Doing Business in The Philippines

Doing
Business in
the
Philippines
1
2009 edition
Foreword
The Philippines has long opened its doors to embrace global
economic interconnectedness. As the world economy shrinks, that
is to say cross border transactions and investments have indeed
resulted in close trade relationship among countries, the need for a
global network which will provide consistent advice has never been
more apparent. RSM International makes a difference worldwide as
it is a global network composed of independently owned and
managed professional service firms, united by a common desire to
provide the highest quality service to their clients.
Alas, Oplas and Co. CPAs, an independent member firm of RSM

International, came up with this publication to give its clients,
prospective investors, and the general public broad insights about
the Philippines. It contains general information about laws,
legislations, and tax guidelines governing local business. Its main
goal is to provide significant yet concise information about the
potential opportunities on the different sectors of the Philippine
economy and to provide investors with the general guidelines of
starting a business locally.
2
Contents
General 4
Types of Business Entities 8
Foreign Exchange Controls 14
Taxation
18
Employment 58
Accounting 68
Intellectual Property Rights (IPR) 70
Asset Valuation 73
Investing in the Philippines 74
Listing Rules in the Philippines 80
Relevant Websites
89
About RSM International 91
About Alas, Oplas & Co., CPAs

92
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General
The Philippines is one of the countries in Southeast Asia which is
located in the “Pacific Rim of Fire.” It is an archipelago composed of
7,100 islands and islets. The country has a total land area of 30
million hectares or 300,000 square kilometers and the three biggest
islands commonly inhabited by people are Luzon. Visayas, and
Mindanao. Its archipelagic nature makes the world’s 5th longest
coastline; it has a coastline of about 36, 300 kilometers. Three
prominent bodies of water surrounded the archipelago: the Pacific
Ocean on the east, the South China Sea on the west, and the
Celebes Sea on the south.
One advantage of the Philippines being an archipelago is that it

offers diverse natural resources, from land to marine to mineral
resources. It is also the biggest copper producer in Southeast Asia
and producer of gold in the world. A home to 2, 145 fish species and
its 7, 100 islands boast of beautiful beaches and breathtaking
sceneries offer leisure and relaxation spots for vacationists and
tourists.
The Philippines has a tropical climate with relatively abundant

rainfall and gentle winds. There are three pronounced seasons: (1)
the wet or rainy season from June to October, (2) the cool, dry
season from November to February, (3) and the hot, dry season
from March to May.
Filipinos are divided geographically and culturally into regions, and

each regional group is recognizable by distinct traits and dialects.
The projected Philippine population as of August 1, 2007 was 88.57
million. From 2000 to 2007, it has a growth rate of 2.04 percent per
year, or an absolute increase of around 1.81 million per year, net of
death and migration. As the country is physically divided, people
created their racial identity through ethnic groups. The biggest
ethnic group is Chinese Malay which comprises 91.5%, 4 % Muslim
Malay, 1.5% Chinese, and others belong to the remaining 3%.
Filipinos use the two official languages, Filipino and English. Filipino
is the native language used nationally as a language of
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communication among ethnic groups while English is also widely
used as a medium of instruction in higher education and in business
trades. There are eight major dialects spoken by majority of the
Filipinos: Tagalog, Cebuano, Ilocano, Hiligaynon or Ilonggo,
Bicolano, Waray, Pampango, and Pangasinense. Eighty-five percent
of the Filipino is predominantly Catholic while the Muslims
constitute of about 5 percent of the population. The remaining 10
percent belongs to other religious groups.
The Philippine education system is patterned after the American

education system and follows four stages of formal education: pre-
primary level, six years of primary education, four years of
secondary education, and college education.
According to the census conducted by the government in 2006,

electronic products still accounted for the majority of the export
products (62.6%), followed by articles of apparel and clothing
accessories (5.6%); cathodes and sections of cathodes refined
sugar (2.6%); woodcrafts and furniture (2 %); and petroleum
products (1.9%). Meanwhile, the top products imported by the
country are also the electronic products (47.2%), followed by
mineral fuel, lubricants, and related materials (15.4%); transport
equipment (3.9%); industry machinery and equipment (3.8 %); iron
and steel (2.3%), and textile yarn, fabrics, made up articles, and
related products (2.2%).
The Philippines has a well-developed communication,

transportation, business and economic infrastructure that makes it
an ideal destination for operations of global business. It is highly
accessible to the world by air, water, and cyberspace. Most major
airlines have multi-weekly flights in and out of Metro Manila, and to
key cities in United States, Europe, and Middle East. The country
has eight (8) international airports and over 200 airports that
connect destination across islands. In key economic areas, some of
Philippine harbors have already been developed into modern ports
and container terminal that play host to national and international
trade. Furthermore, the three main islands of the country, Luzon,
Vizayas, and Mindanao, are made accessible by roads, waterways,
and airports.
Despite more modest infrastructure capabilities, the Philippines

assures investors of efficiently communicating their business
5
message to the rest of the world through world-class transmission
facilities. The country’s communication infrastructure is well-
developed and expanding, a high quality, low cost bandwidth
domestic network, with six available platforms: fixed line, cellular,
cable TV, over the air TV and radio, and the VSAT system.
Economy
The Philippine economy is considered a mixed economic system,
which means it may feature both capitalism and socialism. The
country is considered by International Monetary Fund (IMF) as a
fastest growing economy is Southeast Asia as the country posted a
real GDP growth of 7.3% in 2007. For 2008, the country’s real GDP
increased by 4.5 percent. Based on the NSO Labor Force Survey in
2008, the full year economic growth increased labor employment by
530,000. The employment created was based on services which
served as the country’s primary growth driver. In response to the
global economic crisis, the government is partnering with private
sector for infrastructure projects. Ownership of dwellings and real
estate, business process outsourcing, agriculture,
healthcare/medical tourism, and tourism are the positive prospects
that could help the economy to remain resilient and prepare for
eventual economic rebound.
Further, based on the Inflation Report of Bangko Sentral ng Pilipinas

(BSP), even though inflation decelerated further in the 4th quarter of
2008, inflation outlook is much more favorable as the emerging
forecasts showed a downward shift in the inflation path to settle the
target ranges for both 2009 and 2010, driven mainly by the
expected easing of world oil prices, the lower-than-expected
inflation outturn for Q4 2008, and the impact of transport fare
reductions. Retreating prices and commodities and the recent string
of low inflation numbers should relieve inflationary pressures and
keep the public inflation’s expectations at bay.
As of 4th quarter of 2008, total approved Foreign Direct Investments

(FDI) declined significantly by 79.2% to Php21.4 billion in the fourth
quarter of 2008 from a higher level of Php102.6 billion in the same
quarter a year ago. On the other hand, the 2008 annual FDI reached
Php182.7 billion, lower by 14.7 % than the Php214.1 billion
approved in 2007. Almost all (99.2%) of foreign and Filipino
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investments approved during the quarter were coursed through BOI
and PEZA.
Administration
The 1987 Constitution provides a presidential system of
government with bicameral parliament and three equal branches:
(1) the Executive, (2) the Legislative, and (3) the Judiciary. As
defined, the Legislature makes the law, the Judiciary interprets the
law (if consistent with the Constitution), and the Executive
implements the law.
The Executive is composed of the Office of the President (OP), Vice

President, Cabinet officials of the 21 departments, about 3 or 4
dozen Presidential advisers and consultants, and several ad-hoc
task forces and commissions. The President makes Executive
Orders (EOs), administrative orders (AOs), and other ordinances.
The 21 departments and its attached agencies create and issue its
own AOs, Memorandum Circulars (MCs) and related ordinances.
The Legislative is composed of the Senate and the House of

Representatives. The upper chamber is composed of 24 Senators
elected nationwide and have a term of 6 years with one term for re-
election. The lower chamber is composed of more than 260
Congressmen/women, about 230 elected in various legislative
districts, and about 30 elected by party-list system for the
marginalized sectors and small political parties.
The Judiciary is composed of the Supreme Court, Appellate courts

and lower courts.
Local government units (LGUs) are currently composed of 81

provinces, 131 cities, 1,497 municipalities, and almost 42,000
barangays or villages. Each of these units has its own local policy-
making councils.
The Philippine Constitution is the fundamental law of the state.
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Local Customs
The regular working day is consisted of eight (8) hours. Banking
institutions can be flexible with their own business hours; however,
the time should not be lesser than six (6) hours a day, anytime
between 8 a.m. to 5 p.m. Generally, commercial banks transact
from 9 a.m. to 3 p.m. and savings bank from 9 a.m. to 5p.m.
Government and private offices are open from 8 a.m. to 5 p.m.,

from Monday to Friday, with one hour lunch break from 12 p.m. to 1
p.m. Several private offices are open on Saturday.
There are eleven (11) regular holidays and (3) special non-working
holidays. These holidays are shown further on this reading.
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Types of Business Entities
Generally, there are three forms of business organization in the
Philippines.
Sole Proprietorship
Type of business entity which there is only one owner and he has
the final word taking all decisions by himself. All debts of the
business are debts of the owner and must pay from his personal
possessions. This means that the owner has unlimited liability.
To form a sole proprietorship, there is a need to apply for a business

name and register at the Department of Trade and Industry (DTI).
Partnership
Type of business organization in which two or more individuals pool
money, skills, and other resources, and share profit and loss in
accordance with terms of the partnership agreement.
In forming the latter with 3,000.00 Philippine pesos or more in

capital, you must register with the Securities and Exchange
Commission (SEC).
Corporation
A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and
properties expressly authorized by law or incident to its existence.
Foreign Investment Entities
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These are equity investments made by non- Philippine nationals in
the form of foreign exchange and/ or other assets actually
transferred to the Philippines and duly registered with the Central
Bank which shall assess and appraise the value of such assets other
than foreign exchange.
They are allowed to set up the following form of business entities:
Foreign Investment in Export Enterprise
An enterprises wherein a manufacturer, processor or service

(including tourism) enterprises exports sixty percent (60%) or more
of its output, or where in a trader purchases products domestically
and exports sixty percent (60%) or more of such purchases.
The enterprise whose products and services do not fall within List A
and B of Foreign Investment Negative List is allowed up to one
hundred percent (100%) ownership.
The same shall register with the Board of Investment (BOI) and
submit the reports that may be required to ensure continuing
compliance of the export enterprise. In case when the export
enterprises fail to meet the export ratio requirement, the BOI shall
advise the Security and Exchange Commission (SEC) and Bureau of
Trade Regulation and Consumer Protection (BTRCP). Thus, both
agencies shall order the non-complying export enterprises to
reduce its sales to the domestic market to not more than forty
percent (40%) of its total production. Failure to comply with such
order without justifiable reason may subject the enterprise in
cancellation of SEC or BTRCP registration and other appropriate
penalties.
Foreign Investments in Domestic Market

Enterprises
Enterprises which produces goods for sale, or renders services to

the domestic market entirely or if exporting a portion of its output
fails to consistently export at least sixty percent (60%) or more of
such purchases.
Non-Philippine nationals may own up to one hundred percent

(100%) of domestic enterprises unless foreign ownership is
10
prohibited or limited by the Constitution and existing law or the
Foreign Investment List. Moreover, a domestic market enterprise
may change its status to export enterprise if over a three-year
period; the former consistently exports sixty percent (60%) or more
of its output each year.
Audit Requirements
A statutory audit is required for all corporations with authorized
capital stock or paid-up capital exceeding P50, 000, including
branches of foreign corporations. It is also required for any
corporation whose gross sales or earnings exceed P150, 000 in any
quarter.
Incorporation of Business Entities-

Approval & Registration
Corporation
Formation procedures
The formation of corporations is governed by the Corporation Code.

However, if foreign investors are to own shares in a corporation, the
Foreign Investments Act of 1991 will also be relevant, as it places
constraints on foreign ownership in enterprises engaged in certain
activities.
Registration Requirements
Corporate existence and juridical personality commences from the

date the Securities and Exchange Commission (SEC) issues a
certificate of incorporation. However, before a corporation may
commence operations in the Philippines, it must also register with
the Bureau of Internal Revenue (BIR), the Social Security System
(SSS), the Home Development Mutual Fund (HDMF), the Philippine
Health Insurance Corporation (PhilHealth), and the local
government unit where its principal office will be located.
Registration with the SEC and other government agencies usually
takes six to eight weeks in total to complete.
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To establish a corporation, between five to 15 individuals must act
as incorporators. They must each own or subscribe to at least one
share, and a majority of them must be residents of the Philippines.
At least 25% of the authorized capital stock must be subscribed at
the time of incorporation, and at least 25% of that subscribed stock
must be paid. However, when the capital stock consists of no-par
value shares, the subscriptions must be paid in full.
Once incorporation formalities are completed, the incorporators

may sell their shares. The corporation will still need to retain at
least five shareholders, as it must have at least five directors, each
of whom must hold at least one share.
Among the more important documents required to be filed with the

SEC on applying for incorporation are the articles of incorporation,
by-laws, and the treasurer's affidavit indicating that the necessary
capital has been subscribed and paid up.
Formation Costs
The cost of registering a corporation will depend on its capital

structure. Filing fees with the SEC are 0.2% of the authorized capital
stock for the corporation, while nominal filing fees will also be
payable to the relevant local government unit.
The original issue of shares of stock is also subject to a

documentary stamp tax equivalent to 0.5% of the par value of the
shares. There are also charges for the other government agencies,
but the amounts involved are minimal.
Public Disclosure of Information Requirements
The SEC requires the submission of audited financial statements by

stock corporations with paid-up capital of at least P50, 000. The
statements must also be accompanied by a statement by
management that it takes responsibility for the information and
representations in the financial statements.
In addition, corporations are required to file annual information

sheets with the SEC, providing information on the corporation's
general profile, such as the names of directors and officers,
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stockholders and capital composition, investments, treasury shares,
retained earnings, and dividends.
All information filed by corporations is available at the SEC for

public inspection.
Partnership
A partnership has a separate legal personality from that of each of

the partners. A partnership will be either general or limited,
depending on the liability of the partners. A partnership is general
when all the partners are personally liable for the contracts of the
partnership once its assets are exhausted. In a limited partnership,
at least one partner has unlimited personal liability, but the liability
of other partners is limited to the amount of their capital
contributions.
A partnership is the legal entity commonly used by professionals

seeking to exercise their common profession, such as accountants
and lawyers. For tax purposes, they are referred to as "general
professional partnerships," and are taxed as conduit vehicles, rather
than as corporations as is the case for other partnerships. Under the
Civil Code, however, they are treated as any other partnership.
Partnerships are not commonly used as business entities, other

than by professional firms. In general, any person who can enter
into contractual relations may become a partner. A partnership can
also become a partner in another partnership, either with natural
persons or with other partnerships. As a matter of public policy, a
corporation may not be a partner in a partnership.
However, the SEC may allow a corporation to become a partner in a

partnership where the contract of partnership provides that it is to
be managed jointly by all the partners and that the partners are to
be collectively liable to partnership creditors. The corporation must
also be permitted to enter into a partnership by its articles of
incorporation.
A partnership with more than P3, 000 in capital must register with
the SEC. Registration follows the pattern outlined above for
corporations. The filing fee for the articles of partnership is the
greater of P1, 000 or 0.2% of the partnership capital.
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Partnerships are subject to the same record keeping and statutory
audit requirements as corporations.
Sole Proprietorship
Sole proprietors must register with the Bureau of Trade Regulations

and Consumer Protection of the Department of Trade and Industry,
as well as the appropriate local government unit. They are not
usually subject to the regulations and requirements governing
corporations and partnerships in the operation of their business.
However, if the activity involves the practice of a profession
included in the Foreign Investments Negative List (FINL),
registration of an alien individual will not be allowed.
Liquidation/Receivership
Corporations may be dissolved for any of the following causes:
• Expiration of the period provided for in the articles of

incorporation
• Enactment of a special law requiring dissolution
• A judicial decree of forfeiture
• Failure to organize and commence business within two

years from the date of incorporation
• Inoperative for five years after it has commenced

operations
• Voluntary dissolution, judicial or extra-judicial
Corporate assets may be liquidated by the corporation itself

through the board of directors and creditors, by receivership, or by
trusteeship. Liquidation through the board of directors takes three
years from corporate dissolution. Liquidation by receivership and
trusteeship may extend beyond three years. Under the trust-fund
doctrine, impairment of capital is prohibited, principally to protect
the corporation's creditors. Upon dissolution, the right of
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shareholders to the distribution of corporate assets is subordinated
to the rights of the creditors.
The interests of the shareholders in the remaining assets are in

proportion to their shareholdings, in the absence of any contrary
provision in the articles of incorporation and in the certificates of
stock. Holders of stocks preferred as to assets must be paid before
holders of common stock and holders of stocks preferred as to
dividends.
As an alternative to dissolution, a financially distressed company, or

creditor(s) holding at least 25% of the company's total liabilities,
may appeal to the Regional Trial Court to place the company under
corporate rehabilitation. The Court will then, within five days,
appoint a rehabilitation receiver, suspend the enforcement of claims
against the company and forbid the company from making any
payment of its outstanding obligations until the court can review
the petition.
Thus court proceedings can be tedious and lengthy, and do not

guarantee recovery. Because of these shortcomings, most secured
creditors would prefer to ensure timely recovery by enforcing their
rights over the collateral through the foreclosure of mortgages.
Unsecured creditors, by contrast, tend to pursue informal "workout
agreements" with the company.
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Foreign Exchange Controls
(ForEx)
The Philippines’ official currency is Philippine Peso (Php), and the
Bangko Sentral ng Pilipinas (BSP) has the sole power and authority
to issue the currency within the territory of the Philippines. The BSP
issues notes and coins for circulation in the Philippines. It also
issues legal tender commemorative notes and coins.
Foreign Exchange Policy (Bangko

