident foreign corporations, RA9337 set the tax rate at 35% of gross income received during each taxable year from all sources within the Philippines. This rate will drop to 30% on January1st2009.

A minimum corporate income tax (MCIT) of 2% of the gross income is imposed on a resident foreign or domestic corporation (beginning with the fourth taxable year immediately following the year the company started business operations). The MCIT applies when such a company has zero or negative taxable income or when the amount of that minimum income tax is greater than the normal income tax due from such a corporation. Any excess of the MCIT over the normal income tax is carried forward and credited against the normal income tax for the next three taxable years. The secretary of finance may suspend the MCIT for any corporation that suffers losses because of prolonged labour disputes, natural disasters and legitimate business reverses.

Resident corporations (domestic or foreign) are also liable for a 32% tax on the grossed-up monetary value of fringe benefits to non-rank-and-file employees, unless the fringe benefits were necessary to the trade, business or profession of the company (Section 33A). (The grossed-up monetary value of the fringe benefit is determined by dividing the actual monetary value of the fringe benefit by 68%.)

RA8424 kept different income tax rates for certain businesses, such as international carriers (2.5% on gross Philippine billings) and offshore banking units (exempt on offshore income but subject to 10% final tax on onshore income or interest income derived from foreign-currency loans extended to residents). After-tax profit remitted by branches to their head offices remained subject to a 15% branch profit remittance tax under the Tax Reform Act.

Corporate taxation, 2007The following rates apply to domestic and resident foreign corporations in the Philippines:Net income per financial statementsP2,000,000Add non-deductible expenses:Interest expense(a)37,000Insurance premium for company president45,000Provision for doubtful accounts35,000Provision for inventory obsolescence40,000Unrealised foreign-exchange loss20,000Income tax paid for first three quarters200,000Total non-deductible expenses377,000Less:Income already subject to final tax, tax-exempt income and othertax-deductible expenses (such as interest income from local peso deposits)150,000Dividends received from a domestic firm10,000Bad debts written off15,000Realised foreign-exchange loss5,000Taxable net income2,197,000Tax due at 35% rate768,950Less income tax paid for first three quarters200,000Income tax payable (greater than MCIT)(b)568,950(a) Interest expense of P100,000 reduced by an amount equal to 42% of interest income (100,000 (150,000 x 42%)). (b) Minimum corporate income tax is 2% of gross income (P2m).Source: PricewaterhouseCoopers Philippines/Isla Lipana & Co.Foreign corporations are taxed only on income derived from sources within the Philippines. Resident corporations (domestic and foreign) are assessed on taxable income (gross income less allowable deductions); non-resident foreign corporations are taxed on their gross income derived within the Philippines.

In computing taxable income, a foreign company may deduct ordinary and necessary expenses from its gross income. Such deductible expenses include the following: interest payments, taxes (except Philippine income tax, income taxes imposed by a foreign country, estate and donors taxes), bad debts, depreciation, depletion of oil and gas wells and mines for these industries, charitable and other contributions (but not more than 5% of taxable income), research and development, and pension trusts for employees.

A company may also deduct a reasonable allowance for entertainment expenses if the expenses do not exceed ceilings set by the Bureau of Internal Revenue. The expenses must also meet the legal requirements for deductibility of ordinary and necessary expenses.

Deductions for interest expense paid on indebtedness also are allowed. However, the allowable deduction will be reduced by 42% (up from 38% under RA9337) of the interest income subject to final tax. RA9337 will again alter this rate, to 33%, on January1st2009.

For foreign corporations, depreciation is allowed only for properties in the Philippines.

Accepted methods of depreciating assets for tax purposes include the straight-line, declining-balance, sum-of-the-years digits and any other method the secretary of finance prescribes as recommended by the commissioner of internal revenue. Corporations may adopt their own depreciation rates if such rates are deemed reasonable.

The straight-line method is customary, though different depreciation methods are allowed for various types of assets. A company may change from an agreed useful life and depreciation rate only if it can prove that it had not considered some circumstances when it adopted the rate.

For properties used in petroleum operations, depreciation is via the straight-line or declining-balance method, at the option of the service contractor. The useful life of property used to produce petroleum is set at ten years, unless the commissioner of internal revenue determines it to be shorter. Property not directly used in petroleum production is depreciated under the straight-line method based on an estimated useful life of five years.

For all properties used in mining operations other than petroleum, depreciation is computed as follows: at the normal rate of depreciation if the expected life is up to ten years, or depreciated over any number of years between five years and the expected life if the latter is more than ten years. The contractor must notify the Bureau of Internal Revenue at the beginning of the depreciation period as to which depreciation rate will be used.

