Different Kinds of Taxes in the Philippines

NOVEMBER 9, 2012 BY VICTORINO ABRUGAR

There are many different kinds of taxes in the Philippines. But we can group them
into two basic types, namely, national taxes and local taxes. National taxes are
those that we pay to the government through the Bureau of Internal Revenue. Our
national taxation is based on the National Internal Revenue Code of 1997 or the
Republic Act No. 8424 otherwise known as the Tax Reform Act of 1997, as amended.
The import and export tariffs levied by the Bureau of Customs under Republic Act
No. 1937 otherwise known as the Tariff and Customs Code of the Philippines (as
amended) can also be considered as national government taxes or duties.

On the other hand, the local government taxation in the Philippines are based on
Republic Act 7160 or otherwise known as the Local Government Code of 1991, as
amended. These taxes, fees or charges are imposed by the local government units,
such as provinces, cities, municipalities, and barangays, who have been given the
power to levy such taxes by the code.

Business owners, professionals, employees, consumers, and every taxpayer should

be aware of the different kinds of taxes in the Philippines. The following are some of
the common national and local taxes in the Philippines:

National Taxes in the Philippines

Capital Gains Tax is a tax imposed on the gains presumed to have been realized
by the seller from the sale, exchange, or other disposition of capital assets located
in the Philippines, including pacto de retro sales and other forms of conditional sale.

Documentary Stamp Tax is a tax on documents, instruments, loan agreements and

papers evidencing the acceptance, assignment, sale or transfer of an obligation,
rights, or property incident thereto. Examples of documentary stamp tax are those
that are charged on bank promissory notes, deed of sale, and deed of assignment
on transfer of shares of corporate stock ownership.
Donors Tax is a tax on a donation or gift, and is imposed on the gratuitous
transfer of property between two or more persons who are living at the time of the
transfer. Donors tax is based on a graduated schedule of tax rate.

Estate Tax is a tax on the right of the deceased person to transmit his/her estate
to his/her lawful heirs and beneficiaries at the time of death and on certain transfers
which are made by law as equivalent to testamentary disposition. Estate tax is also
based on a graduated schedule of tax rate.

Income Tax is a tax on all yearly profits arising from property, profession, trades or
offices or as a tax on a persons income, emoluments, profits and the like. Self-
employed individuals and corporate taxpayers pay quarterly income taxes from 1st
quarter to 3rd quarter. And instead of filing quarterly income tax on the fourth
quarter, they file and pay their annual income tax return for the taxable year.
Individual income tax is based on graduated schedule of tax rate, while corporate
income tax in based on a fixed rate prescribe by the tax law or special law.

Percentage Tax is a business tax imposed on persons or entities who sell or lease
goods, properties or services in the course of trade or business whose gross annual
sales or receipts do not exceed the amount required to register as VAT-registered
taxpayers. Percentage taxes are usually based on a fixed rate. They are usually paid
monthly by businesses or professionals. However, some special industries and
transactions pay percentage tax on a quarterly basis.

Value Added Tax is a business tax imposed and collected from the seller in the
course of trade or business on every sale of properties (real or personal) lease of
goods or properties (real or personal) or vendors of services. It is an indirect tax,
thus, it can be passed on to the buyer, causing this to increase the prices of most
goods and services bought and paid by consumers. VAT returns are usually filed and
paid monthly and quarterly.

Excise Tax is a tax imposed on goods manufactured or produced in the Philippines

for domestic sale or consumption or any other disposition. It is also imposed on
things that are imported.

Withholding Tax on Compensation is the tax withheld from individuals receiving

purely compensation income. This tax is what employers withheld in their
employees compensation income and remit to the government through the BIR or
authorized accrediting agent.

Expanded Withholding Tax is a kind of withholding tax which is prescribed only for
certain payors and is creditable against the income tax due of the payee for the
taxable quarter year. Examples of the expanded withholding taxes are those that
are withheld on rental income and professional income.

