Corporate - Other taxes

Last reviewed - 30 June 2022

Value-added tax (VAT)

VAT applies to practically all sales of services and imports, as well as to the sale, barter, exchange, or lease of goods or properties (tangible or intangible). The tax is equivalent to a uniform rate of 12%, based on the gross selling price of goods or properties sold, or gross receipts from the sale of services. On importation of goods, the basis of the tax is the value used by the Bureau of Customs (BOC) in determining tariff and customs duties plus customs duties, excise taxes, if any, and other charges. Where the valuation used by the BOC is by volume or quantity, the VAT basis is the landed cost plus excise taxes, if any.

Certain transactions are zero-rated or exempt from VAT. Export sales by VAT-registered persons are zero-rated.

Certain sales of services exempt from VAT, including services provided by financial intermediaries, are subject to percentage taxes based on gross sales, receipts, or income.

Some of the VAT rules that were amended under CREATE Law are effective 1 January 2021 (unless otherwise stated below), as follows:

  • Additional transactions exempted from VAT:
    • Sale or importation of medicines for cancer, mental illness, tuberculosis, and kidney diseases (effectivity moved by the CREATE Law).
    • Sale, importation, printing, or publication of journal, or any such educational reading material covered by the UNESCO agreement on the importation of educational, scientific, and cultural materials, including the digital or electronic format of the same and of books, newspapers, magazines, reviews, or bulletins, provided that the said materials are not devoted principally to the publication of paid advertisements.
    • Sale or importation of COVID-19 related medicines and medical supplies and equipment from 1 January 2021 to 31 December 2023.
  • The 3% tax on persons who are not VAT-registered because their annual sales or receipts do not exceed the VAT threshold of PHP 3 million is adjusted to 1% from 1 July 2020 to 30 June 2023 but will revert to 3% thereafter.

Following the amendments under Republic Act No. 10963 (Tax Reform for Acceleration and Inclusion or TRAIN), and implemented by Revenue Regulations 9-2021, 12% VAT will apply on the following transactions beginning 27 June 2021:

  • Sales of raw materials or packaging materials to a non-resident buyer for delivery to resident local export-oriented enterprises.
  • Sales of raw materials or packaging materials to export-oriented enterprises whose export sales exceed 70% of total annual production.
  • Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws.
  • Processing, manufacturing, or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.
  • Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed 70% of total annual production.

Customs duties

Applicable customs duties are determined based on the tariff classification of the import product. As with the rest of the Association of Southeast Asian Nations (ASEAN) countries, tariff classification in the Philippines is based on the ASEAN Harmonised Tariff Nomenclature (AHTN), which is patterned after the Harmonised Commodity Classification and Coding System (HS) Convention and its 2002 revisions, and the latest edition is HS Code 2017 under the Customs Modernization and Tariff Act. 

In the first half of 2022, the Tariff Commission had issued 164 rulings to address commonly raised valuation and tariff classification issues. Despite this, it is still advisable that tariff classification rulings from the Philippine Tariff Commission be secured prior to importation of goods into the Philippines in case of uncertainty as to the correct classification or valuation. Note that while the tariff classification rulings issued by the Philippine Tariff Commission do not prevent the BOC from conducting its own verification, these rulings carry persuasive reference in support of the classification and duty rate used by an importer.

The Philippines adopts the World Trade Organization (WTO) Valuation Agreement, where the declared invoice price is used as the basis for determining customs duties.

As a protective measure, the Philippines retains higher tariff rates (20% to 50%) on certain sensitive agricultural products, such as livestock and meat products, sugar, vegetables, and coffee. A few agricultural commodities are subject to minimum access volumes, but these represent less than 1% of all tariff lines.