Sentral ng Pilipinas)
At present, the country’s exchange rate policy supports a freely
floating exchange rate system whereby the BSP leaves the
determination of the exchange rate to market forces. Under a
market-determined exchange rate framework, the BSP does not set
foreign exchange rate but instead allows the value of the peso to be
determined by the supply and demand of the foreign exchange.
Reformatory measures to deregulate the Philippine foreign

exchange system were implemented sometime in 1992.
Consequently, foreign exchange surrender requirements were
removed, access to foreign currency deposit facilities was
liberalized, restrictions on the repatriation of foreign investments
and/or profit remittances were lifted, and limitations on the
quantitative restrictions on current account transactions deleted.
Trading Foreign Exchange in the

Market
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One’s county’s banking system plays a major role on foreign
investment. The Philippines have different banks: there are
universal and commercial banks (including international banks with
officers in the country), rural banks, and credit unions covering a
wide range of banking needs. Banking in the Philippines varies
greatly between urban and rural environments. Many rural banks of
the Philippines function on the basis of mobile phone technology.
Meanwhile, urban Philippine banks function similarly to major banks
all over the world, offering personal, business, and corporate
banking services through a wide variety of means. It is also
important to keep in mind that foreigners involved in Philippine
banking are subject to government restrictions on foreign
investment. As such, foreign investors and business people need to
research banking practices thoroughly before they begin.
In the Philippines, peso-dollar trading among Bankers Association

of the Philippines (BAP) member-banks and between these banks
and the BSP are done through the Philippine Dealing System (PDS).
Most of the BAP-member banks which participate in the peso-dollar
trading use an electronic platform that allows nearly instantaneous
transmission of price and trade confirmation. Funds transfers, or the
remittances of funds from one bank to another, either locally or
internationally, in local or foreign currencies, can be recognized
through teletransmission, draft, manager’s check, or certified check
depending on the request of the applicant.
Foreign Exchange Measures

As a continuation of the foreign exchange liberalization program,
the BSP approved on 15 January 2009 the third phase of reforms,
which include the liberalization/streamlining of the rules on foreign
borrowings of private banks for relending purposes and the
registration of inward foreign portfolio investments. The third phase
of foreign exchange regulatory reforms also includes all the
provisions that are intended to improve the monitoring of foreign
exchange flows and to formalize/clarify existing practices.
Moreover, the Monetary Board (MB) approved on 23 April 2009 the

streamlining of the documentation requirements and other reforms
on the sale of the foreign exchange by foreign exchange
dealers/money changers (FXDs/MCs). The streamlining of the
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documentation requirements will make it possible for residents that
chose not to seek BSP approval and/or registration of the
loans/investments to source their foreign exchange requirements
without necessarily compromising compliance with anti-money
laundering regulations.
Registration of Foreign
Investments with BSP
Registration with the central monetary authority - Bangko Sentral
ng Pilipinas [BSP] - of loans and investments accounts was lifted
except in cases where funding will be made through the banking
system of transactions like repatriation of capital and remittances of
dividends and profits, as well as foreign exchange requirement for
future debt.
Further, BSP approval and registration are required in case of

outward investments of residents in an amount in excess of
US$6,000,000.00; per investor per year should the funds therefore
be sourced from the banking system. Foreign borrowings by the
public sector should also be approved by the BSP.
The law allows the deposit in foreign currency accounts of any

foreign exchange received in the Philippines or abroad. It also
allows the selling and acquisition of foreign exchange outside of the
Philippine banking system. The only restriction on foreign exchange
transaction pertains to the payment of foreign loans and/or foreign
investments, in which case, such may only be serviced with foreign
exchange purchased through authorized agent banks, if the loan is
approved/registered with the BSP or the investment is register.
Thus, in case of sales of foreign exchange for payment of foreign
obligations [foreign loan or foreign investment], the purchaser shall
be required by the authorized agent bank to present proof of BSP
approval and/or registration for each loan or investment.
In case of purchase of foreign exchange for any non-trade purposes,

authorized agent banks may sell foreign exchange to residents
without need of prior BSP approval subject, however, to the
following:
[a] Written notarized application and supporting

documents from the foreign exchange purchaser if the
amount exceeds US$25,000.00.
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[b] Simple written application if the amount does not
exceed US$25,000.00.
This limitation on non-trade purchase cannot be circumvented by

splitting the foreign exchange purchase into separate smaller
amounts. Splitting of purchase of foreign exchange is presumed if
the bank sells to any purchaser, a combined total amount
exceeding US$25,000.00 within a period of fifteen (15) banking
days.
In cases of outward payments, the law does not prescribe any

particular currency requirements. However, all foreign exchange
proceeds from exports and invisibles should be procured through
specified currencies numbering more than twenty [20].
Philippine-peso denominated bank accounts may be opened by non-

residents, whether an individual or corporate, without need to
secure BSP approval. Non-resident depositors may freely withdraw
their accounts but non-resident bank accounts may only be credited
with the proceeds from inward foreign exchange remittance or with
income earned in the Philippines. The maintenance of foreign
currency deposit accounts with local banks by residents and non-
residents alike is not subject to any further restrictions.
Basic Requirements for BSP

Registration of Foreign
Investments
First, as a general rule, there must be an inward remittance of FX
(Foreign Exchange), which should be sold for pesos through an AAB
(Authorized Agent Banks) as evidenced by duly accomplished BSP-
prescribed Certificate of Inward Remittance of Foreign Exchange
(for cash investments) or, proof of transfer of the assets invested to
the investee/beneficiary firm in the Philippines (for investment
kind).
Second, there must be evidence of receipts of the funds/assets by

the local investee/beneficiary/seller of the investment instruments
such as Sworn Certification of such receipt or issuance of shares (for
investment in stock corporations); stockholder’s purchase invoice or
subscription agreement (for PSE-listed shares); accredited dealer’s
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Confirmation of Sales (for government securities); Certificate of
Time Deposit (for peso time deposits with tenor of 90 days or
longer); and contract/certificate of investment (for money market
instruments).
Repatriation of Profit
There are no existing restrictive regulations on the repatriation of
funds related to BSP-registered foreign investments such as sales or
divestment proceeds, profits, dividends, royalties, loan payments
and liquidation. BSP registration of foreign investments is necessary
only in cases where the foreign exchange required to service the
repatriation of capital and remittance of profits, dividends, royalties,
loan payments or liquidation proceeds will be sourced from the
banking system.
Further, it bears to emphasize that investments in government or

listed securities or money market instruments or bank deposits
need not be registered with the BSP or with the designated
custodian bank of the investor concerned.
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TAXATION
Overview of Philippine Taxation
and Philippine Tax Regulation
The National Internal Revenue Code (NIRC) of 1997 contains the
laws governing taxation in the Philippines. The Bureau of Internal
Revenue (BIR), which is under the Department of Finance (DOF),
administers taxation. Its main functions consist of assessment,
collection, processing, and taxpayer assistance. The BIR is headed
by a Commissioner who has exclusive and original jurisdiction to
interpret the provisions of the Code and other tax laws.
Aside from national taxes, local government units (LGUs),

promulgates its own local tax code applicable only in its jurisdiction.
The taxpayers are required to have their books of account, either

manual books of accounts, loose leaf, or computerized accounting
system, be registered with the BIR. The taxpayer’s book of accounts
must be kept in its premise at all times and shall be kept in a native
language, English, or Spanish.
TYPES OF TAXES
Individual Income Tax
Individual citizen residing in the Philippines is taxable on its income

earned from all sources within and outside the Philippines; whereas,
a non-resident citizen, a resident alien, a non-resident alien
engaged on trade or business or a non-resident alien not-engaged
in trade or business, is taxable on its income earned from all
sources within the Philippines. Individual taxpayer, except non-
resident alien not engaged in trade or business in the Philippines, is
subject to the graduated rates of 5% to 32%.
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Personal exemption of Php 50,000 is allowed as a deduction to
taxable income of individual taxpayer regardless if he/she is single
or married. Individual, whether single or married, shall be allowed a
personal exemption of Php 25,000 for each qualified dependent
child, provided that the total number of dependent for which
additional exemptions may be claimed shall not exceed four (4)
dependents. In case of married individuals, only one spouse may
claim additional exemptions for qualified dependent child. A non-
resident alien engaged in trade or business shall be allowed
personal exemption subject to reciprocity rule.
Rates of Income Tax on Citizens and Resident Aliens* (In

PhP)
Amount Subject to Tax Applicable Rate
Not over P10,000 5%
Over P10,000 but not over P500 + 10% of the excess over
P30,000 P10,000
Over P30,000 but not over P2,500 + 15% of the excess over
P70,000 P30,000
Over P70,000 but not over P P8,500 + 20% of the excess over
140,000 P 70,000
Over P140,000 but not over P22,500 + 25% of the excess

P250,000 over P140,000
Over P250,000 but not over P50,000 + 30% of the excess

P500,000 over P250,000
Over P500,000 P125,000 + 32% of the excess

over P500,000
*Applicable to resident citizens and resident aliens whether

engaged in trade or business, practicing profession, or employed.
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• Non-resident aliens are taxed at a rate of 25% of gross
income from sources within the Philippines if their stay
within the country does not exceed 180 days in a calendar
year. Otherwise, they are taxed on the basis of graduated
rates.
• Foreign nationals who are employed by regional area or
regional operating headquarters of multinational
corporations, representative offices, offshore banking
units, petroleum service contractors and subcontractors,
are subject to income tax at 15% of their gross income
from such employers (e.g. salaries, annuities, honoraria,
and allowances).
Tax Rates on Certain Passive Income Received by a Citizen,

Resident Alien Individual, and Non-Resident Alien Engaged
in Trade or Business.
1. Interest from any peso bank deposit, and yield or any other
monetary benefit from deposit substitutes and from trust
funds and similar arrangements; royalties, prizes, and
other winnings derived from sources within the Philippines
shall be tax at a rate of 20%;
2. Royalties on books, as well as other literary works and
musical compositions is taxed at a rate of 10%;
3. Interest income received by a resident individual taxpayer
from a depository bank under Foreign Currency Deposit
System is taxed at a rate of 7.5%;
4. Interest income from long term deposit which was pre-
terminated by the holder before the fifth (5th) year shall be
taxed at a rates herein to be deducted and withheld from
the proceeds based on the length of time the instrument
was held by the taxpayer:
Holding Period Rate

Four (4) years to less than five (5) years 5%
Three (3) years to less than four (4) years 12%
Less than three (3) years 20%
5. Cash and/or property dividends actually or constructively

received from a domestic corporation, joint stock company,
insurance or mutual fund companies or on the share of an
individual partner in the distributable net income after tax
of a partnership (except general professional partnership)
or on the share of individual in the net income after tax of
an association, a joint account or a joint venture or
23
consortium of which he is a member or a co-venturer shall
be taxed at a rate of 10% except for non-resident alien
engaged in trade or business which is taxed at a rate of
20%;
6. Capital gains on sale of real property are taxed at 6% of
gross selling price or fair market value, whichever is
higher; and
7. Capital gains in sale of stocks.
Corporate Taxes
A domestic corporation, resident foreign corporation and other

entities treated as a domestic corporation for tax purposes, shall be
taxed at a rate of 30% on its taxable income starting January 2009;
whereas, a non-resident foreign corporation shall be taxed at a rate
of 30% on its gross income received during the year from all
sources within the Philippines.
Minimum Corporate Income Tax (MCIT) on Domestic Corporations

and Resident Foreign Corporations. When the minimum income tax
is greater than the tax computed at the regular 30% corporate tax
rate, the minimum corporate income tax (MCIT) of two percent (2%)
of the gross income is levied at the end of the taxable year. MCIT is
imposed on a corporation beginning the fourth taxable year
immediately following the year in which such corporation
commenced its business operations. A carry forward of excess
minimum tax is allowed wherein any excess of the minimum
corporate income tax over the regular income tax shall be carried
forward and credited against the regular income tax rate of the
three (3) immediately succeeding taxable years.
Tax Rates for Certain Domestic and Resident Foreign

Corporate Taxpayers
1. Proprietary Educational Institutions and Hospitals shall be taxed

at a rate of ten percent 10% on its taxable income.
2. International Carriers doing business in the Philippines is taxable

at a rate of two and one-half percent (2 1/2%) on in Gross Philippine
Billings.
24
3. Offshore Banking Units shall be subject to final tax at a rate of
ten percent (10%).
4. Regional or Area Headquarter shall not be subject to income tax.
5. Regional or Area Operating Headquarters shall be taxed at a rate

of ten percent (10%) of their taxable income.
6. An enterprise registered with Philippine Economic Zone Authority

and registered under Bases Development Act shall be taxed at a
rate of five percent (5%) on its gross income for its registered
activities.
Tax Rates on Passive Income of Domestic/Resident

Corporation
Passive Income Tax rates
Dividends received from Not subject to tax

domestic corporations
Interest on any currency bank 20% of final tax

deposit and yield or other
monetary benefit from deposit
substitutes and from trust fund
and similar arrangements
Interest from foreign currency 7 1/2% of final tax

deposits with foreign currency
deposit units (FCDUs)
Capital gains from the sale of a. Not over P100,000 5%

shares of stock not traded in the
stock exchange is subject to final b. Amount in excess of
tax rates P100,000 10%
Capital Gains Realized from Sale, 6%

