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In the Philippines, all companies – domestic or foreign – are liable to pay corporate income tax (CIT). The tax
liability for a corporation is determined by its residency status and is based on the net income it obtains while
carrying out its business activity, normally during one business year.
TAXES
Income tax does not include dividends received from domestic corporations; interest on Philippine currency
bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar
arrangements; and other passive income previously subject to final taxes.
Corporate income tax
The applicable CIT rate for both resident and non-resident corporations is 30 percent based on net taxable
income. Royalties, interest, dividends, and other passive income of domestic and resident foreign corporations
are subject to different rates.
Withholding tax
Dividends
Dividends distributed by a resident company are subject to withholding tax at 30 percent; those distributed to
non-residents are taxed at 15 percent, provided the country of the non-resident recipient allows a tax credit of 15
percent. The withholding tax may be reduced under an applicable tax treaty.
Interest
Interest paid to a non-resident is subject to a 20 percent withholding tax unless otherwise stipulated under a tax
treaty.
Royalty
Royalty payments made to a domestic or resident company are subject to a final withholding tax of 20 percent. A
30 percent withholding tax is levied on royalty payments to non-residents.