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NOTES: On Philippines Taxes

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MODEL No: persons:  NOW / pers. / +25% : /room /mon. / +50%: /room /mon. /

Grd fl.:  02  units —  : P64K (now) :   + 25%>           :  P80K :  +50%>             P96K :
Sm rm: 06 : x 2 = 12 :  48K : 4.00K/ 5.00K : 10,000:   60K : 6.00K : 12,000:   72K :
Lg. rm: 18 : x 4 = 72 : 288K : 4.00K/ 5.00K : 20,000: 360K: 6.00K : 24,000: 432K:
Sub-T. : 24 :  ——  84 : 336K : 4.00k/ 5.00K : 17,500 : 420K: 6.00K : 21,000: 504K:
+5th fl Potential Inc.: 100K :                                       : 125K :                           : 150K:
——— Total :              : 500K :                                        : 632K :                           : 750K:
/ 1400: per sqm          P 357 /                                      P 451 /                           P 536 /
Annual (x12):              P6.00M                                    P7.58M                           P9.00M
Gross Yield, on 90M:   5.95 %                                      8.42 %                           10.00 %
Net Yield, 75% Gross.  4.46 %                                      6.32 %                            7.50 %

======= (above relates to 5 storey building in C. area)


Philippines Taxes


Income tax
Liability for income tax
The liability of aliens for Philippines tax is determined by their residence status. An alien who is present in the Philippines
for at least two years is a resident alien. An alien who stays in the Philippines for less than two years is considered
a nonresident alien. There are two classifications of a nonresident alien:
+ Engaged in trade or business in the Philippines
+ Not engaged in trade or business in the Philippines
A nonresident alien engaged in trade or business (NRAETB) is one who stays in the Philippines for more than 180 days during
the calendar year. If the individual stays in the Philippines for less than 180 days, the individual is considered a nonresident
alien not engaged in trade or business (NRANETB). The taxable income of citizens, resident aliens, and NRAETB is
defined as gross compensation and net business income less personal allowances. The taxable income of NRANETBs is their
gross income.
Nonresident citizens and aliens are subject to income tax on Philippines-sourced income only.
NRANETBs are taxed at a flat rate of 25 percent.
In general, every citizen, resident alien, and NRAETB in the Philippines is required to file an income tax return and an annual information return.
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Taxation of Non-Residents

> http://www.bir.gov.ph/index.php/international-tax-matters/taxation-of-non-residents.html


/ 2 /

Those are good questions to ask Alex,

he is a Resident Alien (I think) so his concern may be a little different for yours and mine -according to this:


"Tax rates

Net taxable income of citizens, resident aliens, and NRAETBs is taxed at graduated rates ranging from 5 percent to 32 percent.

The maximum rate is currently 32 percent on income earned over 500,000 Philippine pesos (PHP). NRANETBs are taxed at

a flat rate of 25 percent of gross income unless a lower rate is applicable under a double tax treaty or special law


> https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/Documents/thinking-beyond-borders-2011/ies-tbb-2011-philippines.pdf


/ 3 /


In short, tax rates in the Philippines vary from 0% to 32% depending on the amount of income:

(For Residents?)

  • 5% - 0 to 10,000 pesos
  • 10% - 10,001 to 30,000 pesos
  • 15% - 30,001 to 70,000 pesos
  • 20% - 70,001 to 140,000 pesos
  • 25% - 140,001 to 250,000 pesos
  • 30% - 250,001 to 500,000 pesos
  • 32% - more than 500,000 pesos

> http://www.expat.com/en/guide/asia/philippines/12878-tax-in-the-philippines.html

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VAT threshold raised from Jan. 2012:


Starting January 1, 2012, BIR increases the threshold amounts for sale of residential lot, sale of house and lot, lease of residential unit and sale or lease of goods or properties or performance of services's as per Revenue Regulations No. 16-2011 :

As per BIR's RR 16-2011 dated Oct. 27, 2011, starting next year, sales on real properties exempt from VAT: For lots below P 1,919,500 (previously P1.5M) and on House & Lot below P3,199,200 (previously 2.5M)

Please click here to see complete text of the BIR Update :
http://theprojectreview.blogspot.com/20 … y-tax.html

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RENTAL Leases & Taxes - 5% withholding
salon2009 7 years ago

Hello,hope you can help me answer this tax question.I am renting a space in paranaque for 20k/month.The buildong owner said to pay her total of 21k for tax and she will refund it to me after 12 months.In my understanding,she will refund me total of 12k at the end of the year.Question is, what is that tax fee for?

should it be the lessor should pay the tax since that rental is really her income? pls reply.thanks.

