In the Philippine archipelago, domiciled citizens are mandated to remit Income Tax on their earnings accrued both domestically and internationally. Conversely, citizens domiciled abroad and all foreign nationals regardless of their residential status are beholden solely to income emanating from Philippine sources.
Remittance Obligations for Foreign Nationals
The imposition of levies upon expatriates, resident or otherwise, hinges upon the typology of income be it from remuneration, fixed-rate investment yields, or miscellaneous earnings. Distinctions in tax brackets correspond accordingly.
Earned Income Compensation Taxation Schema
For non-citizen individuals conducting enterprise within Philippine boundaries and deriving compensation-based earnings, the following progressive tax system has been operational since January 1, 2023:
| Taxable Earnings (PHP) | Tax Obligation on Base (PHP) | Incremental Levy (%) |
|---|---|---|
| 0 – 250,000 | Nil | 0% |
| 250,001 – 400,000 | Nil | 15% |
| 400,001 – 800,000 | 22,500 | 20% |
| 800,001 – 2,000,000 | 102,500 | 25% |
| 2,000,001 – 8,000,000 | 402,500 | 30% |
| Over 8,000,000 | 2,202,500 | 35% |
Fringe Benefits Levy (FBT)
Employers must pay a final, non-refundable fringe benefits tax (FBT), generally set at 35% of the grossed-up monetary value, when they provide executive or managerial-tier benefits. This bracket applies to employees wielding authoritative discretion in hiring, disciplining, or administratively steering subordinates, as well as those in supervisory roles whose advisories possess substantial managerial sway.
For non-resident aliens unengaged in Philippine commerce, this final imposition stands at 25%.
The employer settles the FBT quarterly on a calendar basis and may record it as an expense in the accounting of benefit disbursements. Employers exclude remunerations subject to FBT from the employee’s taxable income. You can find a detailed explanation in the “Income Determination” section.
Fixed-Rate Income (Passive Revenue)
For both resident and transient aliens engaged in Philippine trade or business, passive capital inflows—customarily from dividends, deposits, or similar yield-bearing instruments—are subjected to a maximum of 20% final tax. In contrast, non-resident aliens bereft of Philippine business involvement endure a flat 25% burden on such income. Further elaboration can be found in the “Capital Gains and Investment Income” section under Income Determination.
Entrepreneurial and Professional Revenue
Individuals, whether nationals or alien residents, who engage in solo business ventures or independent professions also fall under the previously outlined graduated tax brackets.
Should an individual’s aggregate gross turnover—including incidental, non-repetitive earnings—fall below the statutory value-added tax (VAT) demarcation of PHP 3 million, they are afforded two fiscal paths:
- A streamlined 8% levy on total gross income surpassing PHP 250,000, which substitutes both the graduated income tax and the percentage business tax, provided the individual is not VAT-registered;
- Or, adherence to the graduated tax rate system, complemented by requisite business tax (either 12% VAT or 3% percentage levy, subject to statutory qualification).
Note: VAT-registered individuals, irrespective of income magnitude, are obligatorily governed by the graduated tax regime.
This rendition seeks to cultivate a deeper grasp of the Philippines’ personal income taxation structure, particularly for global denizens and transient earners operating within its territorial ambit.