Philippines: Worked Example of Tax on Rent
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Tax Example: Rent
| Non-resident couple's joint monthly rental income1 | US$1,500 | US$6,000 | US$12,000 | |
| Annual Rental Income | 18,000 | 72,000 | 144,000 | |
| Less: Business Expenses2 | (14,400) | (57,600) | (115,200) | |
| Less: Personal Deduction3 | (1,117) | (1,117) | (1,117) | |
| = Taxable Income | US$2,483 | US$13,283 | US$27,683 | |
| Income Tax Rates4 | ||||
| Up to PHP10,000 | 5% | 11 | 11 | 11 |
| PHP10,000 – PHP30,000 | 10% | 45 | 45 | 45 |
| PHP30,000 – PHP70,000 | 15% | 134 | 134 | 134 |
| PHP70,000 – PHP140,000 | 20% | 184 | 313 | 313 |
| PHP140,000 – PHP250,000 | 25% | – | 614 | 615 |
| PHP250,000 – PHP500,000 | 30% | – | 1,676 | 1,676 |
| Over PHP500,000 | 32% | – | 676 | 5,283 |
| Annual Income Tax Due | US$374 | US$3,469 | US$8,077 | |
| Other Taxes | ||||
| Value Added Tax (VAT)5 | 540 | 1,728 | 3,456 | |
| Annual Taxes Due | US$914 | US$5,197 | US$11,533 | |
| Tax Due as % of Gross Income | 5.08% | 7.22% | 8.01% | |
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DISCLAIMER: The information contained above is marketing material only and is not written tax advice directed at the particular facts and circumstances of any person and should not be relied upon. We encourage you to discuss your particular situation with us or an independent tax advisor. This information was last updated on July 28, 2008.
Notes
Punongbayan & Araullo is a member firm of Grant Thornton International. Grant Thornton International is not a worldwide partnership. Member firms of the international organization are independently owned and operated.
1 The residential property is jointly owned by husband and wife. For tax purposes, the property owners are considered non-resident foreigners engaged in trade or business in the Philippines. Exchange rate used: US$1 = PHP44.756.
2 Income-generating expenses are deductible. Typical deductions are repairs and maintenance, depreciation, taxes and licenses (local business tax, mayor’s business permit, and real estate tax). All deductible expenses can range from 70% to 90% of the gross income but for calculation purposes, deductible expenses are assumed to be around 80% of gross income.
3 Individual taxpayers are entitled to a personal allowance of PHP50,000 (US$1,117) annually.
4 The income of non-resident foreigners considered to be engaged in trade or business in the Philippines is taxed at progressive rates.
5 Under existing VAT regulations, rental payments exceeding PHP10,000 (US$223) per unit received by landlords whose gross annual rental income exceed PHP1,500,000 (US$33,515) are subject to 12% VAT. If the gross annual rental income is less than PHP1,500,000 (US$33,515), the applicable tax rate is 3%. The VAT burden is generally shouldered by the tenants but for calculation purposes, the VAT was added to the landlord’s tax liability.
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