THE TAX SYSTEM OF

THE PHILIPPINES
• The Philippines Taxation System is made up of Direct and Indirect taxes.
These are regulated by several laws, among which:

-          the National Internal Revenue Code, which was enabled in 1997 also
known as R.A No. 10963 and it is the most important law regulating taxation
here;
-          the Income Tax Law;
-          the Value Added Tax Code;
-          the Excise Taxes Code.
 WHAT ARE THE TAXES TO BE PAID IN THE
PHILIPPINES?
• As mentioned above there are two types of taxes levied in the
Philippines:thedirect and indirect ones.

Direct taxes apply to the citizens and residents of the Philippines,

individuals and companies and are levied directly on the incomes generated
by them. These are the personal income and the corporate tax. With respect
to indirect taxes, the value added tax (VAT) or the goods and services tax
(GST) is the most important one.
 TAXES IN THE PHILIPPINES ARE CLASSIFIED
INTO TWO BASIC TYPES: 

• The National Taxes and Local Taxes. National taxes are paid to the
national government through the BIR. Meanwhile, local taxes are
paid to the Treasury Office of the city hall, municipal hall, or
provincial capitol of the taxpayer’s home, office, or business
location.
 NATIONAL TAXES
I. CAPITAL GAIN TAX VI.INCOME TAX
II. DOCUMENTARY STAMP VII.PERCENTAGE TAX
TAX VIII.VALUE ADDED TAX
III. DONOR’S TAX (VAT)
IV. ESTATE TAX IX.WITHHOLDING TAX
V. EXCISE TAX
 CAPITAL TAX
• A 6% Capital Gains Tax is imposed on the presumed gain from
the sale of real property located in the Philippines which is
classified as a capital asset, based on the gross selling price,
the BIR zonal valuation or the assessed value of the property,
whichever is the highest.
 DOCUMENTARY STAMP TAX

• The documentary stamp tax (DST) is a tax on loan agreements/contracts, promissory

notes, powers of attorney, deeds of sale of real property, life insurance policies, and other
documents that prove the sale, acceptance, assignment, or transfer of a property, rights, or
obligation.
• This tax is paid by the person who makes, issues, signs, or accepts the document. 
DST rates vary per document or transaction and are either fixed or based on the value of
the document.
• For example, getting approved for a bank loan means you’ll be paying a DST of Php 1.50
per Php 200 of the loan amount. The lender deducts the DST payment from your loan
proceeds. You won’t be charged this tax, though, if the value of your loan is Php 250,000 or
less1.
 DONOR’S TAX

• Gifts and donations worth over Php 250,000 are taxed in the Philippines. Taxable gifts
include cash, relief goods, and real and personal properties.

• Paid by the donor (not by the donation recipient or donee), the donor’s tax is 6% of the fair
market value (FMV) of total net gifts in excess of the Php 250,000 threshold for tax-exempt
gifts during the calendar year

• The donor’s tax rate applies regardless of the donor’s relationship with the donee, whether
the donee is a relative or a stranger.
 ESTATE TAX

• Estate Tax is a tax on the right of the deceased person to transmit his/her
estate to his/her lawful heirs and beneficiaries at the time of death and on
certain transfers, which are made by law as equivalent to testamentary
disposition.
• It is not a tax on property. It is a tax imposed on the privilege of transmitting
property upon the death of the owner.
• The Estate Tax is based on the laws in force at the time of death not with
standing the postponement of the actual possession or enjoyment of the
estate by the beneficiary.
 EXCISE TAX

• The excise tax applies to goods produced,

imported, or sold in the Philippines.
Manufacturers, producers, importers, and sellers
file and pay the excise tax. But because it’s an
indirect tax, the excise tax is passed on to
consumers as part of the selling price.
 INCOME TAX
• The income tax is the most familiar tax among employees who get
deductions every payday and businesses that file taxes on their earnings
with the BIR. Essentially, it’s a tax on a person’s income or profit earned
from his/her job, business, or property.
 PERCENTAGE TAX
• Percentage tax is a business tax imposed on persons, entities, or
transactions specified under Sections 116 to 127 of the National Internal
Revenue Code of 1997 (also known as Tax Code), as amended, and as
required under special laws.
• Percentage Tax in the Philippines is a form of sales tax.
• Percentage Tax is a direct tax the seller is the one who shoulders the tax and
files it with the BIR.
• The Percentage Tax computation is based on gross sales, receipts or
earnings (except for insurance companies which is based on the total
premium collected/paid) within the Philippines.
 VALUE-ADDED TAX(VAT)
• A VAT is a tax on consumption imposed on the sale, barter, exchange, or
lease of goods, properties, and services in the Philippines.
• VAT is an indirect tax which means the end consumer is being charged for
the tax. In the Philippines, the rate of VAT is at 12% except for export sales
and other zero-rated sales which is at 0%.
 WITHHOLDING TAX
• is a set amount of income tax that an employeer withholds from an
employee’s paycheck and pays directly to the government in the employee’s
name
 LOCAL TAXES

