Income Tax in the Philippines

Find out about income tax for foreigners in the Philippines...

Taxation for expatriates in the Philippines

Expat employees fall into three categories in the Philippines; non-resident aliens, resident aliens and special aliens. They are defined as follows:

  • Non-resident alien: is neither a citizen, nor a resident in the Philippines but derives some income from the country.
  • Resident alien: is a non-Filipino citizen who resides within the Philippines.
  • Special alien: include managerial and technical employees at a number of multi-national companies.

Find further information on the tax classification of expats in the Philippines.

The Philippines has a number of tax treaties with other countries to allow foreign residents to avoid double taxation. Foreigners from these countries are therefore only taxed on their income from sources within the Philippines (as opposed to Filipino resident-citizens who are taxed for their income world-wide).

Income Tax Rates

The rates of tax are dependent on the nature of the income and the type of tax payer. The Philippines uses a tax bracket system, each bracket is taxed a set amount and then a further set percentage on excess earned over that amount. The percentage of excess increases with an individual’s income.

Further taxes are placed on fringe benefits, interests from bank accounts, royalties, prizes and winnings, cash or property dividends and capital gains.

How to pay income tax

The Bureau of Internal Revenue (BIR) is the government department responsible for the collection of personal taxation in the Philippines.

The BIR’s website has details of all the relevant deadlines and procedures, as well as links to all the necessary forms.

Other Taxes Relevant to Foreigners

Donor tax, sometimes known as gift tax, is applicable to any transfer of money, gifts or property between two entities. The tax is only applicable to donations over a certain amount

Estate tax is charged to any heirs receiving an inheritance from the estate of a deceased individual. The tax is only levied on estates with a value of more than PHP 200 000.

As with income tax, both estate and donor tax are calculated using tax brackets. Each bracket over the minimum threshold is taxed a set amount and then a further set percentage on excess given over that amount.