Types of Taxes of the Philippines

Tax is a big burden to all individual and corporation not only in the Philippines but also every elsewhere in the world. I think the tax system of the Philippines is quite complicated especially in terms of compliance.
There would be several ways categorizing taxes but in this article, I simply use National and Local Tax.

National Tax
1. Income Tax
It is directly imposed on income, of course. There are several factors which affect taxation.
 a) Personal Income Tax (PIT, 0 ~ 35%)

• Target Individual: Resident Citizen, Non-Resident Citizen, Resident Alien, Non-Resident Alien.
• Income from : within or without Philippines
• Income Source : Compensation, Business/Professional, Passive and other taxable income
• Others (Amount of Income, Business Field, etc) 

 b) Corporate Income Tax (CIT)

• Target company: Domestic, Resident Foreign, Non-Resident Foreign corporation
• Income from: within or without Philippines
• Income Source: Business Income, Passive Income and other taxable income
• Period of operation : Normal CIT (NCIT), Minimum CIT (MCIT)
• Others (Special Rate, Business Field, etc)

Notes: Tax base for NCIT (30%) is net income but MCIT (2%) is gross income. DOF is planning to reduce NCIT in 2018, Comprehensive Tax Reform Package 2.

2. Value Added Tax (VAT, 12%)
It a indirect tax imposed to all persons who sell, barter, exchange or lease goods or properties, or render services in the course of trade or business whose gross sales or receipts exceed PhP1,919,500, and those who import goods, whether for business or otherwise.

Notes: The VAT threshold is increased to P3 million annually. There is no IRR yet but you can't just choose whether to pay VAT or Percentage Tax (3%). Ask BIR or your accountant.

 a) 12% VAT

• Sale of Goods or properties including those subject to exercise. (There are exemptions)
• Importation of Goods
• Sale of services and use or lease of properties

 b) Zero-Rated

• Some sale of goods and services like export sale are zero-rated.

 c) VAT Exempted

• There are some cases but it's not for normal (?) business.

 d) Input Tax vs. Output Tax

• In general, VAT is imposed to the final consumer. If you purchase goods for sale, you pay VAT to the supplier but it could be deductible from your VAT payment. BIR is quite strict recognizing Input Tax Credit, so you need to be careful whether you followed all the rules.

3. Percentage Tax

• Those exempted from VAT (3%)
• Domestic/International Carriers
• Franchise Tax: Congressional Franchise grantees like utility firms.
• Overseas Communication Tax
• Tax on banks and non-bank financial intermediaries performing quasi-banking functions
• Tax on life insurance premiums
• Tax on agents of foreign insurance companies
• Tax on amusement activities
• Tax on winning
• Tax on sale of shares of listed and traded in PSE (Stock Transaction Tax, STT) or IPO

4. Excise Tax
The excise tax based on weight, volume capacity or any other physical unit of measurement is referred to as “specific tax”; if based on selling price or other specified value is referred to as “ad valorem” tax. The excise tax shall be in addition to VAT. It is imposed on specific items such as alcohol, cigarette, sugar, petroleum, etc.

5. Documentary Stamp Tax (DST)
DST is an excise tax levied on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto. The amount of tax is either fixed or based on the par or face value of the document or instrument.

6. Estate Tax
is imposed on the transfer of the decedent’s estate to his lawful heirs and beneficiaries based on the fair market value of the net estate at the time of the decedent’s death. It is not a tax on property.

7. Donors Tax
is imposed on the transfer by any person, resident or nonresident, of property by gift. Gift includes real and personal property, whether tangible or intangible.

Local Tax
Local government units (LGUs) derive their revenues from local and external sources. Local sources include tax revenues from the real property tax and the business tax, and non-tax revenues from fees and charges, receipts.

1. Taxes on Real Property (Real Property Tax)
2. Provincial Taxes
3. Municipal Taxes
4. City Taxes
5. Barangay Taxes
6. Community Tax

Taxes on Special Law
1. Travel Tax
2. Motor vehicle user's charge
3. Head Tax
4. Charges on forest products
5. Energy Consumption Tax on electric power consumption

Tariff and Customs duties
Whatever name it has, it's a tax, right? There are duties on import and export.