I. REAL PROPERTY TAX VII.ANNUAL FIXED TAX FOR

II. TAX ON THE BUSINESS OF DELIVERY TRUCKS OR VANS
PRINTING AND PUBLICATION VIII.
BUSINESS TAXES
III.FRANCHISE TAX IX.BARANGAY TAX
IV. TAX ON SAND GRAVEL AND X. COMMUNITY TAX
OTHER QUARRY RESOURCES
V. PROFESSIONAL TAX
VI.AMUSENT TAX
 REAL PROPERTY TAX
• Real Property Tax this is when you own a house and lot a condo unit, building
or a piece of land you are entitle to pay Real property Tax every quarter or year.
• The RPT, locally known as amilyar, covers the following types of real properties:
1. Residential
2. Commercial
3. Agricultural
4. Industrial
5. Timberland
6. Mineral.
 REAL PROPERTY TAX

• RPT rates vary per city or municipality in the Philippines. In Metro

Manila, property owners pay up to 2% of the assessed property
value. In the provinces, the maximum real property tax rate is 1%.
• The assessed value is based on a certain percentage of the real
property’s fair market value (20% for residential/timberland, 40%
for agricultural, and 50% for commercial/industrial/mineral
properties).
 TAX ON THE BUSINESS OF PRINTING AND PUBLICATION

• The Local Government Code of the Philippines authorizes LGUs to collect

taxes from printing or publication businesses that produce books, cards,
posters, tarpaulins, pamphlets, leaflets, and other similar materials.
• The maximum rate for this local tax is 50% of 1% of the gross annual
receipts for the previous calendar year. For newly opened
printing/publication businesses, the maximum tax rate is 1/20 of 1% of the
capital investment.
 FRANCHISE TAX

• If you run a franchise business, your LGU may require you to pay the
franchise tax, with the same maximum rates as the tax on the
business of printing and publication.
 TAX ON SAND, GRAVEL, AND OTHER QUARRY RESOURCES

• This is a tax you may need to pay when you get a permit at
the Sangguniang Panlalawigan to extract sand, ordinary stones,
gravel, earth, and other quarry resources from public lands or
waters in your province.
• The maximum rate for this local tax is 10% of the fair market
value per cubic meter of the quarry resources you’ll extract.
  PROFESSIONAL TAX

• Professionals who passed the bar exams or board exams—including Lawyers

, Doctors, Engineers,Teachers and CPAs—pay a professional tax of up to Php
300 every year to the city or province where they practice their profession or
hold their main office.
• If you practice two professions at the same time (CPA and a Lawyer), you
should pay both the professional tax imposed on lawyers and CPAs.
• Once you pay the professional tax, you can practice your profession anywhere
in the Philippines.
 AMUSEMENT TAX

• Owners, operators, or lessees of amusement places such as

cinemas, theaters, concert halls, and circuses may be required to
pay the amusement tax up to 10% of the gross receipts from
admission fees.
• The amusement tax is passed on to customers by including it in
the admission or ticket price.
 ANNUAL FIXED TAX FOR DELIVERY TRUCKS OR VANS

• A tax of up to Php 500 applies to every truck, van, or any vehicle that
manufacturers, producers, dealers, and retailers use to deliver goods such
as soft drinks, cigarettes, and alcohol products to consumers and sales
outlets within the province.
 BUSINESS TAXES

• Municipalities may require businesses within their area

(including manufacturers, wholesalers, distributors, exporters,
contractors, retailers, and banks) to pay graduated-fixed taxes,
percentage taxes, or both.
• Business taxes on the local level are paid in addition to the
excise tax, percentage tax, or VAT paid to the BIR.
 BARANGAY TAX