Exchange or Disposition of Lands
and / or Buildings.
25
Preferential Tax Rates for Non-Resident Corporations
Tax Rates
Interest on foreign loans 20%
Dividends received form 30%

domestic corporations
Income derived form any foreign Exempt

currency transaction with FCDUs
and OBUs
Capital gains from the sale of a. Not over P100,000

shares of stock not traded in the 5%
stock exchange is subject to final
tax rates b. Amount in excess of
P100,000 10%
Rents and other fees paid to non 7 1/2% on gross rentals or

resident corporate lessors of fees
aircraft, machinery, and other
equipment
Rents of charter fees paid to 4 1/2% on gross rentals or

non-resident corporate owners of fees
vessels chartered by Philippine
Nationals
Fees paid to non-resident 25% on gross income

cinematographic film owners or
lessors
26
Improperly Accumulated Earnings Tax
A tax of ten percent (10%) shall be imposed to on the improperly

accumulated earnings of a corporation, except in the case of
publicly held corporations, banks and other non-bank financial
intermediaries and insurance companies when the corporations
profit or earnings exceeds its paid-up capital accumulates beyond
the reasonable needs of the business.
Branch Profit Remittance Tax
A branch office of a Foreign Company shall be subject to fifteen

percent (15%) tax on any profit remitted by a branch to its head
office which shall be based on the total profits applied or earmarked
for remittance without any deduction for the tax component.
Documentary Stamp Tax
Documentary Stamp Tax is a tax on documents, instruments, loan

agreements, and papers and upon acceptance, assignment, sales,
and transfer of the obligation, right and property and shall be
imposed to the person making, signing, issuing, accepting, or
transferring the same whether the document is made, signed,
issued, accepted, or transferred the obligation or right arises from
the Philippine sources or the property is situated in the Philippines.
Tax Incentives
Deductibility of Expenses
There shall be allowed as deduction from gross income all the

ordinary and necessary expenses paid or incurred during the
taxable year in carrying on or which are directly attributable to, the
development, management, operation and/or conduct of the trade,
business or exercise of a profession, including:
a. A reasonable allowance for salaries, wages, and other

forms of compensation for personal services actually
27
rendered, including fringe benefit furnished or granted
by the employer to the employee: wherein the final
tax has been paid;
b. A reasonable allowance for travel expenses, here and
abroad, while away from home in the pursuit of trade,
business or profession;
c. A reasonable allowance for rentals and/or other
payments which are required as a condition for the
continued use or possession, for purposes of the trade,
business or profession, of property to which the
taxpayer has not taken or is not taking title or in which
he has no equity other than that of a lessee, user or
possessor;
d. A reasonable allowance for entertainment,
amusement and recreation expenses during the
taxable year, that are directly connected to the
development, management and operation of the
trade, business or profession of the taxpayer, or that
are directly related to or in furtherance of the conduct
of his or its trade, business or exercise of a profession
not to exceed such ceilings.
e. Interest. The amount of interest paid or incurred
within a taxable year on indebtedness in connection
with the taxpayer's profession, trade or business shall
be allowed as deduction from gross income; however,
the taxpayer's otherwise allowable deduction for
interest expense shall be reduced by an amount equal
to the thirty three percentages of the interest income
subjected to final tax.
f. Taxes. Taxes paid or incurred within the taxable year
in connection with the taxpayer's profession, trade or
business, shall be allowed as deduction, except:
a. The income tax provided for under the Law;
b. Income taxes imposed by authority of any foreign
country;
c. Estate and donor's taxes; and
d. Taxes assessed against local benefits of a kind
tending to increase the value of the property
assessed.
Credit against Tax for Taxes of Foreign Countries. If

the taxpayer signifies in his return his desire to have the
benefits, the tax imposed shall be credited with:
28
a. Citizen and Domestic Corporation.
b. Partnerships and Estates.
Limitations on Credit. The amount of the credit taken shall

be subject to each of the following limitations:
a. The amount of the credit in respect to the tax paid

or incurred to any country shall not exceed the
same proportion of the tax against which such
credit is taken, which the taxpayer's taxable
income from sources within such country bears to
his entire taxable income for the same taxable
year; and
b. The total amount of the credit shall not exceed
the same proportion of the tax against which such
credit is taken, which the taxpayer's taxable
income from sources without the Philippines
taxable bears to his entire taxable income for the
same taxable year.
Proof of Credits. The credits provided shall be allowed

only if the taxpayer establishes the following:
a. The total amount of income derived from

sources without the Philippines;
b. The amount of income derived from each
country, the tax paid or incurred to which is
claimed as a credit; and
c. All other information necessary for the
verification and computation of such credits.
g. Losses. Losses actually sustained during the taxable

year and not compensated for by insurance or other
forms of indemnity shall be allowed as deductions:
a. If incurred in trade, profession or business;

b. Of property connected with the trade, business or
profession, if the loss arises from fires, storms,
shipwreck, or other casualties, or from robbery,
theft or embezzlement.
c. No loss shall be allowed as a deduction under if at
the time of the filing of the return, such loss has
been claimed as a deduction for estate tax
purposes in the estate tax return.
29
Net Operating Loss Carry-Over. The net operating
loss of the business or enterprise for any taxable year
immediately preceding the current taxable year, which
had not been previously offset as deduction from
gross income shall be carried over as a deduction from
gross income for the next three (3) consecutive
taxable years immediately following the year of such
loss. A net operating loss carry-over shall be allowed
only if there has been no substantial change in the
ownership of the business or enterprise.
Capital Losses. The excess of the losses from sale or

exchange of capital assets over the losses from such
sales or exchange.
a. Loss from sales or Exchanges of capital assets

shall be allowed only to the extent of the gains
from such sales or exchange.
b. Securities becoming worthless.
Losses from Wash Sales of Stock or Securities.
a. In the case of any loss claimed to have

been sustained from any sale or other disposition
of shares of stock or securities where it appears
that within a period beginning thirty (30) days
before the date of such sale or disposition and
ending thirty (30) days after such date, the
taxpayer has acquired (by purchase or by
exchange upon which the entire amount of gain
or loss was recognized by law), or has entered
into a contact or option so to acquire,
substantially identical stock or securities, then no
deduction for the loss shall be allowed, unless the
claim is made by a dealer in stock or securities
and with respect to a transaction made in the
ordinary course of the business of such dealer.
b. If the amount of stock or securities
acquired (or covered by the contract or option to
acquire) is less than the amount of stock or
securities sold or otherwise disposed of, then the
particular shares of stock or securities, the loss
form the sale or other disposition of which is not
deductible, shall be determined under rules and
regulations prescribed by the Secretary of
30
Finance, upon recommendation of the
Commissioner.
c. If the amount of stock or securities
acquired (or covered by the contract or option to
acquire which) resulted in the non-deductibility of
the loss, shall be determined under rules and
regulations prescribed by the Secretary of
Finance, upon recommendation of the
Commissioner.
Wagering Losses. - Losses from wagering

transactions shall be allowed only to the extent of the
gains from such transactions.
Abandonment Losses.
a. In the event a contract area where petroleum

operations are undertaken is partially or wholly
abandoned, all accumulated exploration and
development expenditures pertaining thereto
shall be allowed as a deduction: the accumulated
expenditures incurred in that area prior to January
1, 1979 shall be allowed as a deduction only from
any income derived from the same contract area.
b. In case a producing well is subsequently
abandoned, the unamortized costs thereof, as
well as the undepreciated costs of equipment
directly used therein , shall be allowed as a
deduction in the year such well, equipment or
facility is abandoned by the contractor: if such
abandoned well is reentered and production is
resumed, or if such equipment or facility is
restored into service, the said costs shall be
included as part of gross income in the year of
resumption or restoration and shall be amortized
or depreciated, as the case may be.
h. Bad Debts. Debts due to the taxpayer actually

ascertained to be worthless and charged off within the
taxable year except those not connected with
profession, trade or business and those sustained in a
transaction entered into between related parties.
31
i. Depreciation. A taxpayer shall be allowed
depreciation as a deduction for reasonable allowance
for the exhaustion, wear and tear (including
reasonable allowance for obsolescence) of property
used in the trade or business.
Certain Methods use in computing reasonable

allowance of depreciation.
a. The straight-line method;

b. Declining-balance method
c. The sum-of-the-years-digit method;
d. Any other method which may be prescribed by
the Secretary of Finance upon recommendation of
the Commissioner.
j. Charitable and Other Contributions. Contributions
or gifts actually paid or made within the taxable year
to, or for the use of the Government of the Philippines
or any of its agencies or any political subdivision
thereof exclusively for public purposes, or to
accredited domestic corporation or associations
organized and operated exclusively for religious,
charitable, scientific, youth and sports development,
cultural or educational purposes or for the
rehabilitation of veterans, or to social welfare
institutions, or to non-government organizations, in
accordance with rules and regulations promulgated by
the Secretary of finance, upon recommendation of the
Commissioner, no part of the net income of which
inures to the benefit of any private stockholder or
individual in an amount not in excess of ten percent
(10%) in the case of an individual, and five percent (5
%) in the case of a corporation, of the taxpayer's
taxable income derived from trade, business or
profession.
Valuation. The amount of any charitable contribution of property

other than money shall be based on the acquisition cost of said
property.
Proof of Deductions. Contributions or gifts shall be allowable as

deductions only if verified under the rules and regulations
prescribed by the Secretary of Finance, upon recommendation of
the Commissioner.
32
l. Research and Development – A taxpayer may treat research
or development expenditures which are paid or incurred by him
during the taxable year in connection with his trade, business or
profession as ordinary and necessary expenses which are not
chargeable to capital account. The expenditures so treated shall be
allowed as deduction during the taxable year when paid or
incurred.
It shall not apply to:
a. Any expenditure for the acquisition or improvement of

land, or for the improvement of property to be used in
connection with research and development of a
character which is subject to depreciation and
depletion; and
b. Any expenditure paid or incurred for the purpose of
ascertaining the existence, location, extent, or quality
of any deposit of ore or other mineral, including oil or
gas.
j. Pension Trusts. An employer establishing or maintaining a

pension trust to provide for the payment of reasonable pensions to
his employees shall be allowed as a deduction (in addition to the
contributions to such trust during the taxable year to cover the
pension liability accruing during the year, allowed as a deduction a
reasonable amount transferred or paid into such trust during the
taxable year in excess of such contributions, but only if such
amount (1) has not been allowed as a deduction, and (2) is
apportioned in equal parts over a period of ten (10) consecutive
years beginning with the year in which the transfer or payment is
made.
k. Optional Standard Deduction (OSD). - In lieu of the expenses

allowed as deduction in computing taxable for individual and
corporate taxpayers, the taxpayer may opt to use Optional
Standard Deduction at a rate of forty percent (40%). For individual
taxpayers, the basis in computing the OSD shall be the gross
revenue or receipts for the taxable year. For corporate taxpayer,
the optional standard deduction is based on the gross income.
OSD shall be allowed to:
33
a. Individual Taxpayer
1. Resident Citizen
2. Non-resident Citizen
3. Resident Alien
4. Taxable Estate or Trust
b. Corporate Taxpayer
1. Domestic Corporation
2. Resident Foreign Corporation
Special Zones and Areas
To attract foreign investments in the Philippines, the government

created ECOZONES or Special Economic Zones (SEZ). These
ECOZONES or SEZ are established in selected areas with highly
developed or which have the potential to be developed into agro-
industrial, Industrial tourist/recreational, commercial, banking,
investment and financial centers. An ECOZONE may contain any or
all of the following: Industrial Estates (IEs), Export Processing Zones
(EPZs), Free Trade Zones, and Tourist/Recreational Centers. Entities
registered with Economic Zones shall be entitled to certain benefits.
Activities Eligible for PEZA Registration and Incentives
1. Export Manufacturing - manufacturing, assembly or

processing activity resulting in the exportation of at least
70% of production
2. IT (Information Technology) Service Export - IT

service activities, of which 70% of total revenues is derived
from clients abroad
3. Tourism – establishment and operation within PEZA

Tourism Special Economic Zones of sports and recreation
centers, accommodation, convention, and cultural facilities
and their special interest attraction activities /
establishments, with foreign tourists as primary clientele
34
4. Medical Tourism – medical health services, endorsed
by the Department of Health, with foreign as primary
clientele
5. Agro-industrial Export Manufacturing – processing

and or manufacturing of agricultural products resulting in
the exportation of its production
6. Agro-industrial Bio-Fuel Manufacturing –

specialized manufacturing of agricultural crops and
eventual commercial processing which shall result in the
production of clean energy such as bio-fuels and the like
7. Logistics and Warehousing Services - (a) operation

of a warehouse facility for the storage, deposit,
safekeeping of goods for PEZA-registered Economic Zone
Export Manufacturing Enterprises, and or (b) importation or
local sourcing of raw materials, semi-finished goods for
resale to - or for packing / covering (including marking /
labeling) cutting or altering to customers’ specification,
mounting and/ or packaging into kits or marketable lots
for subsequent sale to - PEZA-registered Export
Manufacturing Enterprises for use in their export
manufacturing activities, or for direct export, or for
consignment to PEZA-registered Export Manufacturing
Enterprises and eventual export.
8. Economic Zone Development and Operation:
a. Manufacturing Economic Zone Development /

Operation - development, operation and maintenance of
an economic zone for export manufacturing enterprises,
inclusive of the required infrastructure, facilities and
utilities such as light and power system, water supply and
distribution system, sewerage and drainage system,
pollution control devices, communication facilities, paved
road network, administration building.
b. IT Park Development / Operation – development,

operation and maintenance of an area as a complex
35
capable of providing infrastructures and other support
facilities required by IT Enterprises, as well as amenities
required by professionals and workers involved in IT
Enterprise, or easy access to such amenities.
c. Tourism Economic Zone Development / Operation

– development, operation and maintenance of an
integrated resort complex, with prescribed carrying
capacities of tourist facilities and activities, such as but not
limited to, sports and recreation centers, accommodations,
convention and cultural facilities, food and beverage
outlets, commercial establishments and other special
interest and attraction activities / establishments, and
provided with roads, water supply facilities, power
distribution facilities, drainage and sewage systems and
other necessary infrastructure and public utilities.
d. Medical Tourism Economic Zone Development /

Operation – development, operation and maintenance of
a Medical Tourism Park or Medical Tourism Center which
are planned and designed in accordance with the
standards of the Department of Health and the
Department of Tourism to have support facilities and
services required for health and wellness, and provided
with required infrastructure facilities and utilities.
e. Agro-Industrial Economic Zone Development /

Operation – development operation and maintenance of
an agro-industrial economic zone planned and designed to
have support facilities and services required for processing
and agro-based manufacturing facilities, and provided with
the required infrastructure facilities and utilities.
f. Retirement Economic Zone Development

/Operation – development. Operation, and maintenance
of a Retirement Economic Zone Park or Center, planned
and designed in accordance with the accreditation
standards of the Philippine Retirement Authority, and
provided with the required infrastructure facilities and
utilities.
36
9. Facilities Providers:
a. Facilities for Manufacturing Enterprises -

construction as owner /operator of factory buildings inside
a PEZA Special Economic Zone for lease to PEZA-registered
Export Manufacturing Enterprises.
b. Facilities for IT Enterprises – construction as

owner/operator of buildings and other facilities inside IT
Parks which are leased to PEZA-registered IT Enterprises.
c. Retirement Facilities – establishment, operation and

management of retirement facilities and other related
activities, with foreign retirees as primary clientele, duly
endorsed by the Philippine Retirement Authority, and
located in a Retirement Economic Zone.
10. Utilities – establishment, operation and maintenance

of light and power systems, water supply and distribution
systems inside Special Economic Zones.
Fiscal Incentives to PEZA-Registered Economic

