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A. Income tax
Who is liable. Resident citizens are subject to tax on worldwide income. Nonresident citizens, resident aliens and nonresident aliens are subject to tax on income from Philippine sources.
Under Section 22E of the Tax Code, the term “nonresident citi zen” means a citizen who meets one of the following conditions:
• Establishes to the satisfaction of the Commissioner of Internal Revenue the fact of his or her physical presence abroad with a definite intention to reside therein
• Leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis
• Works and derives income from abroad and whose employment requires him or her to be physically present abroad most of the time during the taxable year
• Has been previously considered as a nonresident citizen and who arrives in the Philippines at any time during the taxable year to reside permanently in the Philippines, with respect to his or her income derived from sources abroad until the date of his or her arrival in the Philippines
The term “most of the time during the taxable year” generally means presence abroad for more than 183 days during the year. However, in determining a Filipino citizen’s residency status, the Bureau of Internal Revenue (BIR) considers other factors such as assignment term, location of payroll, assignee’s employment status in the Philippines and residency status in the host country. As the BIR’s interpretation may change from time to time, consultation with a tax advisor is highly recommended.
For foreign nationals, residence is determined by the length and nature of an individual’s stay in the Philippines. An alien who comes to the Philippines for a definite purpose that is promptly accomplished is not deemed to be resident. However, if an alien makes his or her home temporarily in the Philippines because an extended stay may be necessary for the accomplishment of the alien’s purpose for coming to the Philippines, the alien becomes a
resident even though it may be the alien’s intention at all times to return to the alien’s domicile abroad when the alien consummates or abandons the purpose of the stay in the Philippines. Aliens who reside in the Philippines with the intention to remain permanently are considered resident. Aliens who acquire residence in the Philippines remain residents until they depart with the intention of abandoning that residence.
Nonresident aliens are classified as either engaged or not engaged in trade or business in the Philippines. A nonresident alien who stays in the Philippines for more than a total of 180 days during any calendar year is deemed to be engaged in trade or business in the Philippines; any other nonresident alien is deemed to be not engaged in trade or business in the Philippines.
A ruling issued by the BIR stated that in applying the above rules to nonresident aliens, all the months in a calendar year covered by the period of assignment of the nonresident alien individual must be considered in evaluating if he or she exceeded the 180day period. If an expatriate’s stay in the Philippines exceeds the 180-day period during any calendar year, he or she becomes a nonresident alien doing business in the Philippines for the entire duration of his or her Philippine assignment. As a result, if an expatriate stays in the Philippines for more than 180 days in any calendar year, he or she is considered a nonresident alien engaged in a trade or business and taxed at the graduated rates of 0% to 35% (as a result of the implementation of Republic Act No. 10963), not only during the year that his or her stay in the Philippines exceeds the 180-day period, but also during the other years of assignment, even if such stay did not exceed 180 days (BIR Ruling DA-056-05).
Income subject to tax. Gross income includes compensation, income from the conduct of a trade, business or profession, and other income, including gains from dealings in property, interest, rent, dividends, annuities, prizes, pensions and partners’ distribu tive shares.
The following income items are excluded from gross income (the Tax Code refers to these items as “exclusions”) and are, conse quently, exempt from taxation:
• Thirteenth month pay, productivity incentives, Christmas bonuses and other benefits, up to an aggregate of PHP90,000
• Proceeds of life insurance policies
• Amounts received by an insured as a return of premium
• Gifts, bequests and devises
• Compensation for injuries or sickness from accident or health insurance or under the Workers’ Compensation Acts
• Income exempt under treaty provisions
• Retirement benefits received pursuant to certain laws or under a reasonable private benefit plan
• Amounts received as a consequence of separation from service as a result of death, sickness, physical disability or any cause beyond the control of the employee
• Social security benefits, retirement gratuities and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the
Philippines from foreign government agencies and other public or private institutions
• Payments or benefits due or to become due to individuals resid ing in the Philippines under US laws administered by the US Veterans Administration
• Benefits received from or enjoyed under the social security systems
• Prizes and awards in recognition of religious, charitable, scien tific, educational, artistic, literary or civic achievement, as well as awards in authorized sports competitions
• Mandated contributions to the government and private social security systems and housing fund
• Gains from the sale of bonds, debentures or other certificates of indebtedness with a maturity of longer than five years
• Gains from redemptions of shares in a mutual fund
Employment income. Employment income includes all remuner ation for services performed by an employee for his or her employer under an employer-employee relationship. The name by which compensation is designated is immaterial. It includes sal aries, wages, emoluments and honoraria, allowances, commissions, fees including director’s fees for a director who is also an employee of the firm, bonuses, fringe benefits, taxable pensions and retirement pay and other income of a similar nature. Emer gency cost-of-living allowances received by employees are also included in their compensation income.
