The government collects tax from your earnings to pay for public services provided. These deductions are usually made automatically by your employer.
When living and working in the Philippines, you will pay Income Tax. There are different rates of Income Tax depending on how much you earn in one year. Not all income is taxable and you're only taxed on "taxable income" above a certain level.
Taxable income includes:
Non-taxable income includes:
For more details, you can go to this page of the Bureau of Internal Revenue (BIR) website.
There are a number of exemptions that can reduce your tax bill:
An additional exemption of PHP 25,000 can be claimed for each qualified dependent but only up to four qualified dependents. This additional exemption can be claimed by:
Tax rates range from 5% to 32% depending on the amount of net taxable income. For details on the rate corresponding to each net taxable income range, you can refer to the table on this page.
Expats will need to register with the nearest BIR office. Many countries have reciprocal agreements with the Philippines to avoid double taxation. To check if your country has an agreement with the Philippines, go to Question 22 and 23 of the BIR FAQ page.
Income tax is collected in different ways, depending on the type of income and whether you're employed or self-employed:
A tax refund for employees is the excess of tax withheld over the tax due on their annual gross compensation income. The employer is responsible for computing any tax refund and paying it out to the employee.
VAT is charged on most goods and services such as food and entertainment. It is included in the marked price of items. As of 2016, VAT is 12 percent.
Certain goods and services are exempt from VAT. More information can be found here.
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