In view of the existing free trade agreements in the region, such as the Most Favoured Nation (MFN), ASEAN-Australia-New Zealand Free Trade Area (AANZFTA), ASEAN-China Free Trade Area (ACFTA), ASEAN-Hong Kong, China Free Trade Agreement (AHKFTA), ASEAN-India Free Trade Area (AIFTA), ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEPA), ASEAN-Korea Free Trade Area (AKFTA), ASEAN Trade in Goods Agreement (ATIGA), Philippines-Japan Economic Partnership Agreement (PJEPA), and Philippines-European Free Trade Association Free Trade Agreement (PH-EFTA FTA), the Philippines has taken steps to progressively eliminate tariffs. Tariff reductions for the Philippines range from 10% to 35% for most products included in the Normal Track list.

Excise taxes

Excise taxes apply to services and to goods manufactured or produced in the Philippines for domestic sales, consumption, or for any other disposition and to things imported.

Manufactured oils and other fuels

Description Units 2018 (PHP) 2019 (PHP) 2020 (PHP)
Lubricating oils and greases Per litre 8.00 9.00 10.00
Processed gas Per litre 8.00 9.00 10.00
Waxes and petrolatum Per kilo 8.00 9.00 10.00
Denatured alcohol Per litre 8.00 9.00 10.00
Naphtha Per litre 7.00 9.00 10.00
Unleaded premium gasoline Per litre 7.00 9.00 10.00
Aviation turbo jet fuel Per litre 4.00 4.00 4.00
Kerosene Per litre 3.00 4.00 5.00
Diesel fuel oil Per litre 2.50 4.50 6.00
Liquefied petroleum gas Per kilo 1.00 2.00 3.00
Asphalts Per kilo 8.00 9.00 10.00
Bunker fuel oil Per litre 2.50 4.50 6.00
Petroleum coke Per ton 2.50 4.50 6.00


Automobile (PHP) Excise tax rate (%)
Over Up to
0 600,000 4
600,000 1,000,000 10
1,000,000 4,000,000 20
4,000,000   50

Hybrid vehicles are subject to 50% of the applicable excise tax rates.

Purely electric vehicles and pick-ups are exempt from excise tax.

Sweetened beverages

Description Excise tax (PHP/litre)
Using purely caloric sweetener, purely non-caloric sweetener, or mixture of both 6
Using purely high-fructose corn syrup 12
Using purely coconut sap sugar / purely steviol glycosides Exempt

Cigars and cigarettes

Effective date Excise tax (PHP/pack)
1 January 2020 45
1 January 2021 50
1 January 2022 55
1 January 2023 60

Effective 1 January 2024, the specific tax rate shall be increased by 5% every year thereafter.

Vapor products

Effective date Excise tax (PHP/ml)
1 January 2020 37.00
1 January 2021 42.00
1 January 2022 47.00
1 January 2023 52.00

Effective 1 January 2024, the specific tax rate shall be increased by 5% every year thereafter.

Heated tobacco products

Effective date Excise tax (PHP/pack of 20 units)
1 January 2020 25.00
1 January 2021 27.50
1 January 2022 30.00
1 January 2023 32.50

Effective 1 January 2024, the specific tax rate shall be increased by 5% every year thereafter.

Cosmetic procedures

An excise tax of 5% excise tax is imposed on gross receipts from invasive cosmetic procedures and surgeries directed solely towards altering or enhancing the patient’s appearance for aesthetic purposes. However, this will not cover procedures necessary to ameliorate a deformity arising from, or directly related to, a congenital or developmental defect or abnormality, a personal injury resulting from an accident or trauma, or disfiguring disease, tumour, virus or infection.

