PHILIPPINES Law and Practice Contributed by: Carina Laforteza, Joanna Marie Joson, Kristina Paola Frias and Joanna Marie Reyes, SyCip Salazar Hernandez & Gatmaitan
The sale of (i) shares listed and traded on the Philippine stock exchange; and (ii) shares of a domestic corpora - tion listed and traded on a foreign stock exchange, is now subject to a stock transaction tax (STT) of 0.1% based on the gross selling price or gross value in mon - ey of the shares sold pursuant to the Capital Markets Efficiency Promotion Act (CMEPA). If the corporation is a non-resident foreign corpora - tion, it may avail itself of tax treaty relief on capital gains derived from the alienation of property in the Philippines. 2.8 Other Taxes on Transactions A corporation that, in the course of trade or business, sells, barters, exchanges, leases goods or proper - ties, or renders services (including digital services consumed in the Philippines), is subject to VAT at the rate of 12% on the sale of goods or service, barter or exchange. The importation of goods is likewise sub - ject to VAT. VAT-registered corporations are required to file VAT returns and pay VAT within 25 days following the close of each taxable quarter. Depending on the transaction, corporations may be subject to documentary stamp tax (DST), which is a tax on documents, instruments, loan agreements and papers, and upon acceptances, assignments, sales and transfers of obligations, rights or properties. Certain goods manufactured or produced (eg, distilled spirits, tobacco products, mineral products, petro - leum products, sweetened beverages) in the Philip - pines for domestic sale or consumption or for any other disposition, or that are imported, are subject to excise tax. Cosmetic surgery services performed in the Philippines are also subject to excise tax. Excise taxes are imposed in addition to VAT, and VAT is cal - culated on the gross selling price or gross receipt plus the excise tax. 2.9 Other Notable Taxes Certain income payments are subject to final or cred - itable withholding taxes. Incorporated businesses (ie, domestic corporations) may be constituted as with - holding agents when they make payments that are subject to final or creditable withholding tax. Under the Ease of Paying Taxes Act (“EOPT Law”), the obli -
gation to withhold tax arises at the time the income becomes payable. Passive income that is subject to final withholding tax (FWT) is no longer included in the calculation of tax - able income. The following types of passive income earned by incorporated businesses are subject to the following FWT: • 20% final tax on interest on currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, and royalties derived from Philippine sources; and • 20% final tax on interest income from a depository bank under the expanded foreign currency deposit system. The sale, exchange or disposition of lands and/or buildings that are not actually used in the business of a corporation and are treated as capital assets is subject to 6% capital gains tax (CGT) based on the gross selling price or fair market value of the property, whichever is higher. The sale of shares of stock in a domestic corporation that are held as capital assets is subject to a separate tax – CGT or STT (whether listed and traded through a local or foreign stock exchange). Additionally, the sale of shares in a foreign corporation not listed on the local or foreign stock exchanges is now subject to 15% CGT pursuant to CMEPA. Incorporated businesses (ie, employers) are also required to pay a 35% fringe benefits tax on the grossed-up monetary value of fringe benefits furnished or granted to their employees, except rank-and-file employees, unless the fringe benefit is required by the nature of, or necessary to, the trade or business of the employer, or the fringe benefit is for the convenience or advantage of the employer.
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