We need to be aware of the taxation system in our country. If you’re a person engaged in business or someone who is practicing his or her profession, you should know the corresponding business and income taxes that may be imposed on your business or professional activities. If you’re an employee, you have to learn how much tax your employer is withholding on your compensation income. Donations and even the properties or the estate of a deceased person could also be taxed. And when you buy goods or services in the market, chances are, the prices of those products are augmented with sales tax, like Value Added Tax.
The two basic types of taxes in the Philippines are local taxes and national taxes. Local taxes include the taxes, fees, and other charges that may be levied by the local government units (i.e., provinces, municipalities, cities, and barangays) to individuals or juridical persons (e.g., corporations and partnerships) in the Philippines. The local government taxation in the Philippines is based on Republic Act 7160 or otherwise known as the Local Government Code of 1991, as amended. You may check out the list of local taxes in the Philippines here.
The national taxes in the Philippines are those that are imposed by the national government through the Bureau of Internal Revenue (BIR). The national taxation in our country is governed by the Republic Act No. 8424 or the National Internal Revenue Code of 1997, as amended by new and subsequent tax laws and tax regulations enacted by our government. Tariffs that are collected by the Bureau of Customs can also be considered as taxes. The import or export tariffs or customs duty in the Philippines are covered by the Republic Act No. 1937 otherwise known as the Tariff and Customs Code of the Philippines, as amended.
The following is the list of taxes in the Philippines which are covered by the National Internal Revenue Code, as amended:
Capital Gains Tax – is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.
Documentary Stamp Tax – is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto. Examples of documentary stamp tax are those that are charged on bank promissory notes, deed of sale, and deed of assignment on transfer of shares of corporate stock ownership.
Donor’s Tax – is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer.
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.
Income Tax – is a tax on all yearly profits arising from property, profession, trades or offices or as a tax on a person’s income, emoluments, profits and the like. Self-employed individuals and corporate taxpayers pay quarterly income taxes from 1st quarter to 3rd quarter. And instead of filing quarterly income tax on the fourth quarter, they file and pay their annual income tax return for the taxable year.
Percentage Tax – is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed the amount required to register as VAT-registered taxpayers.
Value Added Tax – is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of services. It is an indirect tax, thus, it can be passed on to the buyer.
Excise Tax – is a tax imposed on goods manufactured or produced in the Philippines for domestic sale or consumption or any other disposition. It is also imposed on things that are imported.
Withholding Tax on Compensation – is the tax withheld from individuals receiving purely compensation income. This tax is what employers withheld in their employees’ compensation income and remit to the government through the BIR or authorized accrediting agent.
Expanded Withholding Tax – is a kind of withholding tax which is prescribed only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year. Examples of the expanded withholding taxes are those that are withheld on rental income and professional income.
Final Withholding Tax – is a kind of withholding tax which is prescribed only for certain payors and is not creditable against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the said income. An example of final withholding tax is the tax withheld by banks on the interest income earned on bank deposits.
Withholding Tax on Government Money Payments – is the withholding tax withheld by government offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations.
Reference: Bureau of Internal Revenue, Republic Act No. 8424, and Republic Act 7160
Disclaimer: The information published on this page is for general information only. New and subsequent laws and regulations may render the whole or part of the article incorrect or obsolete. This post doesn’t also constitute professional advice.