Corporations may use the calendar year or their own fiscal year as the basis for filing income tax returns.

Corporate income tax payments are due and payable within 60 days of the close of each of the first three quarters of the taxable year. A final return covering the total taxable income of the corporation for the preceding calendar or fiscal year must be filed on or before the 15th day of the fourth month after the close of the firms taxable year. Late payments incur a penalty equivalent to 25% of the amount due. In addition, annual interest of 20% applies on the unpaid amount from the due date until fully paid.

Since 2000 the countrys largest taxpayers have been able to pay taxes and file returns online. To enrol in the electronic filing and payment system (EFPS) of the Bureau of Internal Revenue (BIR), a firm must write a letter to the BIR providing necessary information such as company name, date of incorporation and contact details. It takes the BIR about a week to process the enrolment application. When making electronic payments through the EFPS, a company must state the name of a bank where it has an account; upon entry to the system, it will connect to the banks website, where the bank-account number must be encoded.

Revenue Regulation 16/2002, issued in 2002, allows taxpayers to pay income tax and file returns through accredited commercial banks.

There are no national taxes on capital, except for nominal stamp taxes. But local governments levy real-property taxes on land, buildings, machinery and other improvements. Municipalities in Metro Manila apply varying rates but generally do not exceed 2% of the real propertys assessed value. Firms registered with the Board of Investments, the Philippine Economic Zone Authority and the Special Free-Trade Zones (like Subic Freeport and Clark Special Economic Zone) are exempt from local taxes, except for the real-property tax.

Under Republic Act (RA) 8424, net capital gain is defined as the excess of gains from sales or exchanges of capital assets over the losses from such sales or exchanges. Capital losses may be deducted only to the extent they offset capital gains. Net capital gain from the sale of shares of domestic corporations not traded on the stock exchange is subject to the following tax rates: 5% for P100,000 or less; 10% for any amount exceeding P100,000.

No capital gains tax applies on the sale of shares listed and traded through a local stock exchange (though a licensed broker must process the sale); instead, a transaction tax applies, computed at 0.5% of the gross sale price.

A final tax of 6% applies on the gain presumed to have been realised on the sale, exchange or disposition of lands and/or buildings that are not actually used in the business of a corporation and that are treated as capital assets, based on the gross selling price or fair market value, whichever is higher. The gain is defined as the amount of money received (excluding interest on instalments) or the fair market value of the property (whichever is higher) in excess of the cost of losses incurred in the sale or disposition.

A share-transaction tax applies on initial public offerings (IPOs). Section 127 of RA8424 sets out a graduated schedule of rates, as follows:

4% if the offer amounts to 25% or less of total outstanding shares;
2% if the offer exceeds 25% but is not more than 33.33% of total outstanding shares; and
1% if the offer exceeds 33.33% of total outstanding shares.The stockbroker in the transaction must collect the tax from the seller, remit it to the Bureau of Internal Revenue no later than five banking days after the transaction and submit a weekly declaration to the secretary of the stock exchange. For IPOs, the corporate issuer must file the return and pay the tax within 30 days of the listing date.

Dividends are paid out of corporate income after tax. Since they have already been taxed as corporate earnings, the dividends are tax exempt when received by a resident foreign corporation from domestic corporations. However, a final withholding tax of 15% applies to dividends received by non-resident foreign corporations from domestic corporations; this applies only if the country in which the non-resident corporation is domiciled allows a credit against the tax due from the non-resident foreign corporation deemed to have been paid in the Philippines at a rate of 20% (that is, the difference between the 15% tax on dividends and the regular income tax of 35%).

Beginning January1st 2009 the credit against the tax due will be equivalent to 15%, which represents the difference between the regular income tax of 30% and the 15% tax on dividends.

Interest earnings in the Philippines are classified as passive income; hence, they are subject to a uniform final withholding tax of 20% for both resident and non-resident foreign corporations (for interest income on foreign loans contracted since August 1986). Under RA8424, interest income derived by resident corporations from banks under the expanded foreign-currency deposit system is taxed at 7.5% of such income.

Royalties and fees paid to resident foreign corporations are subject to a 20% withholding tax. Under RA8424, payments for royalties are considered ordinary and necessary expenses deductible from gross income.

Royalties to non-resident foreign corporations are part of gross income. If services were performed by a non-resident foreign corporation not covered by a tax treaty, the income is subject to a final income tax of 35%, based on gross payments. If a tax treaty covers the non-resident foreign corporation and it has no permanent establishment in the Philippines, the payments are subject to the tax rate provided under the treaty.