• The barangay tax covers small retailers(sari-sari store) with fixed

business establishments (meaning peddlers or mobile vendors
are exempted) and with annual gross sales or receipts not
exceeding Php 50,000 (for those located in cities) or Php 30,000
(for those located in municipalities).
 COMMUNITY TAX

• Each time you get a community tax certificate, better known as cedula, you’re
required to pay a basic community tax of Php 5 plus Php 1 per Php 1,000 of your
income.
• For example, if your monthly income is Php 20,000, your community tax due is
Php 25.
• Corporations are also mandated to pay the community tax at a rate of Php 500
(basic fee) plus Php 2 per Php 5,000 worth of gross sales/receipts from
business and Php 2 per Php 5,000 worth of real property owned.
• Individuals should pay no more than Php 5,000 for the community tax. The
maximum community tax for corporations is Php 10,000.
 TAXES UNDER SPECIAL LAWS

I. ENERGY CONSUMPTION TAX

II. FOREST CHARGES
III. HEAD TAX
IV. MOTOR VEHICLE USER’S CHARGE
V. TRAVEL TAX
 ENERGY CONSUMPTION TAX

• You’re probably paying for the energy consumption tax every month—but
you might not be aware of it unless you take a look at your Electric Bill.
• Batas Pambansa Blg. 36 (yes, it’s an old law enacted in 1979) imposes an
energy tax on the monthly electric power consumption of residential
users to encourage energy conservation in the country.
• The energy consumption tax rate is Php 0.10 per kilowatt-hour (KWH) for
households with more than 650 KWH consumption. If your monthly
consumption is lower than 650 KWH, you’re exempted from this tax.
 FOREST CHARGES

• Forest charges are the tax you pay for the privilege of cutting and harvesting
forest products that are used as raw materials for manufacturing furniture and
other wood products.
• This tax is mandated by the Republic Act 7161, the law that amends the Revised
Forestry Code of the Philippines. Forest charges apply to forest products
gathered in public forestlands and areas covered by tax declarations.
• Exempted from forest charges are forest products collected in private 
lands covered by existing land titles and approved land applications, as well as
those from industrial tree plantation areas.
• Rates of forest charges vary per species group and are
charged per cubic meter (for mahogany, yakal, pulpwood,
firewood, etc.), per linear meter (for unsplit rattan), per
kilogram (for split rattan), or per piece (for bamboo).
• Note, however, that the law bans the cutting of all
mangrove species in the Philippines.
 HEAD TAX
• Under the Philippine Immigration Law, a head tax of Php 250 should be paid,
among other immigration fees, by the following foreigners:
• Over 16 years old staying in the Philippines for more than 59 days
• Those with permanent residence status in the Philippines upon their return from an
overseas trip and retrieval of their Alien Certificate of Registration
(ACR)/Immigration Certificate of Residence (ICR)
• Those applying for re-entry permit and Special Return Certificate
• If you’re one of the foreigners described above, pay the head tax to the
immigration officer during your arrival at the airport in the Philippines
 MOTOR VEHICLE USER’S CHARGE

• When you register your vehicle and renew your car registration every year,
you’re required to pay the motor vehicle user’s charge (MVUC) to the Land
Transportation Office (LTO).
• The MVUC is a combination of tax for road usage and registration fee under
the Republic Act 8794 (Motor Vehicle User’s Charge Law). It’s charged to
compensate for the potential damage a vehicle may cause to the road, which
is why MVUC rates are based on the vehicle type and weight.
• MVUC rates are Php 1,400 to Php 8,000 for passenger cars, at least Php 2,000
for utility vehicles, and at least Php 2,300 for SUVs. The MVUC for motorcycles
without a sidecar is Php 240, while the fee for those with a sidecar is Php 300.
 TRAVEL TAX

• Up to this day, the travel tax is still charged. Under the Republic Act 9593 (Tourism Act of 2009),
50% of the travel tax collections go to the Tourism Infrastructure and Enterprise Zone Authority
(TIEZA)’s projects and expenses.
• CHED gets a 40% allocation for tourism-related educational programs and courses. The
remaining 10% of the collected travel tax goes to the National Commission for Culture and Arts.
• The travel tax covers Filipinos, foreign permanent residents, and foreigners who have stayed
in the Philippines for longer than one year.
• Travel tax rates are Php 1,620 for travelers on economy flights and Php 2,700 for travelers flying
first-class. The travel tax is discounted for dependents of OFWs and children aged two to 12.
• OFWs, Filipino permanent residents abroad, and infants aged two and below are exempted
from the travel tax payment.
 TAX RATES IN THE PHILIPPINES

