Philippines: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Citizens and resident foreigners are liable to tax on their Philippine-sourced income. Married couples are required to compute their individual income tax separately but they may file jointly.
INCOME TAX
Income is aggregated and taxed at progressive rates. Taxable income is computed by deducting income-generating expenses (for business income) and personal allowances from gross income.
INCOME TAX |
|
| TAXABLE INCOME, PHP (US$) | MARGINAL TAX RATE |
| Up to 10,000 (US$232) | 5% |
| 10,000 – 30,000 (US$696) | 10% on band over US$232 |
| 30,000 – 70,000 (US$1,623) | 15% on band over US$696 |
| 70,000 – 140,000 (US$3,246) | 20% on band over US$1,623 |
| 140,000 – 250,000 (US$5,797) | 25% on band over US$3,246 |
| 250,000 – 500,000 (US$11,593) | 30% on band over US$5,797 |
| Over 500,000 (US$11,593) | 32% on all income over US$11,593 |
| Source: Global Property Guide | |
Allowances
Personal allowances or deductions from the taxable income are:
- PHP20,000 (US$464) for single individuals,
- PHP25,000 (US$580) for the head of a family, and
- PHP32,000 (US$742) each for married individuals,
- PHP8,000 (US$186) for each of the first four dependents. The additional tax exemption for each dependent shall be claimed only by the husband unless he waives the right in favor of his wife.
Deductions
Depreciation costs can be set against income for the purpose of income tax. Approved methods are the straight-line, the declining balance, sum of years-digits, unit of production method, the operating day method, and any other method as prescribed by the Secretary of Finance.
TAX ON CAPITAL GAINS
Capital gains realized from the sale of real property are included in the aggregate income and taxed at progressive rates. Taxable capital gains are computed by deducting acquisition costs and incidental expenses from the gross selling price or fair market value of the property.
Capital Gains Tax
The Philippines has a tax called Capital Gains Tax but it is really a local transaction tax on selling or transferring real estate properties. This tax is not an actual tax on the gains incurred on the sale of the property. The capital gains tax is levied at a flat rate of 6% on the property’s gross selling price or market value (see “Costs of Buying Property”).
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