Documentary stamp tax (DST)

DST is payable at varying rates on various documents and transactions. The following table contains selected examples as revised:

Taxable document/transaction (tax base) DST rate
Original issue of shares PHP 2.00 for every PHP 200 of the par value or actual consideration for no-par shares
Sale, barter, or exchange of shares of stock listed and traded through the local stock exchange Exempt
Other sales agreement, agreement to sell, memoranda of sales, delivery or transfer of shares or certificates of stock PHP 1.50 for every PHP 200 of the par value or 50% of the DST paid upon original issuance of no-par shares
Certificate of profits, interest in property or accumulations PHP 1.00 for every PHP 200 of the face value
Non-exempt debt instruments PHP 1.50 for every PHP 200 of the issue price.
Bank check, draft, certificate of deposit not bearing interest, other instruments PHP 3.00 for each instrument
Deed of sale, conveyance of real property PHP 15.00 for each PHP 1,000 of consideration/value or fractional part thereof
Bills of exchange or drafts PHP 0.60 on each PHP 200 of the issue price
Acceptance of bills of exchange and others PHP 0.60 on each PHP 200 of the face value
Foreign bills of exchange and letters of credit PHP 0.60 on each PHP 200 of the face value
Policies of annuities or other instruments PHP 1.00 on each PHP 200 of premium or instalment payment
Pre-need plans PHP 0.40 on each PHP 200 of the premium or contribution collected
Certificates PHP 30.00 per certificate
Warehouse receipts PHP 30.00 per warehouse receipt (valued at PHP 200 or more)
Jai-alai, horse race tickets, lotto, or other authorised number games PHP 0.20 on every PHP 1.00 cost of the ticket
Bills of lading or receipts Exempt if bill/receipts not exceeding PHP 100; PHP 2.00 for bill/receipts not exceeding PHP 1,000; or PHP 20.00 for bill/receipts exceeding PHP 1,000
Proxies PHP 30.00 on each proxy of voting
Powers of attorney PHP 10.00 on each power of attorney; except acts connected with claims due to/from the government
Leases and other hiring agreements PHP 6.00 for the first PHP 2,000 + PHP 2.00 for every PHP 1,000 thereafter
Mortgages, pledges, and deeds of trust PHP 40.00 for the first PHP 5,000 + PHP 20.00 on every PHP 5,000 thereafter

DST on life insurance policies

Life insurance policy (PHP) DST (PHP)
Does not exceed 100,000 Exempt
Exceeds 100,000 but does not exceed 300,000 20.00
Exceeds 300,000 but does not exceed 500,000 50.00
Exceeds 500,000 but does not exceed 750,000 100.00
Exceeds 750,000 but does not exceed 1,000,000 150.00
Exceeds 1,000,000 200.00

DST on charter party and similar instruments

Registered tonnage DST rate
Does not exceed 1,000 tons PHP 1,000 + an additional tax of PHP 100 for each month or fraction of a month in excess of 6 months
Exceeds 1,000 tons and does not exceed 10,000 tons PHP 2,000 + an additional tax of PHP 200 for each month or fraction of a month in excess of 6 months
Exceeds 10,000 tons PHP 3,000 + an additional tax of PHP 300 for each month or fraction of a month in excess of 6 months

DST on Financial Institutions Strategic Transfer Corporations (FISTCs)

Document DST rate
Any document evidencing the transfer or dation in payment exempt
Any document evidencing new loans exempt
Any document evidencing an FISTC’s capital infusion to the borrower’s business with a non-performing loan (NPL) acquired from an FI on or before 18 February 2023 exempt

Capital gains tax

Capital gains arise from the sale or exchange of ‘capital assets’. Capital assets are property held by the taxpayer (whether or not connected with its trade), other than the following:

  • Inventories or property held primarily for sale to customers in the ordinary course of business.
  • Real property or depreciable property used in trade or business.
  • Property of a kind that would be included in the inventory of the taxpayer if on hand at the close of the taxable year.

Capital losses are deductible only to the extent of capital gains.

There are no holding period requirements for capital assets of corporations.

A 6% final tax is imposed on the higher of the gross selling price or fair market value upon the sale, exchange, or disposition of land or buildings not actually used in the business of a corporation. The tax is withheld by the buyer at the time of sale.

Net capital gains derived by domestic corporations from the sale, exchange, transfer, or similar transactions of shares of stock not traded through a local stock exchange are now taxed at a flat 15% rate.