However, if the non-resident foreign company has a permanent establishment in the Philippines, the royalties are subject to a final tax of 20%, which the Philippine payer withholds and remits to the Bureau of Internal Revenue.

A 12% value-added tax (VAT) applies on the sale or lease of copyrights, patents, trade or service marks, regardless of where the services are performed. RA9337 removed an exemption from VAT that had been granted on the sale by the artists themselves of their works of art, literary works and musical compositions.

Since VAT is an indirect tax, it may be shifted or passed on to the buyer, transferee or lessee of the goods (properties or services), who then credits it against his own VAT liability on his own sales. However, where the seller of the services, including royalty-type services, is a non-resident foreign corporation, the payer of the fees is responsible for paying VAT on such royalties on behalf of the non-resident foreign company by filing a separate VAT return for this purpose.

The Philippines has tax treaties with 35 countries for avoiding double taxation. These treaties provide procedures for resolving interpretative disputes and enforcing taxes of both countries.

Applications for tax-treaty relief, including requests for exemptions, beneficial rates, refunds and tax credits, are filed with the International Tax Affairs Division of the Bureau of Internal Revenue (BIR). The division provides prescribed application forms, which must be filed 15 days before the transaction (that is, before paying dividends, royalties etc), along with supporting documents. Upon application, the BIR can grant a certification attesting to the applicability of tax treaties.

Obtaining a refund of excess tax may prove difficult. In addition, some treaty disputes in recent years arose between US companies and the BIR, mainly because over the interpretation of permanent establishments, business profits and royalties. A number of disputes (such as the applicability of a preferential withholding tax rate on royalties paid to US firms by a Philippine company) were resolved in favour of US taxpayers.

Withholding tax rates under Philippine double-tax treaties (%)Country of recipientBranch profit remittanceDividendsInterestRoyaltiesAustralia1515/2510/1515/25Austria1010/2510/1
510/15Bahrain1010/151010/15Bangladesh1010/151515Belgium15*15/2010/1515/25Brazil1
515/2510/1515/25Canada1515/2510/1525China1010/151010/15Czech Republic1010/151010/15Denmark1010/151015Finland151510/1515/25France1010/1510/151
5Germany10*10/1510/1510/15Hungary1515/201515India15*15/2010/1515*Indonesia2015/2
010/1515/25Israel1010/151015Italy201510/1515/25Japan10*10/2510/1510/15/25Malaysi
a15*15/251515/25Netherlands1010/1510/1510/15New Zealand1515/2510/1515/25Norway1515/25157.5/10/25Pakistan1515/2510/1515/25Romania
1010/1510/1510/15/25Russia15*151515Singapore15*15/2510/1515/25South Korea1010/2510/1510/15Spain10*10/1510/1510/15/20Sweden1010/151015Switzerland1010
/151015Thailand15*15*10/1515/25United Kingdom15*15/2510/1515/25United States20*20/2510/1515/25Vietnam1010/151515* Philippines tax.Source: Bureau of Internal Revenue.A portion of the home-office expenses may be charged to a Philippine branch and deducted in the computation of taxable income if the expenses can be proved reasonable and relevant to the operations of the Philippine branch. The company must properly apportion such deductions based on the ratio of gross income within the Philippines to total gross income or the ratio of net sales in the Philippines to total net sales. The commissioner of internal revenue must approve any other allocation method. An independent auditor must certify claims for such deductions.

Net losses of any branch, income tax payments, capital expenditures and expenses directly chargeable to any branch may not be pro-rated to the Philippine branch.

Book III of the 1987 Omnibus Investment Code (and a subsequent amendment in 1999 via RA8756) exempts regional or area headquarters of international corporations in the Philippines from income tax if they do not derive income from the Philippines. They are also exempt from the contractors tax, local fees, dues, imposts and any other local taxes. Foreign personnel of such headquarters are eligible for special tax treatment.

Headquarters companies must register with the Securities and Exchange Commission and Board of Investments, and they must bring into the Philippines at least US$50,000 a year (or its equivalent in other acceptable currencies) to finance their operations. Regional operating headquarters (ROHQ) are allowed to derive income from the Philippines under RA8756, but they must initially remit into the country not less than US$200,000 for their operations.

