Tax system in Philippines
Resident Filipino citizens are generally taxable on income from Philippine and foreign sources. Non-resident citizens and aliens are generally taxed only on Philippine-source income, with the source of personal services usually following where the work is performed.
Individuals use progressive income-tax rates from 0% to 35%. A qualifying non-VAT self-employed person with gross sales or receipts not exceeding PHP 3 million may elect an 8% tax on gross sales or receipts above PHP 250,000 in lieu of graduated income tax and percentage tax.
Domestic companies generally pay 25% corporate income tax on worldwide income, or 20% when total assets do not exceed PHP 100 million and net taxable income does not exceed PHP 5 million. The system also includes 12% VAT, withholding taxes, local business and property taxes, and payroll contributions.
The Philippines does not have a broad annual net wealth tax. Instead, investment and property events can trigger separate taxes: 15% on net gains from unlisted shares, 0.1% stock transaction tax on listed shares sold through an exchange, 6% on presumed gains from capital-asset real property, and 6% estate or donor tax.
Tax rates at a glance
- Income tax
- 0% - 35%Progressive
- Wealth tax
- 0%
- Inheritance tax
- 6% estate tax
- Capital gains tax
- 15% / 0.1% / 6%
- Corporate tax
- 25% / 20%
- Dividend tax
- 10% individual
- VAT
- 12%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
EmployeesSmall professionalsFoundersBPO and service businessesLong-term investors
Watch out for
- The Philippines is not a zero-tax base. A 35% top personal rate, 25% standard corporate rate, 12% VAT, withholding taxes, local taxes and mandatory payroll contributions can produce a materially higher real burden than one headline rate suggests.
- A Filipino citizen who remains resident can be taxed on worldwide income, while a foreigner working physically from the Philippines can generally have Philippine-source employment or business income even when the client or employer is abroad.
- The 8% option is a gross-receipts regime, not an 8% tax on profit. It is limited to eligible non-VAT individuals and can cease to apply when the PHP 3 million threshold is exceeded.
- CREATE MORE incentives can change the result for qualifying registered business enterprises, but they are conditional incentives rather than the ordinary rate for every Philippine company.
Frequently asked questions
Is the Philippines a low-tax country?
Not in the simple sense. The Philippines has a 0% to 35% personal income-tax schedule, 25% standard corporate tax, 12% VAT, withholding taxes, local taxes and mandatory payroll contributions.
Does the Philippines tax foreign income?
Resident Filipino citizens are generally taxable on worldwide income. Non-resident citizens and aliens are generally taxed only on Philippine-source income, subject to the detailed source and treaty rules.
Does the Philippines have a wealth tax?
No broad annual net wealth tax applies to individuals. Property ownership and investment events can still trigger local real property tax, income tax, capital-gains tax, estate tax, donor tax or documentary stamp tax.