Employment income received for services provided in the Philip pines is subject to tax in the Philippines regardless of where the compensation is paid. Remuneration for services remains classi fied as compensation even if paid after the employer-employee relationship is ended.
Taxable employment income equals employment income less exclusions. With the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act (Republic Act [RA] No. 10963), personal and additional exemptions and premium payments on health and/or hospitalization insurance are no longer considered as deductions from employment income of citizen and resident alien taxpayers. As a result, beginning with the 2018 tax year, these deductions may no longer be deducted from employment income to arrive at taxable employment income. Nonresident aliens not engaged in trade or business in the Philippines remain taxable on their gross income.
Fringe benefits are any goods, services or other benefits granted in cash or in kind by employers to employees (except rankand-file employees, as defined) such as, but not limited to, the following:
• Housing
• Expense account
• Any vehicles
• Household personnel, such as maids, drivers and others
• Interest on loan at less than market rate to the extent of the dif ference between the market rate and actual rate granted
• Membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations
• Expenses for foreign travel
• Holiday and vacation expenses
• Educational assistance to the employee or his or her dependents
• Life or health insurance and other non-life insurance premiums or similar amounts in excess of the amounts allowed by law
Under the tax law, the following fringe benefits are exempt from tax:
• Fringe benefits that are authorized and exempt from tax under special laws
• Contributions of employers for the benefit of employees to retirement, insurance and hospitalization benefit plans
• Benefits granted to the rank-and-file employees (as defined), regardless of whether they are granted under a collective bar gaining agreement
• De minimis benefits (see below)
• Fringe benefits required by the nature of, or necessary to, the trade, business or profession of the employer
• Fringe benefits granted for the convenience or advantage of the employer
De minimis benefits are items furnished or offered by employers to their employees that are of relatively small value and are offered or furnished by the employers as a means of promoting the health, goodwill, contentment, or efficiency of their employ ees. De minimis benefits are expressly exempt from income tax as well as from fringe benefits tax (FBT).
The following are de minimis benefits:
• Monetized unused vacation leave credits of private employees not exceeding 10 days during the year and the monetized value of the vacation and sick leave credits paid to govern ment officials and employees
• Medical cash allowance to dependents of employees, not exceeding PHP1,500 per employee per semester or PHP250 per month
• Actual medical assistance not exceeding PHP10,000 per year
• Laundry allowance not exceeding PHP300 per month
• Employees’ achievement awards, which must be in the form of tangible personal property other than cash or gift certificates, with an annual monetary value not exceeding PHP10,000, received by the employee under an established written plan that does not discriminate in favor of highly paid employees
• Gifts given during Christmas and major anniversary celebra tions not exceeding PHP5,000 per employee per year
• Daily meal allowance for overtime work not exceeding 25% of the basic minimum wage on a per-region basis (the basic mini mum wage rate is not the same across jurisdictions within the Philippines because such rates are determined by a Wage Board on a per region [city or province] basis)
• Rice subsidy of PHP2,000 or 1 sack of 50 kilograms of rice per month amounting to not more than PHP2,000
• Uniform and clothing allowance not exceeding PHP6,000 per year
• Benefits received by an employee in accordance with a collec tive bargaining agreement (CBA) and productivity incentive schemes, if the total combined annual monetary value received from the CBA and the productivity incentive schemes do not exceed PHP10,000 per employee per tax year
The above list is exclusive. All other benefits granted by employ ers that are not included in the above list are not considered de minimis benefits, and accordingly are subject to income tax, withholding tax on compensation, and FBT (Revenue Regulations [RR] No. 5-2011), as amended by RR No. 11-2018 with the introduction of the TRAIN Act.
Fringe benefits are subject to FBT if the cost of the benefit is borne or claimed as an expense by the Philippine entity and if the recipient of the benefit is a non-rank-and-file employee. If the cost is not borne by the Philippine entity or if it is borne by the Philippine entity but received by a rank-and-file employee, the benefit is classified as compensation income subject to income tax and accordingly withholding tax on wages. As mentioned above, de minimis benefits are exempt from both FBT and income tax or withholding tax on wages.