RA8424 says that regional or area headquarters not deriving income from the Philippines are not subject to income tax and value-added tax (VAT), but that regional operating headquarters must pay a tax of 10% of their taxable income and a 12% VAT. Moreover, any income derived from the Philippines by ROHQs, when remitted to a parent company, is subject to a tax on branch-profit remittances (Section 28[a] of the National Internal Revenue Code). RA8424 defined a regional or area headquarters as a branch that does not earn income in the Philippines and was established by a multinational company as a supervisory, communications and co-ordinating centre for its affiliates, subsidiaries or branches in the AsiaPacific region and other foreign markets. An ROHQ is a branch established in the Philippines by a multinational company to provide the following services: general administration and planning, business planning and co-ordination, procurement of raw materials and components, corporate finance advisory services, marketing control and sales promotion, training and personnel management, logistical services, research-and-development services and product development, technical support and maintenance, data processing and business development.

A general value-added tax (VAT) at 12% (increased from 10% on February1st 2006) applies to all manufacturers, producers, traders, wholesalers, retailers, and providers of most goods and services with gross annual sales exceeding P1.5m. The VAT also applies to those that import goods, whether for business or otherwise. VAT payments are collected monthly.

The expanded VAT (E-VAT) law, which took effect on January1st 1996, extended the tax to several previously uncovered transactions. These include the sale of services by hotels, restaurants, caterers, securities dealers, telecoms, and transport and insurance companies, and the sale and lease of real properties and intangibles such as patents, copyrights, and trade and service marks. Republic Act (RA) 9337, which went into force on November1st 2005, further expanded the number of products and services subject to VAT. Coal, petroleum products, power, sales of electric co-operatives, domestic transport of passengers by air and sea, medical and legal services by professionals, non-food agricultural products, and works of art are now subject to VAT. To mitigate the effect of VAT on the prices of petroleum products, however, the new law reduced the excise taxes on these products.

Under RA9337, an entity engaged in a business activity covered by VAT, whose annual sales total less than P1.5m, is subject to a 3% tax, in lieu of the VAT.

Businesses otherwise exempt from VAT (but subject to percentage tax) may opt to be subject to VAT to obtain two advantages: (1) access to the credits allowed in every subsequent sale or transaction, resulting in a reduction of tax payable, and (2) access to refunds on all VAT paid to buy raw materials, supplies, capital goods and certain services used to produce export goods.

A preferential zero rate applies to the export of goods and sales of services related to processing, manufacturing or repackaging goods for export (if they are paid in foreign currency accounted under the central banks rules). Assuch, zero rating applies to sales of raw materials and services rendered by contractors and subcontractors to export firms registered with the Board of Investments. The sale of goods, equipment and fuel to firms engaged in international shipping and air-transport operations also are subject to a zero rate.

The following transactions are exempt from VAT: sale or import of agricultural and marine food products in their original state; sale of fertilisers, seeds, fingerlings, poultry feeds and raw materials thereof; import of personal and household effects of returning resident or non-resident citizens resettling in the Philippines; services of agricultural contract growers and millers of rice, maize and sugar; medical, dental, hospital and veterinary services except those rendered by professionals; educational services rendered by private educational institutions; services rendered by individuals pursuant to an employer-employee relationship; services rendered by regional or area headquarters of multinational companies; transactions exempt under special laws or international agreements; sales by agricultural, credit and other co-operatives, except electric co-operatives; gross receipts from lending activities of credit co-operatives registered with the government; exports by persons who are not VAT registered; sale of residential lots valued at less than P1.5m and residential dwellings valued at less than P2.5m; lease of residential units with monthly rentals of less than P10,000; printing, publication or sale of most books, newspapers and magazines; import, sale or lease of passenger or cargo vessels and aircraft; import of fuel, goods and supplies by firms engaged in international shipping or air-transport operations; and services of banks and non-bank financial intermediaries.

Banks and other financial intermediaries with quasi-banking functions are subject to a gross receipts tax (GRT) of 17% under RA9337. For example, income from lending is subject to 5% GRT if the maturity period is five years or less, and 1% for longer periods. Dividends and equity shares and net income of subsidiaries of banks, however, are zero-rated. RA9337 raised the GRT on net trading gains of banks on foreign currency, debt securities, derivatives and other similar financial instruments to 7% (from 5%).

VAT is an indirect tax and thus may be shifted or passed on to the buyer, transferee or lessee of the goods, (properties or services), which then credits the amount against its own VAT liability on its own sales (called output VAT). RA9337 allows a taxpayer to claim input VAT credits of up to 70% of its own output VAT. However, this applies only to companies whose input VAT credits exceed their output VAT.