    • avatar92.jpg?1267552806
      admin Mod salon2009 7 years ago

      Hi Salon2009,

      First of all, a lease agreement should be evidenced by a contract of lease. There, the stipulations are stated (e.g., fee, terms, tax, etc). Assuming you are renting for business purposes, you, as a lessee is required by BIR to withhold (5%) witholding tax on income payments from rental fee. You are right in saying that the lessor is the one who earns income, and the one who is liable to BIR an income tax. That's why the BIR requires lessee to deduct a 5% withholding tax on monthly rent income that you will pay to the lessor. To make this clear, let us say for example, your gross monthly rent is 20,000. You should withhold 5% of it (1,000) and remit monthly to BIR using BIR form 1601E as discussed in my previous answers on the previous questions. Thus, you will only pay the lessor an amount of P19,000, which is net of 1,000 withholding tax (remitted to BIR). The lessor, in return will ask you for the certificate of withholding tax, which he will use to claim against his Income tax when he file and pay it to the BIR.

      I just don't know what is the reason of the additional 1,000 your lessor is charging you every month. It can be an allowance to cover the tax that will be incurred by the lessor. Or it can be another allowance which can be returned to you after a period of time. I would recommend reading and examining your contract of lease with your lessor to determine the clear stipulations stated in there, and find out if they are fair and square.

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439 posts
Quezon City

I'm not a tax expert. But, I do have parents, both Filipinos, who have rental properties / apartments (not condos though). Here's what they pay on a regular basis to Bureau of Internal Revenue or BIR:

Monthly percentage tax (BIR Form 2551M): 7% of rent received.

Quarterly income tax (BIR Form 1701Q); There are tax brackets. You can pick itemized or 45% standardized deduction.

Annual income tax (BIR Form 1701).

You can download the BIR online forms app or samples of forms from the BIR website to give you an idea of what you would need to fill out and pay.

My parents also pay an annual real estate tax to the city. This may or may not increase per year depending on whether there's an increase in zonal valuation.

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As non-resident earning income in the Philippines, what do i need to know?

As an individual


How do I pay and file my income tax return?
As a nonresident individual engaged in trade or business
You are required to file an income tax return (BIR Form 1701) 1 and an annual information return on a calendar year basis. The said return should be filed and the net tax on the income tax return should be paid on or before April 15 following the close of the year covered by the return
As a nonresident individual not engaged in trade or business
Withholding tax regulations provides that a person making payment of income earned in the Philippine source by an NRINETB is required to withhold (BIR Form 1601F) the tax due and remit the tax to BIR, the amount of income tax withheld is constituted as a full and final payment of the income tax due of an NRI NETB and VAT also is required to be withheld and remitted by the payor of income. Thus, the responsibility of the remittance of tax on an NRINETB rests primarily on the payor of income as a withholding agent

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Simpler preferential tax rates to reel in more foreign investors -- TMAP

Posted on August 30, 2016

New rules being prepared by the Bureau of Internal Revenue (BIR) to make tax payments easier for foreigners betting on stocks and other assets here would attract more investors, an official from the Tax Management Association of the Philippines (TMAP) said.


A draft memorandum circular posted on the BIR’s Web site last week outlines a “simplified” procedure for non-residents to claim “preferential” tax rates for dividend, interest and royalty incomes incurred in the Philippines under tax treaties forged by the Philippines with other countries.

TMAP President Benedict R. Tugonon said the planned reform would “certainly improve the ease of doing business” in the country, and in turn would attract more investors to make their bets here.

“When businesses invest here like in shares of stock in Philippine companies, they would always want to know how much dividends they get after tax. With these simplified rules, it’s relatively easier to avail this tax rate. It will definitely encourage them (foreign investors),” Mr. Tugonon said in a phone interview last week.

Under the proposal put forward by BIR Commissioner Caesar R. Dulay, foreigners only need to submit a Certificate of Residency (CoR) to be eligible for lower tax rates as covered by an existing tax treaty between the Philippines and his/her home country.

The CoR will also be the basis for company officials and other withholding agents in applying the reduced income tax rate to non-residents. In turn, these agents must submit the form to the bureau within 30 days from income payments.


> http://www.bworldonline.com/content.php?section=Economy&title=simpler-preferential-tax-rates-to-reel-in-more-foreign-investors----tmap&id=132646

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