Philippines: Taxes and Costs
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Double high tax whammy
Effective Tax Rate on Rental Income |
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| Monthly Income | US$1,500 | US$6,000 | US$12,000 |
| Tax Rate | 25% | 25% | 25% |
| Click here to see a worked example | |||
Source:
Disclaimer
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INDIVIDUAL TAXATION
Nonresident (i.e. whose stay in the country does not exceed 180 days) foreigners are liable to tax on their Philippine-sourced income.
Nonresident foreigners are classified depending on business activities and the applicable taxation rules depend on this classification:
- Nonresident foreigners not engaged in trade or business in the Philippines
- Nonresident foreigners engaged in trade or business in the country
INCOME TAX
Nonresident foreigners who are not engaged in trade or business in the Philippines are liable to tax on the gross income at 25%. Nonresident foreigners earning rental income from leasing residential property are taxed on the gross rent at 25%, withheld by the tenant.
Business Permit
A business permit is required before renting out property.
Nonresident foreigners engaged in trade or business in the Philippines are taxed in the same manner as citizens or resident foreigners (see “Living There”).
VALUE ADDED TAX (VAT)
VAT is levied at 12% of gross rent, where the monthly rental exceeds PHP10,000 (US$232). No VAT is levied on the lease of a residential property with a monthly rental less than PHP10,000 (US$232).
TAX ON CAPITAL GAINS
According to the Tax Code, nonresident foreigners not engaged in trade or business in the country selling their properties located in the Philippines are taxed at 25% of the property’s selling price or fair market value, whichever is higher.
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”).
PROPERTY TAXATION
Real Estate Tax
Real estate tax is levied on Philippine real property and the applicable rate varies depending on the location. The owner has the option to pay the tax in four equal installments on or before the last day of each calendar quarter.
Calculating Real EstateTax The tax is levied on the property’s assessed value (which is a prescribed percentage of current and fair market value depending on the type and zoning of property). In computing for the taxable value, the property’s fair market value is determined and the assessment percentage is then applied. The resulting amount is the tax base where the real estate tax rate is applied.Properties located in the cities and municipalities of Metro Manila are taxed at 1% to 2% of its assessed value. Local governments may levy the tax from 0.25% to 2%. |
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Property owners are required to file a sworn statement declaring the true current and fair market value of the property once every three years. The filing period is from 01 January to 30 June annually.
Philippines - more data and information
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Your Comments
posted by Jan Hoevenaar | 2008-04-02
Retired, USA
Resently we bought property in marikina, the seller give her capital gains up for less than we paid for. Can we be in trouble if we sign the DEED OF SALE for less than we paid?