Excise taxes apply to wines and spirits, beer, cigarettes and tobacco products, lubricating oils and grease (and similar preparations and additives), processed gas, waxes, denatured alcohol, cinematographic films, saccharine, coal and coke, cars, non-essential goods (jewellery, yachts and other pleasure vessels), mineral products, naphtha and other similar products of distillation, asphalt, and petroleum and other fuel products.

RA8184, passed in 1996, restructured the excise tax on petroleum products. RA8240, approved the same year, restructured the excise tax on distilled spirits, wines, beer and other fermented liquor, cigars and cigarettes. RA9334, passed in December 2004 and signed into law by the president in January 2005, further increased excise taxes on tobacco and alcohol products.

RA9337 reduced excise taxes on several petroleum products to mitigate the effect of the VAT, including on naphtha and regular petrol, kerosene, diesel-fuel oil and bunker-fuel oil. In addition, RA9337 removed the excise tax on locally extracted natural gas.

A documentary stamp tax (DST), either fixed or based on the face value of the document, applies to instruments such as bonds and certificates of indebtedness, share certificates, sales agreements, bank drafts, bills of exchange, letters of credit, insurance policies, bills of lading, lease agreements, mortgages, charter parties and warehouse receipts. Although failure to stamp a document does not invalidate it, unstamped documents are not acceptable in court until the stamp tax is paid.

Republic Act (RA) 9243 of February 2004 revised some DST rates. It abolished the stamp tax on several products, including derivatives and bank deposit accounts without fixed terms, and on the secondary trading of securities in the equities market. The law also reduced stamp taxes on original issues of share certificates, and on premiums of annuities and pre-need plans. But it increased stamp taxes on debt instruments of more than one year, driving up the costs of borrowing medium and long-term funds. DST rates, as amended by RA9243, are as follows:

P1 (reduced from P2) on each P200 or fraction thereof of the original issue of share certificates by a corporation or association (the rate is on the actual value for share dividends or no-par-value shares);

P0.75 (reduced from P1.50) on each P200 or fraction thereof on the par value of certificates of obligation or share certificates in any corporation or association covered in any memorandum of sale or delivery or other evidence of transfer; and

P1 (increased from P0.30) on each P200 or fraction thereof of the issue price on the original issue of debt instruments of more than 365 days. Debt instruments with terms of less than one year are charged a DST proportional to the ratio of their terms in number of days to 365 days. Debt instruments include debentures, certificates of indebtedness, bonds, loan agreements, securities issued by the government, promissory notes and deposit debt instruments. (Loan agreements or promissory notes are exempt if they are valued at P250,000 or less and executed by an individual to buy a house, lot, motor vehicle, appliance or furniture on instalment for personal usenot for business, resale, barter or hire).RA9243 did not change the following rates:

P0.30 on each P200 or fraction thereof on the face value of all bills of exchange or drafts;
P0.50 on each P200 or fraction thereof on the face value of certificates of profits or any document showing interest in the property or accumulation of any corporation or association, and on all transfers of such certificates;

P1.50 on each bank cheque, draft or certificate of deposit not drawing interest;
P15 on a proxy for voting at any election for officers of a corporation or association;
P3 for the first P2,000 or fraction thereof, and an additional P1 for every P1,000 exceeding the P2,000, for each year of the term of a lease or rent of any land or tenement; and

P0.30 on each P200 or fraction thereof on the face value of letters of credit and foreign bills of exchange.For insurance documents, DSTs are as follows:

life insurance: P0.50 on each P200 or fraction thereof of the premium collected;
property insurance, fidelity bonds and other non-life policies: P0.50 on each P4 of premium charged;

annuities: P0.50 (reduced by RA 9243 from P1.50) on each P200;
pre-need plans: P0.20 (reduced from P0.50) on each P200 of plan value; and
indemnity bonds: P0.30 on each P4 of premium charged.Various other transactions also are subject to DSTs.

Besides real-property taxes, local governments also impose various taxes on practically all businesses operating within their jurisdictions. Rates vary but are usually small percentages of gross annual sales.

A 10% withholding tax applies to interest paid by local companies and certain other entities on loans from offshore banking units.

An airline travel tax of P1,620 applies to (1) all Philippine citizens, (2) permanent resident aliens and (3) non-immigrant aliens who stay in the Philippines longer than one year. Executive Order25 exempts from the tax overseas Filipino contract workers with approved employment contracts duly certified by the Department of Labour and Employment. Reduced rates of P810 apply to children (aged 212 years) and to recipients of awards and grants from foreign governments or organisations certified by the National Economic and Development Authority or by the president.

A 10% tax applies to all communications by telephone, telegraph, telex, wireless and similar communication methods from the Philippines.