• The following tax rates apply to individuals and 

companies in the Philippines:

-  the personal income tax, which is levied at rates between 5% and 32%;
- the corporate tax which is levied at a 30% rate;
- the VAT which has a standard rate of 12%.
 Purposes and Significance of Taxes
• Primary Purpose- To generate funds or revenues used to defray
expenses incurred by the government in promoting the general
welfare of its citizenry.

• Other Purpose -To equitably contribute to the wealth of the

nation
Taxation During Commonwealth Period
1. New measures and legislation
2. Income tax rates were increased in 1936
3. Surtax rate on individual net income in excess of 10,000 pesos
4. Income tax rates of corporation were also increased
5. Cedula tax was abolished
6. Residence tax was imposed on every citizen aged 18 yrs old and on every
corporation
 In 1939, the Commonwealth Government drafted National Internal
Revenue Code

1. Normal tax of 3 percent and the surtax on income was replaced by a single tax at
progressive rate.
2. Personal exeptions were introduced
3. Corporation income tax was slightly increased by introducing taxes on inherited
estates or gifts donated in the name of dead persons.
4. The cumulative sales tax was replaced by a single turnover tax of 10% on luxuries
5. Taxes on liquors,cigarettes,forestry products, and mining were increased
6. Dividends were made taxable
 World War II
• Japanese military administration continued the system of tax collection
• Foreign trade fell
Fiscal Policy from 1946 to
Present
• The United States advised the adoption
of direct taxation,but the administration
of President Manuel Roxas declined the
proposal because it did not want to
alienate its allies in Congress.
 PRESIDENT ELPIDO QUIRINO
1. Implementation of import and exchange controls
2. It reduced economic dependence on imports
3. New tax measures were passed
4. Tax revenues increase twohold
• The succeeding presidencies of magsaysay,Garcia and Macapagal
promised to study the tax structure and policy in our country.(Through the
creation of tax commision by means of Rep Act No. 2211)
• Congress did not pass any tax legislation
• Indirect Taxation
• Omnibus Tax Law
• Rise in corruption
 FISCAL POLICY

A. President Ferdinand Marcos

B. President Corazon Aquino
C. Fidel Ramos
 PRESIDENT FERDINAND MARCOS

1. Tax system was dependent on indirect taxes(Excise tax, VAT ,Service Tax)
2. Taxes remained regressive and unresponsive
3. Taxes grew at an average annual rate of 15%
4. Tax effort (which is index of the ratio between the shares of the actual tax
collection in gross domestic product and taxable capacity was in at a low
10.7%
 PRESIDENT CORAZON AQUINO
1. Introduction of VAT
2. Restructuring of Department of Finance and its agency the BIR through the Executive Order No.127
3. Computerization was introduced
4. Corruption was relatively reduced
5. Both Tax and Revenue effort rise( increasing from the Marcos time which is 10.7% to 15.4% in the
year 1992)
6. 10% uniform rate and sales of domestic and imported goods and services and 0% on exports and
foreign country denominated sales
7. 10% in lieu of varied rates (which is applicable fixed taxes (advance sales tax, tax on original sale,
subsequent sales tax, compensations tax, millers tax, contractors tax, brokers tax, excise tax on
solvent and matches
8. 2% tax on entities with annual sales or receipts of less than 5 million and
200,000
9. Adoption of tax credit method of calculating tax.
10. Exemption of the sale of basic commodities ( such as agriculture and
marine food products in their original state,price regulated petroleum
products and fertilizers)
11. Additional 20% tax on non-essential articles
 PRESIDENT FIDEL VALDEZ RAMOS
1. VAT base was broadened in 1997( through R.A 7716)
2. Comprehensive Tax Reform Program (CTRP) was implemented
3. FEATURES OF THE IMPROVED VAT:
4. Restored the VAT exemptions for all cooperatives provided that the share capital
of each member does exceed in PhP 515,000.
5. Expanded the coverage of the term “simple processes” ( by including the broiling
and roasting effectively narrowing the tax based for food products).
6. Expanded the coverage of the term “original state” ( by including molasses ( a
dark sweet syrupy made during the extractions of sugar from sugar canes and
sugar beets)
 EXEMPTIONS FROM THE VAT:
1. Importation of meat
2. Sale or importation of coal and natural gas( in whatever form or state)
3. Educational Services(rendered by private educational institutions duly accredited by
CHED)
4. House and lot and other residential dwellings(which valued at 51 million and below,
subject to adjustment using the consumer price index)
5. Lease of residential units ( with monthly rental per unit not more than 58,000 subjects
to adjustments using CPI (consumer price index).
6. Sale ,importation ,printing, or publication( of books or any newspapers .
 FISCAL POLICY
A. President Gloria Macapagal Arroyo
B. President Benigno Aquino III
C. President Rodrigo Duterte
PRESIDENT GLORIA MACAPAGAL -
ARROYO
1. Expanded Value Added Tax (E-VAT) was signed into law as R.A
9337.
2. Subjected to:
1. VAT energy products such as coal and petroleum products and electricity
generation ,transmission ,and distribution.
2. Professional services were also taxed.
3. VAT tax rate was also increased from 10% to 12%.
EXPANDED VALUE ADDED TAX (E-VAT)
-is a form of sales tax that is imposed on the sale of the goods into
the Philippines.

