Taxation of international executives
Are there social security/social insurance taxes1 in the Philippines? If so, what are the rates for employers and employees?
The Social Security System (SSS) is compulsory to all employees aged 60 or less and their employers. Self-employed persons may choose to be covered on a voluntary basis.
Contributions to the SSS are made both by employees, by deduction from their salaries, and by employers, who are responsible for remitting the contributions. Membership with the SSS gives automatic membership with the Employees’ Compensation Program.
The maximum monthly contributions for each employee under each program are as follows:
|Type of insurance||Paid by employer||Paid by employee||Total|
Services performed in the employ of a foreign government or international organization or their wholly owned agencies/subsidiaries/branches are exempted from the social security levies.
Home Development Mutual Fund (HDMF) contribution
2 percent of the monthly income. The maximum monthly compensation used in computing the employee contributions is set as PHP5,000. As such, the maximum member contribution and employer counterpart per month are each PHP100.
Moreover, Home Development Mutual Fund (HDMF) issued Circular No. 421, dated 16 January 2019, instructing all affected employers to stop deducting contributions from all expatriates under their employ. The refund of contributions and accrued dividends from expatriates shall be processed upon filing of corresponding applications for claim. However, the HDMF has not yet released the guidelines on how to process the refund claims and which period is subject to the refund.
The maximum member contribution and employer counterpart per month is PHP900 each.
Are there any gift, wealth, estate, and/or inheritance taxes2 in the Philippines?
Estate taxes are imposed on transmission of property by resident and non-resident decedents based on the value of the net estate transferred. Estates with a net value of PHP5 million and below will be exempted from paying the estate tax. Family homes that are valued at PHP10 million or less will also be exempted from estate tax. Taxable net estate is subject to a flat rate of six percent.
For decedents who are citizens or residents, gross estate includes real property and tangible personal property located in the Philippines or abroad and intangible property wherever situated. For non-resident alien decedents, gross estate includes real property and tangible personal property located in the Philippines and intangible property located in the Philippines, subject in the latter case, to exemption under the principle of reciprocity.
The donor’s tax is intended to tax transfers of property by gift and includes transfer of real or personal property as well as tangible or intangible property. A flat rate of six percent is imposed on total gifts in excess of PHP250,000 regardless of relationship to the donor.
Are there real estate taxes in the Philippines?
Yes. The primary responsibility for the proper, efficient, and effective administration of real property tax, subject to the rules and regulations governing the classification, appraisal and assessment of real property issued by the Department of Finance (DOF), is borne by the provinces and cities, including municipalities within Metro Manila.
Are there sales and/or value-added taxes in the Philippines?
The VAT is levied, assessed and collected on every sale, barter or exchange of goods or properties at the rate of 12 percent of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged such tax to be paid by the seller or transferor.
Are there unemployment taxes in the Philippines?
Are there additional taxes in the Philippines that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.
There are no local taxes imposed on income of individuals in the Philippines. However, certain individuals are required to pay a basic community tax of PHP5 plus an annual additional tax not exceeding PHP5,000, computed at PHP1 for every PHP1,000 of income.
Is there a requirement to declare/report offshore assets (e.g. foreign financial accounts, securities) to the country/jurisdiction’s fiscal or banking authorities?
None, in general.
Package 2 of the CTRP or the Comprehensive Income Tax and Incentives Rationalization Act (CITIRA) deals with corporate taxation. Specifically, it aims to reduce the corporate income tax rate from 30 to 20 percent and rationalize fiscal incentives. Moreover, Package 4 or the proposed Passive Income and Financial Intermediary Taxation Act (PIFITA) of the CTRP aims to simplify the taxation of passive income, financial services, and transactions. It will also harmonize the tax rates on interest, dividends, and capital gains, and the business taxes imposed on financial intermediaries.
1Republic of the Philippines Social Security System.
2Republic of the Philippines Bureau of Internal Revenue.
All information contained in this publication is summarized by R.G. Manabat & Co., the Philippine member firm of KPMG International, based on the Republic of the Philippines Bureau of Internal Revenue, Social Security System, Philippine Health Insurance Corporation, and Home Development Mutual Fund.
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