Zone Enterprises
1. Economic Zone Export Manufacturing Enterprise
• Income Tax Holiday (ITH) – 100% exemption from

corporate income tax
o 4 years ITH for Non-pioneer Project
o 6 years ITH for Pioneer Project
ITH Extension years may be granted if the project complies with the
following criteria, (one criterion is equivalent to one ITH extension
year), provided that the total ITH entitlement period shall not
exceed eight (8) years:
a. The average net foreign exchange earnings of the project for the
first three (3) years of operations is at least US$500,000.00 and,
37
b. The capital equipment to labor ratio of the project does not
exceed US$10,000.00 to 1 for the year immediately preceding the
ITH extension year being applied for.
c. The average cost of indigenous raw materials used in the

manufacture of the registered product is at least fifty per cent
(50%) of the total cost of raw materials for the preceding years prior
to the ITH extension year.
o 3 years ITH for Expansion project (ITH applies to incremental

sales)
• Upon expiry of the Income Tax Holiday - 5% Special Tax on

Gross Income and exemption from all national and local
taxes
• Tax and duty free importation of raw materials, capital
equipment, machineries and spare parts.
• Exemption from wharfage dues and export tax, impost or
fees
• VAT zero-rating of local purchases subject to compliance
with BIR and PEZA requirements
• Exemption from payment of any and all local government
imposts, fees, licenses or taxes. However, while under
Income Tax Holiday, no exemption from real estate tax,
but machineries installed and operated in the economic
zone for manufacturing, processing or for industrial
purposes shall be exempt from real estate taxes for the
first three (3) years of operation of such machineries.
Production equipment not attached to real estate shall be
exempt from real property taxes
• Exemption from expanded withholding tax
2. Information Technology Enterprise:
• Income Tax Holiday (ITH) – 100% exemption from

corporate income tax:
o 4 years ITH for Non-pioneer project
o 6 years ITH for Pioneer project
ITH Extension year may be granted if Project complies with the

following criteria (one criterion is equivalent to one ITH extension
38
year), provided that the total ITH entitlement period shall not
exceed eight (8) years:
> The average net foreign exchange earnings of the project for the
first three (3) years of operations is at least US$500,000.00 and,
> The capital equipment to labor ratio of the project does not
exceed US$10,000.00 to 1 for the year immediately preceding the
ITH extension year being applied for.
o 3 years ITH for Expansion project (ITH applies to incremental

sales)

taxes. Tax and duty free importation of equipment and
parts.
• Exemption from wharfage dues on import shipments of
equipment.
• VAT zero-rating of local purchases of goods and services,
including land-based telecommunications, electrical power,
water bills, and lease on the building, subject to
compliance with Bureau of Internal Revenues and PEZA
requirements
• Exemption from payment of any and all local government
imposts, fees, licenses or taxes. However, while under
Income Tax Holiday, no exemption from real estate tax,
but machineries installed and operated in the economic
zone for manufacturing, processing or for industrial
purposes shall not be subject to payment of real estate
taxes for the first three (3) years of operation of such
machineries. Production equipment not attached to the
real estate shall be exempt from real property taxes.
• Exemption from expanded withholding tax.
3. Tourism Economic Zone Locator Enterprise
• Four (4) years of Income Tax Holiday ITH (as qualified

under the National Investment Priorities Plan)
39
taxes
• Tax and duty-free importation of capital equipment
• VAT Zero Rating on local purchases of goods and services,
including land-based telecommunications, electric power,
and water bills
4. Medical Tourism Enterprise
• Four (4) years of Income Tax Holiday on income solely

from servicing foreign patients
• Upon expiry of the Income Tax Holiday - 5% Special tax on
Gross Income upon in lieu of all national and local taxes
• Tax and duty-free importation of medical equipment,
including spare parts and equipment supplies, required for
the technical viability and operation of the registered
activity/ies of the enterprise
and water bills
5. Agro-Industrial Economic Zone Enterprise
• Four (4) years of Income Tax Holiday

• Upon expiry of the Income Tax Holiday - 5% Special tax on
taxes.
• Tax and duty free importation of production equipment
and machineries, breeding stocks, farm implements
including spare parts and supplies of the equipment and
machineries
• Exemption from export taxes, wharfage dues, impost and
fees
and water bills
40
• Exemption from payment of local government fees such as
Mayor’s Permit, Business Permit, permit on the Exercise of
profession/Occupation/Calling, Health Certificate Fee,
Sanitary Inspection Fee, and Garbage Fee
6. Economic Zone Logistics Services Enterprise
• Exemption from duties and taxes on raw materials, semi-

finished goods for re-sale to - or for packing/covering,
cutting, altering for subsequent sale to PEZA-registered
Export Manufacturing Enterprises, for direct export or for
consignment to PEZA-registered export enterprise.
• VAT Zero Rating on raw materials for checking, packing,
visual inspection, storage and shipping to be sourced
locally.
7. Economic Zone Developer / Operator
a. Manufacturing Economic Zone Developer / Operator
• Special 5% Tax on Gross Income and exemption from all

national and local taxes, except real property tax on land
owned by the Economic Zone Developer.
• VAT Zero rating of local purchases
b. IT Park Developer / Operator

owned by the IT Park Developer
c. Tourism Economic Zone Developer / Operator

owned by the Tourism Economic Zone Developer
41
d. Medical Tourism Economic Zone Developer / Operator

owned by Medical Tourism Zone Developer
e. Agro-Industrial Economic Zone Developer / Operator

owned by the Agro-Industrial Economic Zone Developer
f. Retirement Economic Zone Developer / Operator

owned by the Retirement Economic Zone Developer
8. Facilities Enterprises
a. Economic Zone Facilities Enterprise

owned by developers
42
b. IT Park Facilities Enterprise

owned by developers
c. Retirement Economic Zone Facilities Enterprise

owned by developers.
9. Economic Zone Utilities Enterprise

owned by developers.
WITHHOLDING TAXES
Compensation
Withholding tax on compensation is imposed on the salaries, wages

and other taxable benefits received as remuneration for the
services rendered by employees for his employer under employer-
employee relationship. The employer is required to deduct the
applicable taxes on the income received by the employee and remit
the same with the BIR.
43
Employees receiving purely compensation income of Minimum
Wage Earners (MWE) who work in private sector and being paid the
Statutory Minimum Wage (SMW) as fixed by the Regional Wage
Tripartite and Productivity Board (RWTPB) and National Wages and
Productivity Commission (NWPC) applicable to the place where they
are assigned shall be exempted from income tax. Holiday pay,
overtime pay, night shift differential pay and hazard pay received
by MWE is also exempted from income tax.
MWE receiving other income, such as income from conduct of trade

and business, practice or profession, except income subject to final
tax, are not exempted from income tax on their entire income
earned during the taxable year.
The following income payments are exempted from the

requirement of withholding tax on compensation:
1. Remuneration received as an incident of employment, as

follows:
a. Retirement benefits received under Republic Act

under 7641 and those received by officials and
employees of private firm, whether individual or
corporate, under a reasonable benefit plan
maintained by the employer which meet the
following requirements:
i. The plan must be reasonable;
ii. The benefit plan must be approved
by the Bureau;
iii. The retiring official or employee must
have been in the service of the same
employer for at least ten (10) years and
is not less than fifty (50) years of age at
the time of retirement; and
iv. The retiring official or employee should
not have previously availed of the
privilege under the retirement benefit
plan of the same or another employer.
b. Any amount received by an official or employee or
by his heir from the employer due to death,
sickness or other physical disability of for any
cause beyond the control of the said official or
44
employee, such as retrenchment, redundancy, or
cessation of business.
c. Social security benefits, retirement gratuities,
pensions and other similar benefits received by
resident or non-resident citizens of the Philippines
or aliens who come to reside permanently in the
Philippines from foreign government agencies and
other institutions private or public.
d. Payments of benefits due or to become due to
any person residing in the Philippines under the
law of United States administered by the United
States Veterans Administrations.
e. Payments of benefits made under the social
Security Systems Act of 1954 as amended.
f. Benefits received from GSIS Act of 1937 as
amended, and the retirement gratuity received by
government officials and employees.
2. Remuneration paid for agriculture

3. Remuneration for domestic services
4. Remuneration for casual labor not in the course of an
employer’s trade or business
5. Compensation for services received by a citizen or resident
of the Philippines for a foreign government or an
international organization
6. Damages
7. Life Insurance
8. Amount received by the insured as a return of premium
9. Compensation for injuries or sickness
10. Income exempt under treaty
11. Thirteenth (13th) month pay and other benefits not
exceeding Php 30,000
12. GSIS, SSS, Medicare and Other contributions
De Minimis Benefits
“De minimis” benefits is a privilege of relatively of small value that

are offered or furnished by the employer’s to its employees merely
as means of promoting the health, goodwill, contentment or
efficiency of the his employees that will not be considered as
compensation subject to withholding tax both managerial and rank
and file employees, such as follows:
45
1. Monetized unused vacation leave credits of employees not
exceeding ten (10) days during the year and the
monetized value of leave credits paid to government
officials and employees;
2. Medical cash allowance to dependents of employees not
exceeding P 750.00 per employee per semester or P
125.00 per month;
3. Rice subsidy of P 1,500.00 or one (1) sack of 50kg. rice per
month amounting to not more than P 1,500.00;
4. Uniform and clothing allowance not exceeding P 4,000.00
per annum;
5. Actual yearly medical benefits not exceeding P 10,000.00
per annum;
6. Laundry allowance not exceeding P 300.00 per month;
7. Employee achievement awards which must be in form of
tangible personal property other than cash or gift
certificate, with annual monetary value not exceeding P
10,000.00 received by the employee under an established
plan which does not discriminate in favor of highly paid
employees;
8. Gifts given during Christmas and major anniversary
celebrations not exceeding P 5,000.00 per employee per
annum;
9. Flower, fruits, books, or similar items given to employees
under special circumstances; and
10. Daily meal allowance for overtime work not exceeding
twenty five percent (25%) of his basic minimum wage.
The amount of “de minimis” benefits within the limit shall not
be considered in determining the P 30,000.00 ceiling of other
benefits excluded from gross income. Any excess of the de
minimis benefits over their respective ceilings shall be
considered part of the other benefits and the employee
receiving it will be subject to tax only on the excess amount
over P 30.000.00
EXPANDED WITHHOLDING TAX
There are certain types of income payment made by taxpayer that

are subject to expanded withholding tax. Failure to deduct and
remit the said tax will result to disallowance of the said expenses in
46
computing the taxable income of the taxpayers. The taxpayer is
required to withhold these taxes and remit the same with the BIR at
the time it was paid or becomes payable, whichever comes first.
Types of Income payment and its applicable tax rates:
Income Payment Applicable Tax Rates
Professional and talents fees paid to If the current year’s gross

juridical person (lawyers, CPAs, income does not exceed 720,000
engineer, etc) except payment to 10%
General Professional Partnership,
management and technical If the current year’s gross
consultants, business and income exceed 720,000
bookkeeping agent and agencies, 15%
fees of director who are not
employee of the company
Rentals 5%
Prime contractors/sub-contractors 2%
Gross commission or service fees of 10%

customs, insurance, stocks, real
estate, immigration and commercial
brokers and fees of agents of
professional entertainers
Income payment made by to 20,000 Supplier of goods

corporation 1%
Supplier of services
2%
Income payment made by top 5,000 Supplier of goods

individual taxpayer 1%
Supplier of services
2%
47
Commission, rebates, discounts and 10%
other similar considerations paid and
granted to independent and
exclusive distributors,
medical/technical and sales
representative and marketing agents
and sub-agents of multi-level
marketing companies
Exemption from Expanded Withholding Tax
a. National government and its instrumentalities, including

provincial, city or municipal government.
b. Persons enjoying tax exemption from payment of income
taxes pursuant to the provision of any law.
FRINGE BENEFIT TAX
Fringe Benefit or any goods, service, or other benefit furnished or

granted by the employer in cash or in kind, in addition to basic
salaries to managerial or supervisory employees and not rank and
file employee such as but not limited to the following;
a. Housing
b. Expense Account
c. Vehicle of any kind
d. Household Personnel
e. Interest on loan at less than market rate to the extent of
the difference between the market rate and actual rate
granted
f. Membership fees, dues and other expense borne by the
employer for the employee in social and athletic clubs or
other similar organizations
g. Expense for foreign travel
h. Holiday and vacation expenses
i. Education assistance to the employee of his dependents
48
j. Life or health insurance and other non-life insurance
premium or similar amounts in excess of what the law
allows
The Fringe Benefit Tax shall be thirty two percent (32%) of the
gross-up monetary of the benefits received. The gross-up monetary
value shall be computed by dividing the monetary value of the
fringe benefit by sixty eight percent (68%).
If the fringe benefit is received by a non-resident alien individual

who is not engaged in trade or business in the Philippines, a fringe
benefit tax of twenty five percent (25%) shall be imposed on the
grossed-up monetary value of the fringe benefit. In computing for
the grossed-up monetary value, the monetary value of the fringe
benefit shall be divided by seventy five percent (75%).
In the fringe benefit is received by an alien individual employed by

regional or area headquarters of a multinational company or by
regional operating headquarters of a multinational company, or by
an alien employed by offshore banking unit of a foreign bank
established in the Philippines, or by an alien individual employed by
a service contractor or by a foreign service subcontractor engaged
in petroleum operations in the Philippines and any of their Filipino
individual employees who are employed and occupying the same
position shall be subject to fifteen percent (15%) of the gross-up
monetary value. The said tax base shall be computed by dividing
the monetary value of the fringe benefit by (85%).
For employees in special economic zones, it shall be covered by the

normal rate of fringe benefit tax or the special rate of twenty five
percent (25%) or fifteen percent (15%).
BUSINESS TAX
VALUE ADDED TAX
Value Added Tax (VAT). The VAT is an indirect tax and the amount
of tax may be shifted or passed on to the buyer, transferee or
lessee of the goods, properties, or services. Twelve percent (12%)
49
of the gross selling price or gross value in money is usually levied to
the goods or properties sold, bartered or exchanged.
A taxpayer shall be required to be registered as VAT taxpayer if its

sale or receipts with in the year or previous year exceed P
1,500,000.00 or a taxpayer opted to be a VAT taxpayer even if its
sales or receipt did not exceed P 1,500,000.00.
Zero-Rated Sale of Goods, properties or services is a taxable

transaction for VAT purposes, but shall not result in any output tax.
However, the input tax on purchase of goods, properties or
services, related to such zero-rated sale, shall be available as tax
credit or refund which should be applied within two (2) years after
the close of the taxable quarter when such sales were made.
Sale of Goods subject to zero percent (0%) rate:
a. Export sales
1. The sale and actual shipment of goods

from the Philippines to a foreign country paid
for in foreign currency or its equivalent in
goods or services, and accounted for with the
rules and regulations of Bangko Sentral ng
Pilipinas (BSP);
2. The sale of raw material or packaging
material to a non-resident buyer for delivery
to a resident local export-oriented enterprise
to be used in manufacturing, processing,
packing or repacking in the Philippines of the
said buyer’s goods;
3. The sale of raw material or packaging
materials to an export-oriented enterprise
whose export sales exceeds seventy percent
(70%) of total annual production;
4. Sale of gold to BSP;
5. Transactions considered export sales
under Executive Order No. 226, otherwise
known a s Omnibus Investments Code of
1987, and under special laws; and
6. The sale of goods, supplies, equipment
and fuel to persons engaged in international
50
shipping or international air transport
operations.
b. Foreign Currency Denominated Sale to a non-

resident of goods, assembled or manufactured in
the Philippines for delivery to a resident in the
Philippines paid for in acceptable foreign currency
and accounted for in accordance with the rules
and regulations of the BSP.
c. Sales to a person or entities deemed tax-exempt
under Special Law or International Agreement.
Sale of services subject to zero percent (0%) rate:
a. Processing, manufacturing or repacking goods for other

person doing business outside the Philippines, which are
subsequently exported and paid for in acceptable foreign
currency and accounted for in accordance with the rules
and regulations of the BSP.
b. Services other than processing, manufacturing or
repacking rendered to a person engaged in business
conducted outside the Philippines or to a non-resident
person not engaged in trade or business who is outside the
Philippines when the services are performed and paid in
foreign currency and accounted for in accordance with the
rules and regulations of BSP.
c. Services rendered to a person or entities whose exemption
under special laws or international agreement to which the
Philippines is a signatory.
d. Services rendered to a persons engaged in international
shipping or air transport operation, including lease or
property used thereof.
e. Services performed by subcontractors and/or contractors
in processing, converting, or manufacturing goods for an
enterprise whose export sales exceeds seventy percent
(70%) of the total annual production.
f. Transport of passenger and cargo by domestic air or sea
carriers from the Philippines to a foreign country.
g. Sale of power or fuel generated through renewable sources
of energy.
VAT Exempt Transactions are sale of goods of properties and or

services and use or lease of properties that is not subject to VAT
(output tax) and the seller is not allowed any credit of VAT (input
tax) on purchases. And the person making the exempt sale of goods
51
or services shall not bill any output tax to his customers because
the said transactions is not subject to VAT.
Sales of goods or services that are exempted from VAT are as