Foreign corporations are now also taxed at the flat rate of 15% under the CREATE Law.

Sales of shares of stock listed and traded on a local stock exchange, other than the sale by a dealer in securities, are subject to a stock transaction tax of 0.6% based on the gross selling price, provided the listed corporation observes a minimum public ownership of at least 10% based on the company’s issued and outstanding shares, exclusive of any treasury shares or such percentage as may be prescribed by the SEC or Philippine Stock Exchange (PSE), whichever is higher. Otherwise, the 15% capital gains tax shall apply.

Capital gains from the sale of bonds, debentures, or other certificates of indebtedness with a maturity of more than five years are exempt from tax.

FISTCs are exempt from capital gains tax on the transfer of land and/or buildings treated as capital assets.

Payroll taxes

The compensation and benefits of employees of employers are subject to withholding tax (WHT) based on graduated rates. The employer shall be the designated withholding agent of the government.

Social security contributions

Corporations doing business in the Philippines must be registered with social institutions, such as the Social Security System (SSS), Home Development Mutual Fund (HDMF), and Philippine Health Corporation (PHIC), upon employment of any employee and prior to the due date of the remittance of any social contributions.

Employee contributions for social security are deducted from the employee’s salary payments. The maximum monthly deductions are PHP 900 for SSS plus a maximum of PHP 225 mandatory provident fund under the Workers’ Investment and Savings Program (WISP), PHP 100 for HDMF, and PHP 1,600 for PHIC.

Employers are also required to make contributions. Employers’ maximum contribution for each employee is PHP 1,700 per month for SSS plus PHP 425 mandatory provident fund. Employer contributions for HDMF and PHIC are generally of the same amount as the employee contributions.

Fringe benefits tax

A final tax of 35%, payable by the employer, is imposed on the grossed-up monetary value of fringe benefits (e.g. housing, expense accounts, vehicles of any kind, household personnel, interest on loans at lower than market rates [the current benchmark rate is 12%], membership dues for social and athletic clubs, foreign travel expenses, holiday and vacation expenses, educational assistance, insurance) furnished or granted to managerial or supervisory personnel by the employer. An exception is for fringe benefits required by the nature of or necessary to the trade, business, or profession of the employer, or when the fringe benefit is for the convenience or advantage of the employer.

The following fringe benefits are not subject to the tax:

  • Those authorised and exempted from tax under special laws.
  • Contributions of the employer for the benefit of the employee to retirement, insurance, and hospitalisation benefit plans.
  • Those granted to rank-and-file employees (however, the employees may be subject to WHT on compensation).
  • Those of relatively small value or de minimis benefits.

The fringe benefits tax is payable on a calendar quarter basis and is an additional deductible expense for the employer. Fringe benefits already subjected to fringe benefits tax will no longer form part of the employee’s taxable income.

The grossed-up monetary value of the fringe benefit is generally computed by dividing the actual monetary value of the benefit by 65%.

Donor’s taxes

Donor’s tax is a tax on a donation or gift, and is imposed on the gratuitous transfer of property. It shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible.

The donor’s tax rate is fixed at 6% based on total gifts in excess of PHP 250,000 made during the calendar year. However, a sale, exchange, or other transfer made in the ordinary course of business (i.e. bona fide transaction, at arm’s-length, and free from donative intent) shall be considered as made for an adequate and full consideration, and is exempt from donor’s tax.

Local government taxes

Local government units impose local business taxes, which are generally based on the gross sales or gross receipts of the prior year, and real property taxes, which are levied annually on the basis of a fixed proportion of the value of the real property (taxable value). The local business tax rate varies depending on the location of the business, but generally shall not exceed 3%. Real property located in a province may be subject to real property tax of not more than 1% of its taxable value, while real property in a city (or municipality in Metro Manila) may be subject to real property tax of not more than 2% of its taxable value. In addition, an annual tax of 1% of the taxable value of real property shall accrue to the special education fund.