Business income. Gross income from the conduct of a trade or business or the exercise of a profession may be reduced by certain allowable deductions.
Resident or local suppliers of goods and services, including non resident aliens engaged in trade or business in the Philippines, are subject to a 1% creditable expanded withholding tax on their sales of goods and to a 2% creditable expanded withholding tax on their sales of services, if the payer is among the top withhold ing agents as classified by the BIR. Expanded withholding tax is a withholding tax that is prescribed for certain payers and that is creditable against the income tax due of the payee for the relevant tax quarter or year (RR No. 11-2018, as amended by RR No. 14-2018).
Professional fees paid to individuals are subject to a 10% credit able expanded withholding tax (EWT) if the individual earns gross income of more than PHP3 million during the year or if the individual is VAT-registered regardless of the amount of his or her gross income. If an individual has gross income during the year of PHP3 million or less, the professional fees are subject to a creditable EWT of 5% (RR No. 11-2018, as amended by RR No. 14-2018).
Directors’ fees. Directors’ fees derived by individuals who are employees of the same company are taxed as income from employ ment and are subject to creditable withholding tax on wages. Directors’ fees derived by individuals who are not employees of the same company are included in the recipients’ business income and are subject to a creditable withholding tax. The rate of the withholding tax is 10% if the gross income for the current year exceeds PHP3 million. Otherwise, the rate is 5%. Directors’ fees derived by nonresident aliens deemed to be not engaged in a trade or business are subject to a final withholding tax at a rate of 25% (RR No. 11-2018).
Investment income. In general, interest on peso deposits and yields, or any other monetary benefit derived from deposit substitutes, trust funds and similar arrangements, is subject to a final 20% withholding tax. However, interest on certain long-term deposits or investments evidenced by qualifying certificates is exempt from the final 20% withholding tax. Final tax is imposed at rates
ranging from 5% to 20% on the income from long-term deposits if the investment is withdrawn before the end of the fifth year. Interest received by residents on foreign-currency deposits is subject to a final 15% withholding tax. Interest received by non resident individuals on foreign-currency deposits is exempt from tax (RR No. 11-2018).
Cash or property dividends actually or constructively received by citizens and resident aliens from domestic corporations, as well as a partner’s share in the after-tax profits of a partnership (except a general professional partnership), are subject to final withhold ing tax at a rate of 10% (RR No. 11-2018). Nonresident aliens engaged in a trade or business in the Philippines are subject to final withholding tax on these types of income at a rate of 20%. For nonresident aliens not engaged in a trade or business in the Philippines, investment income is generally taxed at a rate of 25%, except for gains from sales of real estate and sales of shares of domestic corporations.
Rental income is considered business income and is taxed at the rates set forth in Rates
Taxation of employer-provided stock options. In general, employerprovided stock options are taxable to the employee as additional compensation or fringe benefit at the time the option is exercised. Revenue Memorandum Circular (RMC) No. 79-2014 provides for the tax treatment of employee income arising from the grant, exercise and sale of stock options. It states that for both Equity Settlement Options and Cash Settlement Options, the difference between the book value or fair market value of the shares, whichever is higher, at the time the stock option is exercised, and the price fixed on the grant date shall, on exercise of the option, be treated in the following manner:
• Additional compensation subject to income tax and to with holding tax on compensation, if the option is granted by an employer to a rank-and-file employee involving the employer’s own shares of stock or shares owned by it
• A fringe benefit subject to FBT, if the employee receiving and exercising the option occupies a supervisory or managerial position
The RMC also imposed reportorial requirements on the issuing corporation with respect to the grant and exercise of options.
Capital gains and losses. In general, capital gains are included in an individual’s regular taxable income and are subject to tax at the graduated rates set forth in Rates. The gain is the excess of the amount realized from the disposal of the asset over the adjusted basis. If the asset is held for 12 months or less prior to disposal, the entire gain or loss is reported. For assets held longer than 12 months, 50% of the gain or loss is reported. The holding period rules do not apply to capital gains derived from the sale of real property in the Philippines or shares of stock in a domestic corporation (see below).
Capital losses are deductible only to the extent of capital gains. Losses carried over are treated as short-term capital losses. Losses incurred from wash sales of stocks or securities are not deductible, unless incurred by a dealer in the ordinary course of business. This
rule does not apply to shares of stock in a domestic corporation or to sales of real property described below.
A final tax of 6% is imposed on capital gains derived from trans fers of real property located in the Philippines. The tax is based on the higher of the gross sales price and the fair market value.