follows:
a. Sale or importation of agricultural and marine food

products in their original state, livestock and poultry of a
kind generally used as, or yielding or producing foods for
human consumption and breeding stock and genetic
material;
b. Sale or importation of fertilizers, seeds seedlings and
fingerlings, fish prawn, livestock and poultry feeds,
including ingredients, whether locally produces or imported
used in manufacture of finished feeds except specialty
feed used for race horses, fighting cocks, aquarium fish,
and other animals considered as pets;
c. Importation of personal and household effects belonging to
residents of the Philippines returning from abroad and non-
resident citizens coming to resettle in the Philippines
provided that it is exempt under Tariff and Customs Code
of the Philippines;
d. Importation of professional instruments and implements,
wearing apparel, domestic animals, and personal
household effects belonging to person coming to settle in
the Philippines, for their own use and not for sale, barter or
exchange;
e. Services subject to percentage tax under the Code;
f. Services by agricultural contract growers and milling for
others of palay into rice, corn into grits and sugar cane into
raw sugar;
g. Medical, dental, hospitals and veterinary services except
those rendered by professionals;
h. Educational services rendered by private educational
institutions duly accredited by the Department of
Education (DepED), Commission on Higher Education
(CHED) and Technical Education and Skills Development
Authority (TESDA) and those rendered by government
educational institutions;
i. Services rendered by individuals pursuant to an employer-
employee relationship;
j. Services rendered by regional or area headquarters
established in the Philippines by multinational companies
52
which acts as supervisory, communication and
coordinating centers for their affiliates, subsidiaries or
branches in the Asia Pacific Region and do not earn or
derive income from the Philippines;
k. Transactions which are exempt under international
agreement to which the Philippines is a signatory or under
special laws;
l. Sales by agricultural cooperatives duly registered and in
good standing with the Cooperative Development Authority
(CDA) to their members, as well as sale of their produce,
whether in its original state or processed form to non-
member; their importation of direct farm inputs,
machineries and equipment, including spare parts thereof,
to be used directly and exclusively in the production and/or
processing of their produce;
m. Gross receipts from lending activities by credit or multi-
purpose cooperatives duly registered and in good standing
with the CDA;
n. Sales by non-agricultural, non-electric and non-credit
cooperatives duly registered with and in good standing
with the CDA;
o. Export sales by persons who are not VAT-registered; and
p. The following sales of real property are exempt from VAT:
1. Sale of real property not primarily held for sale to

customer or held for lease in ordinary course of
trade or business;
2. Sale of real property utilized for low-cost housing;
3. Sale of real property utilized for socialized housing;
4. Sale of residential lot valued at One million five
hundred thousand pesos and below or house and
lot and other residential dwellings valued at two
million five hundred thousand pesos and below;
5. Lease of residential units with monthly rental per
unit not exceeding ten thousand pesos (P
10,000.00), regardless of the amount of
aggregate rental received by the lessor during the
year;
6. Sale, importation, printing or publication of books
and any newspaper, magazine, review or bulletin
which appears at regular intervals with fixed
prices for subscription and sale and which is not
53
devoted principally to the publication of paid
advertisements;
7. Sale, importation or lease of passenger or cargo
vessels and aircraft, including engine equipment
and spare parts thereof for domestic and
international transport operation;
8. Importation of fuel, goods and supplies by person
engaged in international shipping or air transport
operations;
9. Services of banks, non-bank financial
intermediaries performing quasi-banking functions
and other non-bank financial intermediaries
subject to percentage tax, such as money
changers and pawnshops; and
10. Sale or lese of goods or properties or the
performance of services other than the
transactions mentioned in the preceding
paragraphs, the gross annual sales or receipts do
not exceed the amount of one million five
hundred thousand (P1,500,000.00).
Invoicing Requirements
A VAT-registered person shall issue:
1. A VAT invoice for every sale goods or properties.

2. A VAT official receipt for every lease of goods, properties
and for every sale, barter exchange of services.
Information contained in VAT invoice or VAT receipt:
1. VAT/ taxpayer identification number (TIN) of the seller;

2. Total amount which the purchaser pays or is
obligated to pay to the seller with the indication that such
amount includes VAT
3. In the case of sales in the amount of one thousand pesos
(P1, 000) or more where the sale or transfer is made to a VAT-
registered person, the name, business style, if any, address TIN
of the purchaser, customer or client, shall indicate in addition
to the information required.
Computation of Output Tax
54
Sale of goods and properties - output tax is computed by
multiplying the gross selling price by the rate of twelve percent
(12%).
Allowable Deductions from Gross Selling Price
a. Discounts
b. Sales returns and allowances
Sale of services - output tax is computed by multiplying the gross

receipts by the rate of twelve percent.
Creditable Input Tax
The amount of input taxes available for used during a month or

quarter shall be the total input taxes arising from purchase of goods
or services during the month or quarter plus any excess input from
the preceding month or quarter reduced by the amount of claim for
VAT refund or tax credit certificate and other adjustments, such as
purchase returns or allowances, input tax attributable to exempt
sales and input tax attributable to sales subject to Final VAT
withholding.
Claim for Input Tax on Depreciable Goods – Purchase or

importation of capital goods with an aggregate amount of more
than one million pesos (P 1,000,000), regardless of acquisition cost
of each capital goods shall be claimed as credit against output tax
in the following manner;
a. If the estimated useful life of capital goods is five (5) years

or more, the input tax shall be spread evenly over a period
of sixty (60) months.
b. If the estimated useful life of capital goods is less than five
(5) years, the input tax shall be spread evenly on a
monthly basis by dividing the input tax by the actual
number of months comprising the estimated useful life of
the capital good.
PERCENTAGE TAX
Percentage Tax shall be imposed to person whose sales or receipts

are exempt from the payment of value-added tax and who is not a
VAT-registered person shall pay a tax equivalent to three percent
(3%) of his gross quarterly sales or receipts except those that are
55
exempted from value added tax even if its revenue exceeds P
1,500,000.00.
Other taxpayer subject to percentage tax and its applicable rates:
a. Domestic Carriers and Keepers of Garages - shall pay

a tax equivalent to three percent (3%) of their quarterly
gross receipts.
b. International Carriers
1. International air carriers doing business in the
Philippines shall pay a tax of three percent (3%) of
their quarterly gross receipts.
2. International shipping carriers doing business in
the Philippines shall pay a tax equivalent to three
percent (3%) of their quarterly gross receipts.
c. Tax on Franchises - there shall be levied, assessed and
collected in respect to all franchises on radio and/or
television broadcasting companies whose annual gross
receipts of the preceding year does not exceed Ten million
pesos (P10,000,000). Radio and television broadcasting
companies referred to in this Section shall have an option
to be registered as a value-added taxpayer and pay the
tax due thereon, once the option is exercised, it shall not
be revoked.
d. Tax on Overseas Dispatch, Message or Conversation

Originating from the Philippines
Person’s Liable. There shall be collected upon every

overseas dispatch, message or conversation transmitted
from the Philippines by telephone, telegraph, telewriter
exchange, wireless and other communication equipment
service, a tax of ten percent (10%) on the amount paid for
such services. The tax imposed shall be payable by the
person paying for the services rendered and shall be paid
to the person rendering the services who is required to
collect and pay the tax within twenty (20) days after the
end of each quarter.
The tax imposed shall not apply to:
1. Government
2. Diplomatic Services
56
3. International Organizations
4. News Services
e. Tax on Banks and Non-bank Financial Intermediaries

- There shall be a collected tax on gross receipts derived
from sources within the Philippines by all banks and non-
bank financial intermediaries in accordance with the
following schedule:
On interest, commissions Short-term maturity (non in excess of

and discounts from lending two (2) years)
activities as well as income 5%
from financial leasing, on
the basis of remaining Medium-term maturity (over two (2)
maturities of instruments years but not exceeding four (4)
from which such receipts years) 3% Long-term
are derived maturity -
(1) Over four (4) years but not
exceeding seven (7) years
1%
(2) Over seven years
0%
On dividends 0%
On royalties, rentals of 5%
property, real or personal,
profits, from exchange and
all other items treated as
gross income
In case the maturity period referred to in paragraph (a) is shortened

thru pretermination, then the maturity period shall be reckoned to
end as of the date of pretermination for purposes of classifying the
transaction as short, medium or long-term and the correct rate of
tax shall be applied accordingly.
f. Tax on Finance Companies - There shall be collected a

tax of five percent (5%) on the gross receipts derived by all
finance companies, as well as by other financial
intermediaries not performing quasi-banking functions
57
dong business in the Philippines, from interest, discounts
and all other items treated as gross . Interests,
commissions and discounts from lending activities, as well
as income from financial leasing, shall be taxed on the
basis of the remaining maturities of the instruments from
which such receipts are derived, in accordance with the
following schedule:
Duration Tax Rate

Short-term maturity (non in excess of two
(2) years) 5%
Medium-term maturity (over two (2) years 3%

but not exceeding four (4)
years)
Long-term maturity -
(1) Over four (4) years but not 1%
exceeding seven (7) years 0
(2) Over seven (7) years %
g. Tax on Life Insurance Premiums - There shall be

collected from every person, company or corporation
(except purely cooperative companies or associations)
doing life insurance business of any sort in the Philippines
a tax of five percent (5%) of the total premium collected,
whether such premiums are paid in money, notes, credits
or any substitute for money; but premiums refunded within
six (6) months after payment on account of rejection of risk
or returned for other reason to a person insured shall not
be included in the taxable receipts; nor shall any tax be
paid upon reinsurance by a company that has already paid
the tax; nor upon doing business outside the Philippines on
account of any life insurance of the insured who is a
nonresident, if any tax on such premium is imposed by the
foreign country where the branch is established nor upon
premiums collected or received on account of any
reinsurance , if the insured, in case of personal insurance,
resides outside the Philippines, if any tax on such
premiums is imposed by the foreign country where the
original insurance has been issued or perfected; nor upon
that portion of the premiums collected or received by the
insurance companies on variable contracts, in excess of
58
the amounts necessary to insure the lives of the variable
contract workers.
h. Tax on Agents of Foreign Insurance Companies -

Every fire, marine or miscellaneous insurance agent
authorized under the Insurance Code to procure policies of
insurance as he may have previously been legally
authorized to transact on risks located in the Philippines for
companies not authorized to transact business in the
Philippines shall pay a tax equal to twice the tax imposed
to life insurance premiums. It shall not apply to
reinsurance and shall not affect the right of an owner of
property to apply for and obtain for himself policies in
foreign companies in cases where said owner does not
make use of the services of any agent, company or
corporation residing or doing business in the Philippines. In
all cases where owners of property obtain insurance
directly with foreign companies, it shall be the duty of said
owners to report to the Insurance Commissioner and to the
Commissioner each case where insurance has been so
effected, and shall pay the tax of five percent (5%) on
premiums paid.
i. Amusement Taxes - There shall be collected from the

proprietor, lessee or operator of cockpits, cabarets, night
or day clubs, boxing exhibitions, professional basketball
games, Jai-Alai and racetracks, a tax equivalent to the
following:
Amusement Tax rates

Cockpits, cabarets, night or day 18%
clubs
Boxing exhibition 10%
Professional basketball games 15%
Jai-alai, race tracks 30%
j. Tax on Winnings - Every person who wins in horse races

shall pay a tax equivalent to ten percent (10%) of his
winnings or 'dividends', the tax to be based on the actual
amount paid to him for every winning ticket after
deducting the cost of the ticket. In the case of winnings
from double, forecast/quinella and trifecta bets, the tax
shall be four percent (4%). In the case of owners of winning
59
race horses, the tax shall be ten percent (10%) of the
prizes.
k. Tax on Sale, Barter or Exchange of Shares of Stock

Listed and Traded through the Local Stock Exchange
or through Initial Public Offering
a. Tax on Sale, Barter or Exchange of Shares of

Stock Listed and Traded through the Local Stock
Exchange - There shall be levied, assessed and
collected on every sale, barter, exchange, or other
disposition of shares of stock listed and traded through
the local stock exchange other than the sale by a
dealer in securities, a tax at the rate of one-half of one
percent (1/2 of 1%) of the gross selling price or gross
value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed which shall be paid
by the seller or transferor.
b. Tax on Shares of Stock Sold or Exchanged

Through Initial Public Offering - There shall be
levied, assessed and collected on every sale, barter,
exchange or other disposition through initial public
offering of shares of stock in closely held corporations,
as defined herein, a tax at the rates provided
hereunder based on the gross selling price or gross
value in money of the shares of stock sold, bartered,
exchanged or otherwise disposed in accordance with
the proportion of shares of stock sold, bartered,
exchanged or otherwise disposed to the total
outstanding shares of stock after the listing in the local
stock exchange:
Percentage Rate
Up to twenty-five percent 4%
(25%)
Over twenty-five percent (25%) but 2%

not over thirty-three and one third
percent (33 1/3%)
Over thirty-three and one third

percent (33 1/3%)
60
1%
The tax herein imposed shall be paid by the issuing corporation in

primary offering or by the seller in secondary offering.
c. Return on Capital Gains Realized from Sale of

Shares of Stocks.
1. Return on Capital Gains Realized from Sale

of Shares of Stock Listed and Traded in the
Local Stock Exchange - It shall be the duty of
every stock broker who effected the sale subject
to the tax imposed herein to collect the tax and
remit the same to the Bureau of Internal Revenue
within five (5) banking days from the date of
collection thereof and to submit on Mondays of
each week to the secretary of the stock exchange,
of which he is a member, a true and complete
return which shall contain a declaration of all the
transactions effected through him during the
preceding week and of taxes collected by him and
turned over to the Bureau Of Internal Revenue.
2. Return on Public Offerings of Share Stock -

In case of primary offering, the corporate issuer
shall file the return and pay the corresponding tax
within thirty (30) days from the date of listing of
the shares of stock in the local stock exchange.
Tax Treaties
The Philippines has entered into a tax treaty to avoid of double
taxation and prevention of fiscal evasion with the following
countries:
61
Australia Hungary Russia
Austria India Singapore
Bahrain Indonesia Spain
Bangladesh Israel Sweden
Belgium Italy Swiss
Brazil Japan Switzerland
Canada South Korea Thailand
Czech Republic Malaysia United Arab Emirates
China Netherlands United Kingdom
Denmark New Zealand United States
Finland Pakistan Vietnam
France Poland
Germany Romania
If the taxpayer opted to use the provision of the tax treaties, it is

required to file with the International Tax Affairs Division a request
for tax treaty relief including claims or request for tax exemption,
and preferential tax treaty rate as covered by any provision of tax
treaty.
TRANSFER PRICING
Currently, the Philippines does not have any rules or regulations
pertaining to transfer pricing. In the previous rulings of the BIR,
particularly in conducting examination which involves related party
transactions, the BIR advice its revenue officer to refer to
Organization for Economic Co-operation and Development (OECD)-
transfer pricing model in determining if the transactions clearly
reflect the proper income of the company. They are yet to release
62
their own rules and regulations in determining the arms length
transaction of related companies.
Tax Filling and Payment Deadlines

Tax Type Date of Filling/Payment
Annual Income Tax On or before the fifteenth day of the
Individual Taxpayer/Corporate Taxpayer fourth month following the close of the
taxable year.
Quarterly Income Tax
Individual Taxpayer On or before the sixtieth day of the
month following the close of the
Corporate Taxpayer quarter.
On or before the sixtieth day of the
month following the close of the
quarter.
Value Added Tax
Quarterly Value Added Tax On or before the twenty-fifth (25) day
following the close of the month.
Monthly Value Added Tax On or before the twentieth (20) day
Percentage Tax
Monthly /Quarterly On or before the twentieth (20) day
Withholding tax
Compensation/Expanded On or before the tenth (10) day
(except for the month of December
Final Tax which is due on or before January 15)
On or before the tenth (10) day
following the close of the month
Fringe Benefit Tax On or before the tenth (10) day

following the close of the month
Documentary Stamp Tax On or before the first day after the close
of the month
63
EMPLOYMENT
FOREIGN VISA
Foreign nationals may come and visit to the Philippines for
business and tourism purposes with a temporary visitor’s visa that
allows stays for period of 59 days extendable to six months. To
extend their stay, visitors need to register, secure an extension of
stay and pay corresponding immigration fees to the Bureau of
Immigration or with the office of the municipal or city treasurer in
areas outside Metro Manila. Executive Order No. 408 allows
foreign nationals, except some specifically restricted nationalities,
to stay in the Philippines for up to 21 days without a visa.
WORK PERMIT
Foreign nationals seeking employment in the Philippines, whether
residents or nonresidents, must secure alien employment permits
(AEP) from the Department of Labor and Employment (DOLE).
What is an Alien Employment Permit (AEP)?
An Alien Employment Permit is a document issued by the

