Global Property Guide

Financial Information for the Residential Property Buyer


Tax Example: Rent

Last Updated: November 22, 2017

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: Expenses3 90% 16,200 64,800 129,600
= Taxable Income 1,800 7,200 14,400
Income Tax Rates4
Up to PHP10,000 5% 20 20 20
PHP10,000 – PHP30,000 10% 80 80 80
PHP30,000 – PHP70,000 15% 90 240 240
PHP70,000 – PHP140,000 20% - 560 560
PHP140,000 – PHP250,000 25% - 400 1,100
PHP250,000 – PHP500,000 30% - 1,320
Over PHP500,000 32% - -
Annual Income Tax Due 190 1,300 3,320
Other Taxes
Value Added Tax (VAT)5 12% 540 8,640 17,280
       
Tax Due as % of Gross Income 4.06% 13.81% 14.31%
Thanks to:
Punongbayan & Araullo

Notes


1 The property is jointly owned by husband and wife.

2 Exchange rate used: 1.00 USD = 50.00 PHP

3 Estimated values. Income-generating expenses are deductible when calculating taxable income. Typical deductions are repairs and maintenance, depreciation, and taxes and licenses.

4 Rental income earned by nonresident individuals is taxed at progressive income tax rates.

INCOME TAX

TAXABLE INCOME, PHP (US$) TAX RATE
Up to 10,000 (US$200) 5%
10,000 – 30,000 (US$600) 10% on band over US$200
30,000 – 70,000 (US$1,400) 15% on band over US$600
70,000 – 140,000 (US$2,800) 20% on band over US$1,400
140,000 – 250,000 (US$5,000) 25% on band over US$2,800
250,000 – 500,000 (US$10,870) 30% on band over US$5,000
Over 500,000 (US$10,000) 32% on all income over US$10,000
Source: Global Property Guide

5 A 12% Value Added Tax (VAT) is imposed on residential property leases that satisfy certain conditions. The VAT burden is generally shouldered by the tenants.

Properties with rental payments exceeding PHP12,800 (US$272) per month received by landlords whose gross annual rental income exceed PHP1,919,500 (US$40,840) are subject to 12% VAT.

Properties with rental payments exceeding PHP12,800 (US$272) per month received by landlords whose gross annual rental income does not exceed PHP1,919,500 (US$40,840) are not subject to 12% VAT. Instead, it will be liable for percentage tax at a flat rate of 3% levied on the gross rent.


Non-Resident Couple (Through a Local Corporation):


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
= Taxable Income 18,000 72,000 144,000
Income Tax 3
Flat rate 25% 4,500 18,000 36,000
Annual Income Tax Due 4,500 18,000 36,000
Tax Due as % of Gross Income 25.00% 25.00% 25.00%
Thanks to:
Punongbayan & Araullo

Notes


1 The property is jointly owned by husband and wife.

2 Exchange rate used: 1.00 USD = 50.00 PHP

3 Rental income earned by nonresident individuals is taxed at a flat rate of 25%.

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