Capital gains derived from the sale of shares in unlisted domestic corporations are taxed at a rate of 15%. The amount of the tax able gain is the excess of the sale price over the cost of the shares. In cases of transfers for less than an adequate and full consider ation in money or money’s worth, the amount by which the fair market value exceeded the value of the consideration is deemed to be a gift and is included in computing the amount of gifts made during the calendar year. However, transfers below consideration that are made in the ordinary course of business (a transaction that is bona fide, at arm’s length, and free from any donative intent) is considered to be made for an adequate and full consid eration in money or money’s worth.
Gains derived from the sale of listed shares are exempt from cap ital gains tax. However, a percentage tax (stock transaction tax) is imposed at a rate of 0.6% on the gross selling price of the shares.
Gains derived by resident citizens from the sale of shares in for eign corporations are taxed as capital gains, subject to the regular income tax rates.
Deductions
General. As mentioned above in Employment income, the TRAIN Act removed personal and additional exemptions as deductions from gross taxable compensation income, effective from 1 January 2018. Individuals who earn income from a trade, business or the practice of a profession may deduct expenses incurred in connection with their trade, business or profession subject to Philippine income tax. These expenses include ordinary and necessary business or professional expenses, interest expense, taxes, losses, bad debts, depreciation, charitable contributions, contributions to a pension trust, and research and development. Alternatively, such taxable individual (except a nonresident alien not engaged in trade or business) may elect the optional standard deduction (OSD) of 40% of gross income instead of the itemized deductions. A taxpayer must signify his or her intention to claim the OSD in the annual tax return; otherwise, the taxpayer is deemed to have claimed the itemized deductions. After the election to claim the OSD is indicated in the return, it is irrevocable for the tax year for which the return is filed.
Contributions to government agencies. Employees age 60 or younger and their employers are compulsorily covered by the Social Security System (SSS). Individuals who are covered by the SSS are compulsorily covered by the Philippine National Health Insurance Program (PhilHealth) and the Home Development Mutual Fund (HDMF). Compulsory contributions to the SSS, PhilHealth and HDMF are deductible from the gross income of an individual. Voluntary contributions to these institutions in excess of the amount considered compulsory are not deductible and, accordingly, not exempt from income tax and withholding tax.
For the 2021 calendar year, the employee’s total maximum com pulsory monthly contribution to these entities amounts to PHP2,125 (SSS: PHP1,125; PhilHealth: PHP900; HDMF: PHP100). Employers’ maximum monthly contributions to these entities amount to PHP3,155 (SSS: PHP2,155; PhilHealth: PHP900; HDMF: PHP100). The monthly contribution varies depending on the salary bracket of the individual.
The social security contributions mentioned above increased in January 2021 as provided in SSS Circular No. 2020-033. Also, HDMF issued Circular No. 421 in January 2019 informing employers to stop deducting contributions from all expatriates employed by them. This repeals Item B, Section (1)(1.1)(1.1.5) of HDMF Circular No. 274 issued in January 2010.
PhilHealth has introduced new guidelines for Overseas Filipinos with the issuance of PhilHealth Circular No. 2020-0014, dated 2 April 2020, increasing the premium rates applicable from 2.75% in 2019 to 3% in 2020. However, the measure is suspended temporarily.
Rates. Net taxable compensation and business income of resident and nonresident citizens, resident aliens, and nonresident aliens engaged in a trade or business are consolidated and taxed at the following graduated rates.
Net taxable income
Tax on lower Rate on Exceeding Not exceeding amount excess PHP PHP PHP % 0 250,000 0 0 250,000 400,000 0 20 400,000 800,000 30,000 25 800,000 2,000,000 130,000 30 2,000,000 8,000,000 490,000 32 8,000,000 2,410,000 35
Effective from 1 January 2023, the following will be the gradu ated rates.
Net taxable income
0 250,000 400,000 0 15 400,000 800,000 22,500 20 800,000 2,000,000 102,500 25 2,000,000 8,000,000 402,500 30 8,000,000 2,202,500 35
Tax on lower Rate on Exceeding Not exceeding amount excess PHP PHP PHP % 0 250,000
The preferential income tax rate of 15% on gross income for aliens and Filipinos employed by regional or area headquarters (RHQs) and regional operating headquarters (ROHQs) of multi national companies occupying a managerial or technical position, including those in offshore banking units (OBUs) and petroleum service contractors and subcontractors, is no longer applicable without prejudice to the application of preferential tax rates under existing international tax treaties. Beginning 1 January 2018, all employees of RHQs and ROHQs of multinational com panies, offshore banking units and petroleum service contractors and subcontractors are subject to the regular income tax rate
under Section 24(A)(2)(a) of the Tax Code, as amended (RR No. 8-2018).