Secretary of Labor and employment through the DOLE - Regional
Director, who has jurisdiction over the intended place of work of
the foreign national, authorizing the foreign national to work in
the Philippines.
Who are the foreign nationals required to apply for an AEP?
1. Foreign nationals seeking employment in the Philippines

whether they are non-residents or refugees;
2. Foreign professionals who are allowed to practice their
profession in the Philippines under reciprocity and other
international agreements and in consultancy services; and
3. Holders of Special Investors Resident Visa (SIRV), Special
Retirees Resident Visa (SRRV), Treaty Traders Visa (9d) or Special
Non-Immigrant Visa (47(a)2) for as long as they occupy any
executive, advisory, supervisory, or technical position in any
establishment.
Validity and procedure of filing
64
1. The AEP shall be valid for one (1) year or co-terminus
with the duration of employment, consultancy services or other
modes of employment or term of office. Said AEP is valid for the
position/s and company for which it was issued.
2. In case of assignment in the company's subsidiaries,
branch offices and joint ventures and those assigned in the
headquarters with oversight function in any of the branch offices,
operation or projects in the country, one (1) AEP shall be required
and valid for all the said assignments irrespective of their place/s.
3. An application for AEP shall be filed personally or through
their respective employer with the DOLE Regional Office having
jurisdiction over the intended place of work.
4. In case of foreign nationals to be assigned in subsidiaries,
branch offices and joint ventures, and those assigned in the
headquarters with oversight functions in any of the branch offices,
operations or projects in the country, they may file their
application in any of the DOLE Regional Offices nearest their place
of work.
PHILIPPINE LABOR LAW

Individual employee rights are governed by the Labor Code of the
Philippines. The country’s policies on foreign workers, on the other
hand, are found mainly in the 1987 Constitution; the Labor Code of
the Philippines, other related laws and statutes; as well as
international covenants entered into by the Philippines.
Below are some of the key articles of the Labor Code:
 Hours of work: The normal hours of work of any

employee shall not exceed eight (8) hours a day. It shall be
the duty of every employer to give his employees not less
than sixty (60) minutes time-off of for their regular meals.
Rest periods of short duration during working hours shall
be counted as hours worked thus should be compensable.
 Night shift differential: Every employee shall be paid a
night shift differential of not less than ten percent (10%) of
his regular wage for each hour of work performed between
ten o’clock in the evening and six o’clock in the morning.
 Weekly rest day: It shall be the duty of every employer,
whether operating for profit or not, to provide each of his
employees a rest period of not less than twenty-four (24)
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consecutive hours after every six (6) consecutive normal
work days. It should be scheduled upon consultation with
the employees; however, the employer shall respect the
preference of employees as to their weekly rest day when
such preference is based on religious grounds.
 Overtime work: Work may be performed beyond eight (8)
hours a day provided that the employee is paid for the
overtime work, an additional compensation equivalent to
his regular wage plus at least twenty-five percent (25%)
thereof. Work performed beyond eight hours on a holiday
or rest day shall be paid an additional compensation
equivalent to the rate of the first eight hours on a holiday
or rest day plus at least thirty percent (30%) thereof.
 Compensation for rest day, Sunday or holiday work:
Where an employee is made or permitted to work on his
scheduled rest day, he shall be paid an additional
compensation of at least thirty percent (30%) of his regular
wage. An employee shall be entitled to such additional
compensation for work performed on Sunday only when it
is his established rest day. When the nature of the work of
the employee is such that he has no regular workdays and
no regular rest days can be scheduled, he shall be paid an
additional compensation of at least thirty percent (30%) of
his regular wage for work performed on Sundays and
holidays. Work performed on any special holiday shall be
paid an additional compensation of at least thirty percent
(30%) of the regular wage of the employee. Where such
holiday work falls on the employee’s scheduled rest day,
he shall be entitled to an additional compensation of at
least fifty per cent (50%) of his regular wage.
o Special Holidays in the country include:
 August 21 Ninoy Aquino Day

 November 1 All Saints Day
 December 31 Last Day of the year
 Minimum wage – It refers to the lowest wage rate fixed

by law that an employer can pay his employees. No
employer shall be allowed to pay less than the minimum
wage. At present, the daily minimum wage is P382.00
 13th Month Pay – all employers are required to pay all

their employees receiving a basic salary of not more that
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P1000.00 a month, regardless of the nature of their
employment, a 13th month pay not later than December 24
of every year. It refers to the one-twelfth of the total basic
salary earned by an employee within the calendar year. It
is computed pro-rata for employees who worked for only a
portion of the year.
 Right to holiday pay: Every worker shall be paid his

regular daily wage during regular holidays, except in retail
and service establishments regularly employing less than
ten (10) workers. The employer may require an employee
to work on any holiday but such employee shall be paid a
compensation equivalent to twice his regular rate.
o Regular Holidays in the Philippines include:
 January 1 New Year’s Day

 Movable Date Maundy Thursday
 Movable Date Good Friday
 April 9 Bataan & Corregidor
Day
 May 1 Labor Day
 June 12 Independence Day
 Last Sunday of August National
Heroes
Day
 November 30 Bonifacio Day
 December 25 Christmas Day
 December 30 Rizal Day
 Movable Date Eid’l Fitr (End of
Ramadan)
o By virtue of Republic Act 9492, an act

rationalizing the celebration of national holidays
in the country, holiday falling on a Wednesday will
be observed on the Monday of the week, on the
other hand, if the holiday falls on a Sunday, the
holiday will be observed on the Monday that
follows.
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 Right to service incentive leave. In the absence of
collective bargaining agreement or any related
company policy. Every employee who has rendered at
least one year of service shall be entitled to a yearly
service incentive leave of five days with pay.
 Service charges. All service charges collected by hotels,

restaurants and similar establishments shall be distributed
at the rate of eighty-five percent (85%) for all covered
employees and fifteen percent (15%) for management. The
share of the employees shall be equally distributed among
them. In case the service charge is abolished, the share of
the covered employees shall be considered integrated in
their wages.
 Forms of Wage payment. No employer shall pay the

wages of an employee by means of promissory notes,
vouchers, coupons, tokens, tickets, chits, or any object
other than legal tender, even when expressly requested by
the employee.
 Time of Wage payment. Wages shall be paid at least

once every two (2) weeks or twice a month at intervals not
exceeding sixteen (16) days. No employer shall make
payment with less frequency than once a month.
 Employment of Women. Employers are required to

provide welfare facilities at the workplace such as seats,
separate toilet rooms and lavatories from men. There is
also prohibition against discrimination with respect to pay,
promotion, training opportunities, and study and
scholarship grants.
 Maternity leave benefits: Every employer

shall grant to any pregnant woman employee who has
rendered an aggregate service of at least six (6) months
for the last twelve (12) months, maternity leave of at
least two (2) weeks prior to the expected date of delivery
and another four (4) weeks after normal delivery or
abortion with full pay based on her regular or average
weekly wages. (60 days in case of normal delivery, and
78 days in case of Caesarean delivery).
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 Paternity Benefit. It refers to the benefit granted to a
married male employee allowing him not to report for work
for seven (7) days (for each delivery for the first 4
deliveries) but continues to earn the compensation
therefore, on the condition that his spouse has delivered a
child or suffered miscarriage for purposes of enabling him
to effectively lend support to his wife in her period of
recovery and/or in the nursing of the newly-born child.
The conditions to entitlement are:

1. The claimant, a married male employee, is
employed at the time of delivery of his child,
2. He is cohabiting with his spouse at the time
she gives birth or suffers a miscarriage
3. He has applied for paternity leave
4. His wife has given birth or suffered a
miscarriage. Wife refers to the lawful wife
which means the woman who is legally
married to the male employee concerned.
 Minimum employable age: No child below fifteen (15)

years of age shall be employed, except when he works
directly under the sole responsibility of his parents or
guardian, and his employment does not in any way
interfere with his schooling. Any person between fifteen
(15) and eighteen (18) years of age may be employed for
such number of hours and such periods of the day as
determined by the Secretary of Labor and Employment in
appropriate regulations. No person below 18 can be
employed in hazardous or deleterious undertaking as
determined by the Secretary of Labor and Employment.
 Security of tenure: In cases of regular employment, the

employer shall not terminate the services of an employee
except for a just cause. An employee who is unjustly
dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to
his full back wages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to
the time of his actual reinstatement.
 Probationary employment: Probationary employment

shall not exceed six (6) months from the date the
employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. The
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services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the
employer to the employee at the time of his engagement.
An employee who is allowed to work after a probationary
period shall be considered a regular employee.
 Termination by employer. An employer may terminate

an employment for any of the following causes:
o Serious misconduct or willful disobedience by the

employee of the lawful orders of his employer or
representative in connection with his work;
o Gross and habitual neglect by the employee of his
duties;
o Fraud or willful breach by the employee of the
trust reposed in him by his employer or duly
authorized representative;
o Commission of a crime or offense by the
employee against the person of his employer or
any immediate member of his family or his duly
authorized representatives; and
o Other causes analogous to the foregoing.
 Closure of establishment and reduction of

personnel: The employer may also terminate the
employment of any employee due to the installation of
labor-saving devices, redundancy, and retrenchment to
prevent losses or the closing or cessation of operation of
the establishment.
 Termination by employee: An employee may terminate

without just cause the employee-employer relationship by
serving a written notice on the employer at least one (1)
month in advance. The employer upon whom no such
notice was served may hold the employee liable for
damages. An employee may put an end to the relationship
without serving any notice on the employer for any of the
following just causes:
o Serious insult by the employer or his

representative on the honor and person of the
employee;
o Inhuman and unbearable treatment accorded the
employee by the employer or his representative;
70
o Commission of a crime or offense by the employer
or his representative against the person of the
employee or any of the immediate members of
his family; and
o Other causes analogous to any of the foregoing.
 Retirement: In the absence of a retirement plan or

agreement providing for retirement benefits of employees
in the establishment, an employee upon reaching the age
of sixty (60) years or more, but not beyond sixty-five (65)
years which is hereby declared the compulsory retirement
age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month
salary for every year of service, a fraction of at least six (6)
months being considered as one whole year.
 Unions - The Constitution and the Labor Code

guarantee workers’ rights to self-organization and
collective bargaining, be engaged in peaceful concerted
activities, participate in policy and decision making
processes affecting their rights and benefits. Union
membership is most common in the manufacturing
sector.
OTHER PRIVILEGE/S
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Solo parent leave – under the SOLO PARENT WELFARE ACT of
2000 (RA 8972) a solo parent employee who has rendered service
of at least one year is entitled to not more than seven working
days of parental leave in addition to the leave privileges under
existing laws.
REGULATING BODY
Department of Labor & Employment (DOLE). The
government agency that works to promote gainful employment
opportunities, develop human resources, protect workers and
promote their welfare, and maintain industrial peace. Among its
strategies are:
• Support and employment generation

• Employment Facilitation
• Employment Preservation
• Employment Enhancement
• General administration and support services
WELFARE BENEFITS
Upon the start of employment, employees including resident
foreign employees are mandated to be reported/registered to the
following government agencies:
 Social Security System (SSS) and

Philippine Health Insurance Corporation
Compulsory coverage. The Social Security System
(SSS) was created to provide private-sector employees
and their families with protection against the hazards of
disability, sickness, old age and death. Standard social
security benefits include disability pension, retirement
pension, funeral benefit, sickness allowance, maternity
and paternity leave, and miscellaneous loans.
Private sector employers, including those of household

helps, who have registered with the SSS prior to July 1,
1999 are considered automatically registered and will only
be required to update their records with Philippine Health
Insurance Corporation (PhilHealth).
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 Employees Compensation Commission (ECC). ECC is
mandated by Philippine law to provide meaningful and
appropriate compensation to workers. The commission
implements the Employee's Compensation Program (ECP)
which provides a package of benefits for public and private
sector employees and their dependents in the event of
work-connected contingencies such as:
1. Sickness
2. Injury
3. Disability
4. Death
The State Insurance Fund (SIF) is established to provide

funding support to the Employees' Compensation Program.
It is generated from the employers' contributions collected
by Social Security System. The employer shall remit to the
Social Security System a monthly contribution of Php10 for
wages earners and 0.20% of the monthly salary credit
(MSC) for employees with higher MSC of P15, 000.00 and
over.
 Home Development & Mutual Fund. Also known as

Pag-IBIG Fund, HDMF offers the following programs and
services:
1. Iskolar ng Pag-ibig Program

2. Provident Savings Benefit
3. Pag-ibig Housing Bond
4. Lending Program
i. Provident Loan
ii. Housing Loan
The base amount for calculation of mandated contributions is the

average monthly salary (before tax, overtime and allowance). Below
is the schedule of contributions:
Agencies Employee Employer Share

Share
Social Security 3 % of 7 % of Monthly

System (SSS) Monthly Salary Credit
73
Salary Credit
Employees Php10 or
Compensation None 0.20% of
Commission (ECC) employees MSC
Philippine Health 1.25% of 1.25% of Salary

Insurance Corporation Salary Base Base
Home Development
Php100 Php100
Mutual Fund
RECRUITMENT, SELECTION AND

PLACEMENT PROCEDURES
74
Accounting
Philippine Financial Reporting
Standards (PFRS) in the
Philippines
75
The Philippines is in full compliant with IFRS effective January 2005,
a process which started back in 1997 in moving from the US based
GAAP to IFRS. The Philippines has introduced the Accountancy Act
of 2004 and the Philippine Institute of Certified Public Accountants
(PICPA) has been designated as the accredited professional
association.
The Financial Reporting Standard Council (FRSC) of the Philippines

issues its Standards in a series of pronouncements called Philippine
Financial Reporting Standards (PFRSs). These consist of:
1. Philippine Financial Reporting Standards (PFRSs) (these

correspond to International Financial Reporting Standards
(IFRS));
2. Philippine Accounting Standards (PASs) (these correspond
to the International Accounting Standards (IASs); and
3. Philippine Interpretations (these correspond to
Interpretations of the IFRIC and the Standing
Interpretations Committee (SIC) of the IASC; (these also
include interpretations developed by the PIC).
The Bureau of Internal Revenue (BIR) issued Revenue Regulation

(RR) 8-2007 on the additional compliance requirements of
concerned taxpayers in the light of mandatory adoption of PFRS.
The Securities and Exchange Commission (SEC) has provided a list
of PFRS applicable to all corporations except Pre-need companies
and those qualified as non-publicly accountable entities (NPAE).
Common Differences between

IFRS and Philippine Accounting
Regulations and Standards
Impact of IAS on Rule 68 of the Rules and Regulations
Implementing the SRC
Rule 68 (special accounting rules) is the Implementing Rules and

Regulations of the Securities Regulation Code (SRC) which deals
with the form and the content of financial statements. Rule 68 has
76
been amended to conform to the IAS. The amendments resulted in
additional disclosure requirements including the presentation of
segment reporting, statement of changes in equity, and cash flow
statement.
Before the adaptation of 2001 IAS, Rule 68 disclosure requirements

were applicable only to those listed corporations and public
companies. The amendment of Rule 68 expands the coverage to all
corporations that file financial statements with the Commission,
which are prepared and presented in conformity with the generally
accepted accounting principles, except those whose paid-up capital
is less than Php50, 000.
Intellectual Property Rights

(IPR)
The Philippine government had made it a State policy to protect and
promote intellectual property rights. The State recognizes that an
effective intellectual and industrial property system is vital to the
development of the domestic and creative activity, facilitates
transfer of technology, attracts foreign investments, and ensures
market access for local products. Thus, Republic Act No. 8293,
otherwise known as Intellectual Property Code of the Philippines
was enacted to protect and secure the exclusive rights of the
scientists, inventors, artists, and other gifted citizens to their
intellectual property and creations, and particularly when beneficial
to the people, for such periods as provided in this Act.
77
It is the policy of the State to streamline administrative procedures
of registering patents, trademarks and copyright, to liberalize the
registration on the transfer of technology, and to enhance the
enforcement of intellectual property rights in the Philippines.
The Philippines is a member of IP-related treaties such as WTO-