Final Withholding Tax is a kind of withholding tax which is prescribed only for
certain payors and is not creditable against the income tax due of the payee for the
taxable year. Income Tax withheld constitutes the full and final payment of the
Income Tax due from the payee on the said income. An example of final withholding
tax is the tax withheld by banks on the interest income earned on bank deposits.

Withholding Tax on Government Money Payments is the withholding tax withheld

by government offices and instrumentalities, including government-owned or
-controlled corporations and local government units, before making any payments
to private individuals, corporations, partnerships and/or associations.

Local Taxes in the Philippines

Tax on Transfer of Real Property Ownership tax imposed on the sale, donation,
barter, or on any other mode of transferring ownership or title of real property.

Tax on Business of Printing and Publication tax on the business of persons

engaged in the printing and/or publication of books, cards, posters, leaflets,
handbills, certificates, receipts, pamphlets, and others of similar nature.

Franchise Tax tax on businesses enjoying a franchise, at the rate not exceeding
fifty percent (50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized, within its
territorial jurisdiction.
Tax on Sand, Gravel and Other Quarry Resources tax imposed on ordinary stones,
sand, gravel, earth, and other quarry resources, as defined under the National
Internal Revenue Code, as amended, extracted from public lands or from the beds
of seas, lakes, rivers, streams, creeks, and other public waters within its territorial
jurisdiction.

Professional Tax an annual professional tax on each person engaged in the

exercise or practice of his profession requiring government examination.

Amusement Tax tax collected from the proprietors, lessees, or operators of

theaters, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement.

Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products an annual fixed tax for
every truck, van or any vehicle used by manufacturers, producers, wholesalers,
dealers or retailers in the delivery or distribution of distilled spirits, fermented
liquors, soft drinks, cigars and cigarettes, and other products as may be determined
by the sangguniang panlalawigan, to sales outlets, or consumers, whether directly
or indirectly, within the province.

Tax on Business taxes imposed by cities, municipalities on businesses before they

will be issued a business license or permit to start operations based on the schedule
of rates prescribed by the local government code, as amended. Take note that the
rates may vary among cities and municipalities. This is usually what businesses pay
to get their Business Mayors Permit.

Fees for Sealing and Licensing of Weights and Measures fees for the sealing and
licensing of weights and measures at such reasonable rates as shall be prescribed
by the sangguniang bayan of the municipality or city.

Fishery Rentals, Fees and Charges rentals, fees or charges imposed by the
municipality/city to grantees of fishery privileges in the municipal/city waters, e.g.,
fishery privileges to erect fish corrals, oysters, mussels or other aquatic beds or
bangus fry areas and others as mentioned in the local government code, as
amended.

Community Tax tax levied by cities or municipalities to every inhabitant of the

Philippines eighteen (18) years of age or over who has been regularly employed on
a wage or salary basis for at least thirty (30) consecutive working days during any
calendar year, or who is engaged in business or occupation, or who owns real
property with an aggregate assessed value of One thousand pesos (P1,000.00) or
more, or who is required by law to file an income tax return. Community tax is also
imposed on every corporation no matter how created or organized, whether
domestic or resident foreign, engaged in or doing business in the Philippines.

Taxes that may be levied by the barangays on stores or retailers with fixed business
establishments with gross sales of receipts of the preceding calendar year of Fifty
thousand pesos (P50,000.00) or less, in the case of cities and Thirty thousand pesos
(P30,000.00) or less, in the case of municipalities, at a rate not exceeding one
percent (1%) on such gross sales or receipts.

Service Fees or Charges fees or charges that may be collected by the barangays
for services rendered in connection with the regulations or the use of barangay-
owned properties or service facilities, such as palay, copra, or tobacco dryers.

Barangay Clearance a reasonable fee collected by barangays upon issuance of

barangay clearance a document required for many government transactions, such
as when applying for business permit with the city or municipality.