Individuals earning income only from self-employment, business and/or the practice of a profession, whose gross sales or receipts and other nonoperating income do not exceed the value-added tax (VAT) threshold of PHP3 million have the option to be subject to an 8% final tax instead of the graduated income tax rates under Section 24(A) and the percentage tax under Section 116, respectively, of the Tax Code, as amended. The taxpayer must notify the tax authorities of his or her intention to elect the 8% income tax rate option in the first-quarter return of the tax year. If the taxpayer fails to do so, the graduated tax rates apply. The income tax rate option, once elected, is irrevocable for the tax year in which it is made. VAT-registered taxpayers whose gross sales or receipts exceeded the VAT threshold are automatically subject to the graduated income tax rates.
In calculating the FBT, the monetary value of the benefit is taken into consideration. The monetary value depends on the type of benefit granted, as well as on the manner in which the benefit is extended to the employee. For example, if the employer purchases a motor vehicle for the use of the employee (who is assumed to be a non-rank-and-file employee), the value of the benefit is the ac quisition cost of the vehicle. The monetary value of the fringe benefit is the entire value of the benefit (meaning the entire acquisition cost). If the employer leases and maintains a fleet of motor vehicles for the use of the business and the employees, the value of the benefit is the amount of rental payments for motor vehicles not normally used for sales, freight, delivery, service and other non-personal uses. The monetary value of the benefit is 50% of the value of the benefit (rental payment). The BIR has issued specific regulations on the treatment of fringe benefits.
After the monetary value is determined, it is then grossed up and subjected to the applicable FBT rate.
The FBT rates and the gross-up factors are shown in the follow ing table.
Factor used in determining the grossed-up FBT monetary rate value
Type of employee
Resident citizen, resident alien or nonresident alien engaged in a trade or business in the Philippines
%
65
Nonresident alien not engaged in a trade or business in the Philippines 25 75 Alien employed by or Filipino employee occupying a managerial or technical position in regional or area headquarters of multinational companies, offshore banking units and petroleum contractors and subcontractors
Although the FBT is a tax on the employee, the actual payment of the tax is borne by the employer. This method is used to ensure that all benefits received by employees are subject to tax. During the deliberations of the Philippine Congress regarding the adop tion of the FBT, it noted that many executives were able to avoid taxation by being paid fringe benefits rather than straight sala ries. The collection of FBT from employers is intended to plug this loophole.
For nonresident aliens engaged in a trade or business in the Philippines, dividends, shares in profits of partnerships taxed as corporations, interest, royalties, prizes in excess of PHP10,000 and other winnings (including Philippine Charity Sweepstakes Office winnings) are subject to final withholding tax at a rate of 20% of the gross amount. Royalties on musical compositions, books and other literary works are subject to a final withholding tax at a rate of 10%. Nonresident aliens are taxed on capital gains derived from sales of real property or shares in domestic corpora tions in the manner discussed in Capital gains and losses.
Nonresident aliens not engaged in a trade or business in the Philippines are subject to a final withholding tax of 25% on gross income, including fringe benefits, from all sources in the Philippines. However, capital gains derived from sales of real property or from sales of shares in domestic corporations are subject to the same tax rates imposed on citizens and resident aliens.
Relief for losses. Under certain circumstances, self-employed persons may carry forward business losses for three years, unless a 25% change in the ownership of the business occurs. Carrybacks are not permitted.
B. Estate and gift taxes
Estate tax. An estate tax is imposed at a fixed rate of 6% on the transfer of a decedent’s net estate. Citizens, regardless of whether resident at the time of death, and resident aliens are taxed on their worldwide estates.
An estate tax return must be filed by the executor or administra tor, or any of the legal heirs, if any of the following circum stances exist:
• Transfers that are subject to estate tax.
• Regardless of the gross value of the estate, the estate consists of registered or registrable property such as real property, motor vehicles, shares of stock or other similar property for which a clearance from the BIR is required as a condition precedent for the transfer of ownership thereof in the name of the transferee.
If the estate tax return shows a gross value exceeding PHP5 mil lion, it must be supported with a statement certified by a certified public accountant.