TRIPS (Agreement on Trade-Related Aspects of Intellectual Property
Rights), WIPO (Convention Establishing the World Intellectual
Property Organization), and other Intellectual Property Rights
conventions and treaties.
Some of the most common forms of IPR in the Philippines are

discussed below:
Law on Patents
A patent is an exclusive right granted to any technical solution to a
problem in any field of human activity which is new, involves an
inventive step, and is industrially applicable. It may be, or may
relate to, a product, or process, or an improvement of any. The right
to patent belongs to the inventor, his heirs, or assigns. When two
(2) or more persons have jointly made an invention, the right to a
patent shall belong to them jointly.
Under the Republic Act 8293, a shift was made from “first-to-invent
system” to “first-to-file system.” The period of grant was 20 years
from the date of filing. In patent infringement, the court may award
damages not exceeding three (3) times the amount of actual
damages sustained. If the damages cannot be readily ascertained,
the court may award damages equivalent to a reasonable royalty.
The criminal action for repetition of infringement is, if the

infringement is repeated by the infringer or by anyone in
connivance with him after finality of the judgment of the court
against the infringer, the offenders shall, without prejudice, to the
institution of civil action for damages, be criminally liable therefore,
and upon conviction, shall suffer imprisonment for the period of not
less than six (6) months but mot more than three years, and/or a
fine of not less than Php100, 000 but not more than Php300, 000, at
the discretion of the court. The criminal action herein provided shall
78
prescribe in three (3) years from the date of the commission of the
crime.
Law on Trademarks
“Marks” are visible signs capable of distinguishing the goods
(trademarks) or services (service marks) of an enterprise. Marked or
stamped containers are also considered “marks.” The registration is
for a period of ten (10) years; renewable for the subsequent ten
(10) periods as long a mark is being used in trade and commerce.
In registering the trademark, if one is a non-resident registrant, the

name and address of the resident agent is needed. No attestation,
notarization, legalization, or other certification is required except
when one claim to be a small entity (natural or juridical person
whose asset are worth Php20 M and government offices) and wish
to pay the filing on that basis. Otherwise, all applicants are
assumed to be big entities.
In trademark infringement, the court may award damages

equivalent to the reasonable profit, or the profit which defendant
actually made out on the infringement. If damages cannot be
readily ascertained, the court may award damages equivalent to
the percentage of the gross sales of the defendant. Damages may
be doubled if there is actual intent to mislead the public or defraud
complainant. The penalties for infringement, unfair competition,
false designation of origin, and false description are a fine of Php50,
000 to Php200, 000 and imprisonment from 2 to 5 years.
Law on Copyrights
There is no registration requirement for copyrights; however, a
deposit is required in order to complete the collection of the
National Library and the Library of the Supreme Court. Deposit with
either library is sufficient under the law. Further, the deposit is not
required for the existence on one’s copyright because the copyright
exists from the moment of creation.
For copyrights and related rights, IP Philippines encourages the

registrant to join the appropriate collecting society. Starting in
January 1998, the Intellectual Property has initiated several meeting
79
with copyright owners, performers, and broadcasters to educate
them on collective administration as the most efficient means of
enforcing their rights. Last January, the Intellectual Property Office
of the Philippines was informed that aside from Japan, the
Philippines is only the other Asian country that has formed the
collecting society for performers.
The legal remedies available are: judicial (filing of case with the
Regional Trial Court), administrative (filing at the Bureau of Legal
Affairs of IP office), request for mediation involving author’s rights,
complaint from violation of laws involving IP, or filing a case at the
Department of Trade and Industry (DTI) regardless of the amount of
damages or if no damages are claimed.
The penalties for copyright’s infringement are:
• First offense: Fine of Php50, 000 to Php150, 000 and 1 year

to 3 years imprisonment
• Second offense: Fine of Php150, 000 to Php500, 000 and 3

to 6 years of imprisonment
• Third and subsequent offense: Fine of Php500, 000 to

Php1.5 M and/or 6 to 9 months of imprisonment in case of
insolvency
ASSET VALUATION
Companies and individuals seek valuations for a variety of reasons,
including merger and acquisition activities, value-based estate and
gift planning, and litigation support. A valuation can often produce
significant benefits in crucial negotiations or help a company realize
the true value of an asset, a transaction, or an entire business.
The Real Estate Service Act of the Philippines was introduced to

regulate and provide institutionalized government support to
develop a corps of highly technical work which provides the basis
for decisions on property sales, expropriations, compensation,
mortgage financing, and assessment of taxes, as well as in the
development of real estate industry in the country. With the
approval of this Act, the transition of transferring power and
80
responsibilities from Department of Trade and Industry (DTI)
through the Bureau of Trade Regulation and Consumer Protection
(BTRCP) to Professional Regulation Commission (PRC) to be
exercised by the Professional Real Estate Service Board (PRESB) is
now on going.
Provider of Asset Valuation

Services
A real estate appraiser or assessor performs asset valuation. A real
estate appraiser is a duly registered and licensed natural person
who, for a professional fee, compensation or other valuable
consideration, performs or renders, or offers to perform services in
estimating and arriving at an opinion of or acts as an expert on real
estate values, such services of which shall be finally rendered by
the preparation of the report in acceptable written form. On the
other hand, a real estate assessor is a duly registered and licensed
natural person who works in a local government unit and performs
appraisal and assessment of real properties, including plants,
equipment, and machineries, essentially for taxation purposes.
A certificate of registration shall be issued to examinees that pass

the national licensure examination for real estate service.
Reliability of Asset Valuation in

the Philippines
Republic Act (RA) 9646 otherwise known as the Real Estate Service
Act of the Philippines, signed approved on June 29, 2009 and
effective July 30, 2009, professionalizes the real-estate practice in
the Philippines. With the law, it is seen that the happy days of
unscrupulous real-estate practitioners will be over as the real-estate
practice will be regulated and confined to competent, responsible
and respected professional real-estate service practitioners. With
the passage of this RA 9646, the regulation of the real-estate
practice is transferred from the Department of Trade and Industry
(DTI) to the Professional Regulation Commission (PRC) which will
create the Professional Regulatory Board of Real Estate Service.
81
Valuations of real properties are used for different purposes -
acquisition and disposal, mortgages, taxation, land and property
management, among others.
Asset Valuation Costs

The real estate prices in the Philippines (just like other countries)
are very diverse owing to the factors such as location, type, and
features of property. On an aggregate level, the mix of real estate
transactions by type has a bearing on the total price. Other factors,
such as, urban development, the entry of foreign investors in the
property market, lower interest rates, and emergence of new
housing and mortgage practices also contributed to the differences
in prices.
Investing in the Philippines

Overview
It is advantageous to do business in the Philippines because of its
quality manpower resources, strategic business location, liberalized
and business friendly economy, hospitable lifestyle, and unlimited
business opportunities. The country has simple-quality manpower
resources, strategic business location, liberalized and business
friendly economy, hospitable lifestyle and unlimited business
opportunities.
Pro-business Environment
82
The Philippines is the third-largest English speaking country in the
world, enabling its manpower to have a unique edge over
neighboring countries in terms of labor quality. Flanked by the
Pacific Ocean and the South China Sea, its strategic location makes
it a critical entry point to some 500 million people in the ASEAN
market - offering vast trade opportunities - and an ideal base for
business. It is also the best Asian country in terms of overall quality
of expatriate life, considering its cultural compatibility with
expatriates, housing, sporting and recreational facilities, quality
healthcare, and first-rate educational institutions.
Being an archipelago, the Philippines has a lot to offer as well in

terms of natural resources. Its 7,100 islands boast numerous white
and black sand beaches, making it eminently attractive to
vacationers and tourists. Its amazing marine biodiversity affords
abundant species of flora and fauna. Land-wise, it is also among the
biggest producers of copper and gold in the world.
Considering its strategic location, unique edge as an English

speaking country and rich natural resources, the cost of doing
business in the Philippines is surprisingly low, with wages down to
less than one-fifth of that in the U.S. Communication, electricity and
housing costs can go as low as a mere half of the costs in the U.S.
Foreign companies now outsourcing programming and business
processes to the Philippines incur 30 to 40% business cost savings,
15 to 30% call center services, and 35 to 50% application systems
and software development.
Business policies of the government tend to be investor-friendly. It

has allowed more private sector participation in the development of
infrastructure and services through privatization. The innovative
Build-Operate-Transfer scheme has been adopted by the
government. Foreign ownership of up to 100% is also allowed in
almost all economic sectors. Attractive incentives are offered in
numerous Special Economic Zones and Industrial Estates, which are
83
being promoted as agricultural, industrial, commercial and
recreational hubs.
Foreign Investments Act (FIA) of

1991
To attract, promote, and welcome productive investments from
foreign individuals, partnerships, corporations, and governments,
including their political subdivisions, in activities which significantly
contribute to national industrialization and socio-economic
development to the extent that foreign investment is allowed in
such activity by the Constitution and relevant laws, Republic Act
No.7042 was enacted in 1991.
This Act encourages foreign investments in the enterprises that

significantly expand livelihood and employment opportunities for
Filipinos; enhance economic value of farm products; promote the
welfare of Filipino consumers; expand the scope, quality and
volume of exports and their access to foreign markets; and/or
transfer relevant technologies in agriculture, industry and support
services. The Act also welcomes foreign investments as a
supplement to Filipino capital and technology in those enterprises
serving mainly the domestic market.
As a general rule, there are no restrictions on extent of foreign

ownership of export enterprises. In domestic market enterprises,
foreigners can invest as much as one hundred percent [100%]
equity except in areas included in the negative list. Foreign-owned
firms catering mainly to the domestic market shall be encouraged
to undertake measures that will gradually increase Filipino
participation in their businesses by taking in Filipino partners,
electing Filipinos to the board of directors, implementing transfer of
technology to Filipinos, generating more employment for the
economy and enhancing skills of Filipino workers.
Key Features of the FIA
• Concept of a negative list

• Opened domestic market to 100% foreign investment
except those in the Foreign Investment Negative List (FINL)
84
• Redefined “export enterprise” to mean at least 60% for
export
• Allowed 100% foreign ownership of business activities
outside FINL but without incentives
Under this law, foreign investors are allowed to invest 100% equity
in companies engaged in almost all types of business activities
subject to certain restrictions as prescribed in the FINL, which is a
shortlist of investment areas or activities that may be opened to
foreign investors/reserved to Filipino nationals.
Classifications of the FINL
• List A - consists of areas of activities reserved to

Philippine nationals where foreign equity participation in
any domestic or export enterprise engaged in any activity
listed shall be limited to a maximum of 40% as prescribed
by the Constitution and other specific laws.
• List B - consists of areas of activities where foreign
ownership is limited pursuant to law such as defense or
law enforcement-related activities, which have negative
implications on public health and morals, and small and
medium-scale enterprises.
The FIA clearly states that if the activity to be engaged in is not

included in the FINL, is more than 40% foreign-owned and will cater
to the domestic market, the capital required is at least US$200,000.
The capital may be lowered to US$100,000, if activity involves
advance technology, or the company employs at least 50 direct
employees.
If the foreign company will export at least 60% of its output, or a

trader that purchases products domestically will export at least 60%
of its purchases, the required capital of US$200,000.00 paid-in is
not applicable.
If the company is at least 60% Filipino - 40% foreign-owned and will

cater to the domestic market, paid-in capital can be less than
US$200,000.00.
Specific areas of equal investment rights for

former Filipino nationals
85
While most areas of businesses have limits for foreign investors, the
amended FIA of 1991 lists the following types of businesses where
natural-born Filipinos can enjoy the same investment rights as a
Philippine citizen.
• Cooperatives
• Thrift banks and private development bank
• Rural banks
• Financing companies
Former natural born Filipinos can also engage in activities under List
B of the FINL. This means that their investments shall be treated as
Filipino or will be considered as forming part of Filipino investments
in activities closed or limited to foreign participation.
The equal investment rights of former Filipino nationals do not

extend to activities under List A of FINL, which are reserved for
Filipino citizens under the constitution.
Natural born Filipinos have also been given the right to be

transferees of private land up to a maximum of 5,000 square
meters in the case of urban land or 3 hectares in the case of rural
land to be used for business or other purposes.
Incentives
The government has come up with a liberal program of fiscal and
non-fiscal incentives to attract foreign capital and technology that
complement local resources. Different incentives schemes are
available relative to the location and registration of the proposed
business activity.
Investment Priorities Plan

Annually, the Board of Investments (BOI) issues the Investment
Priorities Plan (IPP), which is a list of promoted areas of investments
eligible for government incentives. The following is the 2008
approved IPP by the President:
86
• Preferred Activities. These cover (1)
agriculture/agribusiness and fishery, (2) infrastructure, (3)
tourism, (4) research and development, (5) engineered
products, and (6) strategic activities.
• Mandatory Inclusions. It covers the areas of (1)

industrial tree plantation, (2) exploration, mining,
quarrying, and processing of minerals, (3) printing,
publication, and content development of books and
textbooks, (4) refining, storage, marketing, and distribution
of petroleum products, (5) ecological solid waste
management, (6) clean air act, and (7) development and
reliance of disabled persons.
• Export Activities. These cover the

production/manufacture of non-traditional export products
and services.
• ARMM List. The list covers the priority activities in

Autonomous Region for Muslim Mindanao (ARMM), such as
(1) export activities, (2) agriculture, food, and forestry-
based industry, (3) basic industries, (4) consumer
manufacturers, (5) infrastructure and services, (6)
engineering industries, and (7) ARMM priority and tourism
areas.
Qualified projects are provided with the following incentives:
• Income tax holidays

• Tax credits
• Tax and duty exemption for imported raw materials and
equipment
• Hiring of foreign labor
• Exemption from contractors tax
• Simplified custom procedure
• Domestic Borrowings
• Export Assistance
• Other tax incentives
Income Tax Holiday (ITH) Advantages
87
Companies registered with the BOI are eligible for income tax
holidays which range form 3 to 8 years. 4 years for new projects
without pioneer status and 6 years for projects with pioneer status.
A 100% foreign owned corporation may be entitled to incentives if

their business has been categorized as a pioneer project and at
least 70% of production / service is exported or the project is in one
of the less-developed areas mentioned in the IPP. Companies not
exporting 100% of their production / services are obliged to have
60% Filipino ownership within a period of 30 years from time of
registration with the BOI. Foreign ownership of corporations in non-
pioneer projects is limited to 40% except if the company exports
more than 70% of its production / service.
How to apply for Board of Investment

incentives:
Submission of a notarized application specifying the nature of the

projects, its inclusion in the IPP or not, percentage of production for
export, the investors details and a 5 year feasibility study.
PEZA also offers other tax breaks.
88
Listing Rules in the
Philippines
The Philippine Stock Exchange, Inc. (PSE or The Exchange) is a
private organization that provides and ensures a fair, efficient,
transparent, and orderly market for the buying and selling of
securities. The Exchange was formed in December 23, 1992
through the union of the country’s two former bourses: Manila Stock
Exchange (MSE) and Makati Stock Exchange (MkSE).
At present, the PSE maintains two trading floors: one in Makati City
and another in its head office in Pasay City. Even with two trading
floors, the PSE maintains a ‘one price-one market’ exchange
through the MakTrade System. This is a single-order-book book
system that tallies all orders into one computer and ensures that
these orders match with the best bid/best offer regardless of which
floor the order were placed. MakTrade, likewise, allows PSE to
facilitate the trading of securities in a broker-to-broker market
through automatic order and trade routing and confirmation. It also
keeps and eye on any irregularity in the transactions with its market
regulation and surveillance databases.
Companies are listed in the PSE on the First Board, Second Board,
or the Small and Medium Enterprises Board. To help the investing
public keep track faster of industry performance, listed companies
are classified into the following sectors: Financial, Industrial, Holding
Firms, Property, Services, and Mining and Oil. More importantly, PSE
has adopted an online daily disclosure system to prove the
transparency of listed companies and ensure full, fair, timely, and
accurate disclosure of material information from all listed
companies.
89
90
GENERAL CRITERIA
BASIC GUIDELINES
FIRST BOARD SECOND BOARD SME BOARD
a. A track record of a. The applicant company The applicant company shall be