-It is a consumption tax (those who consume more are taxed more)
and an indirect tax ,which can be passed on to the buyers.

During the Administration of President Arroyo ,the E-VAT law was

enacted. The national debt to GDP ratio peeked, and underspending
and other capital expenditures was observed.
• In 2008 a Republic Act No. 9504 passed by President Arroyo .
• Exempted minimum wage earners from paying income taxes.
• The Current EVAT rate is 12% of transactions. Some Items which are subject to EVAT Includes the
following :
1. Petroleum
2. Indigenous fuels
3. Medical services
4. Legal services
5. Electricity
6. Non basis commodities
7. Clothing
8. Non food agricultural products
9. Domestic travel by land and sea
10. Natural Gases
PRESIDENT BENIGNO AQUINO III
1. Promised that no new taxes would be imposed
2. Adjustment of excise tax on liquor and cigarettes or Sin Tax Reform.
3. Increase of Department of Health Budget
4. Increase of free health insurance for the poor people enrolled in Phil-Health.

During the first Aquino Administration a large fiscal deficit from the previous Administration ,
but managed to reduced fiscal imbalance and improve tax collection through the introduction
of the 1986 tax reform program and the value added tax(VAT)
5. The Republic Act No. 10351 or also known as Sin Tax reform law is one of the
landmark legislation under the Aquino Administration .

6. It is primarily a health measure with revenue implications. But more

fundamentally it is a governance measure.
7. Sin Tax Law helps finance the Universal Health Care Program of the
government ,simplified the current excise tax system on alcohol and tobacco
products and fixed long standings structural weaknesses, and addresses
public health issue relating to alcohol and tobacco consumptions.
8. Aquino imposes a law of higher taxes on tobacco and alcohol products,
overcoming a strong industry lobby that kept prices in the Philippines among
the cheapest in the world.
9. He signed the Sin Tax Bill into law ending a grueling battle to reform the
Philippines excise tax system.
PRESIDENT RODRIGO ROA DUTERTE
1. Promised tax reform
2. Lower Tax Rates shouldered by working Filipinos.
3. Limit VAT exemptions and increase excise taxes on petroleum products and automobiles.
4. Duterte signed into law the Tax Reform for Acceleration and Inclusion (TRAIN) Bill which
is expected to generate PhP 130 Billion in revenues.
5. He also signed the R.A 10963 or also known as the Train Law ,this is a priority measure of
the Duterte Administration at Malacañang Ceremonial Hall last December 19,2017.
6. Revenues from the tax reform measure are meant to fund the Duterte Government’s “Build
, Build, Build” infrastructure program and socio-economic programs.
7. Income taxpayers with an annual salary of 250,000 or those earning
approximately PhP 22,000 monthly and below ,are now exempt from
income tax payment .
8. The Law also exempts from tax payment the first PhP 90,000 of the 13th
month pay and other bonuses.