profitable operations for must demonstrate its evaluated based on the following:
three (3) full fiscal years; potential for superior
or growth to the Exchange; a. The integrity and capability
b. It must have an operating of the company’s
b. A market capitalization of history of at least one (1)
P500M, provided that it management and its
year prior to its listing; and controlling stockholders;
has a five-year operating
history; or b. The company’s prospects of
c. At listing, the market further growth and
capitalization of the profitability;
c. Net tangible assets of company must be at least c. The viability of the business
P500 M, provided that it P250 M. and sustainability of the
has a five-year operating projected earning stream;
history. and
d. The company’s lack of
existing material
conflicts of interest.
91
TRACK RECORD REQUIREMENT
A company must have a cumulative None, but must demonstrate a The applicant company
consolidated pre-tax profit of at potential for superior growth,
least at least P50 Million and a through the submission of should have been
minimum pre-tax profit of P10 Statement of Active Business operational for at least
Million for each of the three (3) full Pursuits and Objectives.
fiscal years immediately preceding
one (1) year with positive
the application for listing. For net operating income
purposes of this rule, pre-tax profit (income before interest,
shall not include non-recurring and
extraordinary income, nor shall it
taxes, depreciation and
be reduced by non-recurring and amortization-EBITDA)
extraordinary loss. The applicant during the last financial
must further be engaged in
materially the same businesses year.
and must have a proven track
record of management throughout
the last three (3) years prior to the
filing of the application.
Exceptions to the 3 year track

record rule:
a. The applicant company
92
has been operating for at
least Ten (10) years prior
to the filing of the
application. The applicant
company shall have a
cumulative pre-tax profit
of at least P50 Million,
excluding non-recurring
and extraordinary income
and/or loss, for the last
Three (3) fiscal years
immediately preceding the
application for listing. No
net operating loss must
have been registered in
the fiscal year
immediately preceding the
filing of the application;
b. The applicant company is

a newly formed holding
company which uses the
operational track record of
its subsidiary(ies). The
company, however, is
93
prohibited from divesting
its shareholdings in the
said subsidiary(ies) for a
period of three (3) years
from the listing of its
securities. The prohibition
shall not apply if a
divestment plan is
approved by majority of
the applicant company’s
stockholders.
NUMERICAL CRITERIA
94
Authorized Capital Stock: Minimum- Authorized Capital Stock: Minimum- Authorized Capital Stock: Minimum-
P 20,000,000.00
P400,000,000.00 P 100,000,000.00 Maximum - P 100,000,000.00
Subscription & Paid-up: Minimum- Subscription & Paid-up: Minimum- Subscription & Paid-up: Minimum-
P100,000,000.00 P 25,000,000.00 25% of the ACS
Condition on Paid-up: at least 75%
of the paid-up must have already * The applicant company
been disbursed to the project, should have net tangible
venture or business referred to in
the business plan assets of at least Five
Million Pesos (P
5,000,000.00). The net
tangible assets
requirement is not
applicable to information
technology companies.
95
OPERATING HISTORY
For a track record of profitable At least one (1) year prior to listing. At least one
operations- At least three (3) full
fiscal years prior to the filing of the
listing application if with track
record
For a market capitalization or net
tangible assets of P500M - at least
five (5) years.
96
REQUIREMENTS
MINIMUM OFFERING
Unless otherwise provided by law or government regulation, the The minimum offering to
minimum offering to the public for initial listing shall be based on the
following schedule: the public for initial listing
shall be twenty percent
MARKET CAPITALIZATION PUBLIC OFFER (20%) of the authorized
Not exceeding P400 M 33% or P50M whichever is higher
capital stock. Provided,
Over P400M to P1B 25% or P100M whichever is higher that the existing
Over P1B to P5B 20% of P250M whichever is higher shareholders prior to
Over P5B to P10B 15% or P750M whichever is higher
Over P10B 10% or P1B whichever is higher listing of securities shall
maintain fifty-one percent
(51%) ownership within
the next three years
following listing date.
97
OFFER PRICE
Discretion of the applicant Discretion of the applicant Discretion of the

company, subject to the
approval of the Exchange
MIN. NUMBER OF DIRECTORS AND STOCKHOLDERS OR SECURITY HOLDERS
Upon filing of the application, the The applicant company shall at all After listing, the company
applicant company shall have and times have a minimum 7 directors.
maintain a minimum of 7 directors. The company shall likewise shall, at all times,
The applicant company shall, at all maintain at least 500 stockholders. maintain a minimum 7
times, maintain, at least 1,000 Each of these stockholders must directors and at least 50
stockholders or security holders hold at least one board lot of the
98
each owning shares or securities shares of the company. stockholders owning
equivalent to at least one board lot
upon listing in the Exchange. shares equivalent to at
least one board lot. The
company shall be held
responsible for
maintaining the
designated number of
stockholders owning
shares of stock in the
company.
LOCK-UP
The applicant company shall cause The applicant company shall cause The company shall cause
its existing stockholders or security its existing security holders who
holders who own an equivalent of own an equivalent of at least 10% all its existing
at least 10% of the issued and of the issued and outstanding stockholders to enter into
outstanding shares not to sell, securities of the company to enter an agreement with the
99
assign or in any manner dispose of into an agreement with the Exchange not to sell,
their shares for a minimum period Exchange not to sell, assign,
of 180 days after the listing of the encumber or in any manner assign, encumber or in
said shares. dispose of their securities for a any manner dispose of
period of three hundred sixty-five their securities for a
If there is any issuance of shares or (365) calendar days after the
securities or instruments which listing of such securities. period of two (2) years
lead to issuance of shares or after the listing of such
securities done and fully paid for If there is any issuance of shares
within 180 days prior to the start of or securities (i.e., private
securities.
the offering period, and the placements, asset for shares swap
transaction price is lower than that or a similar transaction) or If there is any issuance of
of the offer price in the IPO, all instruments which lead to issuance
shares or securities availed of shall of shares or securities (i.e., shares (i.e., private
be subject to a lock-up period of at convertible bonds, warrants or a placements, asset for
least 365 days from full payment similar instrument) done and fully
of the aforesaid shares or paid for within One-hundred-eighty
shares swap or a similar
securities. (180) days prior to the start of the transaction) or
offering period, and the instruments which leads
transaction price is lower than that
of the offer price in the Initial
to the issuance of shares
Public Offering, all shares or (i.e. convertible bonds,
securities availed of shall be warrants or a similar
subject to a lock-up period of at
least three-hundred-sixty-five instrument) done and
(365) days from full payment of fully paid for within One-
the aforesaid shares or securities.
hundred-eighty (180)
100
days prior to the start of
the offering period, and
the transaction price is
lower than that of the
offer price in the Initial
Public Offering, all
persons who availed of
the securities shall be
subject to a lock-up
period of Three-hundred-
sixty-five (365)
consecutive calendar
days from full payment of
such securities.
ISSUED AND OUTSTANDING SHARES
101
All issued and outstanding All issued and outstanding All issued and outstanding shares
securities of including treasury securities of the type and class shall be applied for listing in the
shares shall be applied for listing. applied for, including treasury Exchange.
shares shall be applied for listing.
LISTING DOCUMENTS
FINANCIAL STATEMENTS
Audited FS for the last three (3) full Audited FS for the last three (3) full When applicable, audited
fiscal years of the company and its fiscal years of the company and its
subsidiaries prepared by an subsidiaries prepared by an FS for the last three (3)
independent auditor together with independent auditor. full fiscal years of the
a schedule of the aging of its applicant company and its
accounts receivable
subsidiaries
102
STATEMENT OF ACTIVE BUSINESS PURSUITS & OBJECTIVES
Not required. Statement of Active Business Statement of Active Business

Pursuits and Objectives - detailed Pursuits and Objectives - detailed
report on its active business report on its active business
pursuits. It shall describe the pursuits. It shall describe the
technical and commercial aspects technical and commercial aspects of
of the applicant company’s the applicant company’s business
business operations. operations.
Active business pursuits is defined Active business pursuits is defined

as the activities undertaken and as the activities undertaken and will
will be undertaken by the applicant be undertaken by the applicant
company in order to advance its company in order to advance its
business. business.
As a general rule, financial As a general rule, financial

projections are not required, but projections are not required, but
103
should there be references made in should there be references made in
the Statement to future profits or the Statement to future profits or
losses, or any other item that losses, or any other item that would
would be construed to indicate be construed to indicate forecasts,
forecasts, then the applicant then the applicant company is
company is required to include required to include financial
financial projections in the projections in the Statement duly
Statement duly reviewed by an reviewed by an independent
independent accounting firm. accounting firm.
For listing applications received For listing applications received

within the first three (3) quarters of within the first three (3) quarters of
the applicant company’s fiscal the applicant company’s fiscal year,
year, the period of discussion the period of discussion should
should cover the previous and cover the previous and current
current fiscal years and the next fiscal years and the next two (2)
two (2) fiscal years. With respect to fiscal years. With respect to listing
listing applications received within applications received within the
the fourth quarter of the applicant fourth quarter of the applicant
company’s fiscal year, the company’s fiscal year, the
discussion should cover the
previous and current fiscal years discussion should cover
and the next three (3) fiscal years. the previous and current
fiscal years and the next
three (3) fiscal years.
104
105
Relevant Websites for
Further Reading
The following are relevant reference websites of several
government offices and other related organizations that could guide
investors who want to do business in the Philippines:
Organization Website
General Reference
Republic of the Philippines www.gov.ph
Macroeconomics
National Economic Development Authority www.neda.gov.ph

National Statistics Office www.census.gov.ph
Commerce and Investment
Department of Trade and industry www.dti.gov.ph

Board of Investments www.boi.gov.ph
Securities and Exchange Commission
www.sec.gov.ph
Bureau of Internal Revenue
www.bir.gov.ph
Philippine Stock Exchange
www.pse.org.ph
Investors Relations Office www.iro.gov.ph
Philippine Economic Zone Authority www.peza.gov.ph
Finance
Bangko Sentral ng Pilipinas

www.bsp.gov.ph
Department of Budget and Management www.dbm.gov.ph
Other Useful Information

106
Department of Foreign Affairs www.dfa.gov.ph
Department of Tourism
www.tourism.gov.ph
Department of Labor and Employment www.dole.gov.ph
Intellectual Property Rights Office
www.ipophil.gov.ph
Philippine Institute of Certified Public Accountants
www.picpa.com.ph
107
About RSM International
RSM international is the 7th largest network of independent
accounting and consulting firms worldwide, with over 730 offices in
over 70 countries, and more than 30, 000 people on hand to serve
its clients’ needs.
RSM International is a global network of independently-owned and

managed professional service firms, united by a common desire to
provide the highest quality of services to its clients. We exist to
make a positive difference to their futures. High standards, common
work ethic, and clear focus make our members valuable partners
for varied client base worldwide.
Contact Details
For more information, please get in touch with:
RSM International Executive

Office
2nd Floor, 11 Old Jewry
London EC2R 8DU
Main: +44 (0) 20 7601 1080
Fax: +44 (0) 20 7601 1090
Website: www.rsmi.com
Jean Stephens, CEO

DID: +44 (0) 20 7601 1080
Email: jean.stephens@rsmi.com
RSM Asia Pacific Regional Office

Level 8, Realto South Tower
525 Collins Street
Melbourne VIC 3000
PO Box 248, Collins Street West, VIC 8007
Main: +61 3 9286 1800
Fax: +61 3 9286 1899
108
Website: www.rsmi.com.au
Neil Hough, Regional Director

DID: +61 3 9286 1862
Email: neil.hough@rsmi.com.au
Lynette McGowan, Regional Co-ordinator (Asia Pacific)

DID: +61 3 9286 1862
Email: lynette.mcgowan@rsmi.com.au
About Alas, Oplas & Co.,

CPAs
Alas, Oplas & Co. CPAs was established in 1976 and worked its way
to be one of the leading accounting and business consultancy firms
for mid-tier market today. As we have been in the professional
service for more than three decades, our accumulated experiences
have given us expertise and helped us develop approaches tailor-fit
to what our clients needs.
We forge a close and enduring relationship with our clients through

quality services and commitment of our people. We recognize that
our clients deserve the best kind of services and highly-experienced
professionals that would handle transactions. Thus, through our
membership with RSM International, we are using worldwide
standards, and bring our capabilities through local approach.
Our Firm is composed of competent business advisors with local

and international experiences and who share enthusiasm for
growth. We employ competent staff and continually seek for
improvement of our capabilities through investing heavily on
training and technology. Our high professional standards, proper
work ethics, and clear focus make us valuable partner for varied
client base of local and multinational companies.
Contact Details
For more information, please get in touch with:
109
Alas, Oplas & Co., CPAs
Makati Head Office
25th Floor, Philippine AXA Life Centre
1286 Sen. Gil Puyat Avenue
Makati City, Philippines 1200
Telephone: (632) 759-5090
Fax: (632) 887-6180
Email: aocheadoffice@rsm-alasoplascpas.com
Contact Partners:
Mr. Donnies T. Alas

Chairman & CEO
Tel: (02) 759-5090
Email: donniesalas@rsm-alasoplascpas.com
Ms. Marycris S. Oplas

Managing Partner
Tel: (02) 759-5090
Email: marycrisoplas@rsm-alasoplascpas.com
Disclaimer Text
The aim of this publication is to provide general information about
doing business in the Philippines and every effort has been made to
ensure that the contents are accurate and current. However, tax
rates, legislation, and economic conditions referred to in this
publication are only accurate at the time of writing. Information in
this publication is in no way intended to replace or supersede
independent or other professional advice. Copies of this booklet can
be obtained from RSM International Executive Office or at Alas,
Oplas & Co., CPAs.
RSM International is the name given to a network of independent

accounting and consulting firms each of which practices on its own
right. RSM international does not exist in any jurisdiction as a
separate legal entity. The network is administered by RSM
110
International Limited, a company registered in England and Wales
(company number 4040598) whose registered office is at 11 Old
Jewry, London EC2R 8DU. Intellectual property rights used by
members of the network including the trademark RSM International
are owned by RSM International Association, an association
governed by articles 60 et seq of the Civil Code of Switzerland
whose set is in Geneva.
© RSM International Association, 2009
111

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Alas, Oplas and Co. CPAs, an independent member firm of RSM

Types of Business Entities 8

Foreign Exchange Controls 14

Intellectual Property Rights (IPR) 70

Investing in the Philippines 74

Listing Rules in the Philippines 80

About RSM International 91

About Alas, Oplas & Co., CPAs

One advantage of the Philippines being an archipelago is that it

The Philippines has a tropical climate with relatively abundant

Filipinos are divided geographically and culturally into regions, and

The Philippine education system is patterned after the American

According to the census conducted by the government in 2006,

The Philippines has a well-developed communication,

Despite more modest infrastructure capabilities, the Philippines

Further, based on the Inflation Report of Bangko Sentral ng Pilipinas

As of 4th quarter of 2008, total approved Foreign Direct Investments

The Executive is composed of the Office of the President (OP), Vice

The Legislative is composed of the Senate and the House of

The Judiciary is composed of the Supreme Court, Appellate courts

Local government units (LGUs) are currently composed of 81

The Philippine Constitution is the fundamental law of the state.

Government and private offices are open from 8 a.m. to 5 p.m.,

To form a sole proprietorship, there is a need to apply for a business

In forming the latter with 3,000.00 Philippine pesos or more in

Foreign Investment Entities

They are allowed to set up the following form of business entities:

Foreign Investment in Export Enterprise

An enterprises wherein a manufacturer, processor or service

Foreign Investments in Domestic Market

Enterprises which produces goods for sale, or renders services to

Non-Philippine nationals may own up to one hundred percent

Incorporation of Business Entities-

The formation of corporations is governed by the Corporation Code.

Corporate existence and juridical personality commences from the

Once incorporation formalities are completed, the incorporators

Among the more important documents required to be filed with the

The cost of registering a corporation will depend on its capital

The original issue of shares of stock is also subject to a

Public Disclosure of Information Requirements

The SEC requires the submission of audited financial statements by

In addition, corporations are required to file annual information

All information filed by corporations is available at the SEC for

A partnership has a separate legal personality from that of each of

A partnership is the legal entity commonly used by professionals

Partnerships are not commonly used as business entities, other

However, the SEC may allow a corporation to become a partner in a

Sole proprietors must register with the Bureau of Trade Regulations

• Expiration of the period provided for in the articles of

• Enactment of a special law requiring dissolution

• A judicial decree of forfeiture

• Failure to organize and commence business within two

• Inoperative for five years after it has commenced

• Voluntary dissolution, judicial or extra-judicial

Corporate assets may be liquidated by the corporation itself

The interests of the shareholders in the remaining assets are in

As an alternative to dissolution, a financially distressed company, or

Thus court proceedings can be tedious and lengthy, and do not

Foreign Exchange Policy (Bangko

Reformatory measures to deregulate the Philippine foreign

Trading Foreign Exchange in the