For estate tax purposes, only that part of a nonresident alien decedent’s estate located in the Philippines is included in the taxable estate. Under specified conditions, deductions may be permitted for certain items, including expenses, losses, indebtedness, taxes and the value of property previously subject to estate or gift tax or of property transferred for public use.
The net estate is computed by deducting the following amounts from the total value of a decedent’s real or personal, tangible or intangible, property, wherever situated:
• Claims against the estate, claims against insolvent persons, and unpaid mortgages or indebtedness on property
• The value of property transferred for public use
• The value of property subject to estate or gift tax (subject to special rules) within five years prior to a decedent’s death
• The value of the family home, not exceeding PHP10 million
• The amount received from the decedent’s employer as a result of the death of the employee
In addition, estates of residents or citizens are entitled to a stan dard deduction of PHP5 million as well as a deduction of up to PHP500,000 for medical expenses incurred by the decedent within one year prior to death.
In the case of married decedents, the surviving spouse’s net share in the conjugal partnership property may also be deducted from the net estate.
To prevent double taxation of estates, the Philippines has con cluded an estate tax treaty with Denmark.
Gift tax. Residents and nonresidents are subject to gift tax, which is payable by the donor on total net gifts made in a calen dar year. Similar to estate taxation, citizens and resident aliens are subject to gift tax on worldwide assets. Nonresident aliens are subject to gift tax on their Philippine assets only.
In the calculation of the net taxable gift, the law allows the fol lowing items to be deducted from the total value of the donation:
• Encumbrance assumed by the donee
• Diminution of gift provided by the donor
• Gifts made to or for the use of the national government or any of its agencies
• Gifts to nonprofit organizations
The tax on the donor is imposed at a fixed rate of 6% of the total gifts in excess of the PHP250,000 exemption for gifts made dur ing the calendar year, regardless of whether the donee is a stranger.
C. Social security
Contributions. All individuals working in the Philippines must pay social security contributions. Effective 1 January 2021, the SSS implemented the New Schedule of Regular Social Security, Employee’s Compensation and Mandatory Provident Fund Contributions (SSS Circular No. 2020-033), following the enact ment of RA 11199 or the Social Security Act of 2018, which increased the social security contribution rate to 13%. The employee’s contribution is approximately 4% of salary and is withheld by the employer. The employer’s contribution is approximately 8.5% of the employee’s salary. Coverage is mandatory for self-employed persons and Overseas Filipino Workers (OFWs). The Mandatory Provident Fund (MPF) is similar to regular contributions in that it is shared by the employer and employee, and shouldered solely by the selfemployed, voluntary, or OFW member. The minimum monthly salary subject to social security contributions is PHP1,000. The
minimum monthly salary credit (MSC) is PHP3,000 and the maximum MSC is PHP25,000. The maximum monthly contributions are PHP2,155 (PHP1,730 regular SSS and PHP425 MPF) for employers and PHP1,125 (PHP900 regular SSS and PHP225 MPF) for employees, which apply to employees receiving monthly compensation of PHP24,750 or more.
As mentioned in Contributions to government agencies in Section A, employees covered by the SSS also must contribute to the PhilHealth and HDMF. Beginning in 2018, employer and employee contributions to HDMF for foreign nationals who live and work in the Philippines are no longer required.
For 2020, the employee’s PhilHealth contribution is 1.5% of monthly basic salary and is withheld by the employer. The employer’s contribution is 1.5% of an employee’s monthly basic salary. The employer and employee’s maximum PhilHealth con tribution is PHP900 each (capped at PHP60,000 income). The contribution increases 0.5% per year beginning in 2021. Therefore, for 2021, the combined employer and employee con tributions are increased from 3% to 3.5% or combined contribu tions of PHP2,450 (capped at PHP70,000 income). However, the increase in the PhilHealth contribution for 2021 is currently suspended.
Bilateral social security agreements. The Philippines has entered into bilateral social security agreements with the following jurisdictions.
Austria Japan (b) Quebec Belgium Korea (South) (c) Spain Canada Luxembourg (d) Sweden (f) Denmark Netherlands (e) Switzerland France Portugal United Kingdom Germany (a)
(a) This agreement entered into force on 1 June 2018. (b) This agreement entered into force on 1 August 2018. (c) This agreement was signed 25 November 2019. (d) This agreement entered into force on 1 January 2020. (e) The agreement with the Netherlands is limited to mutual administrative assis tance (for example, income validation and life certification [a document that helps attest or prove that the pensioner is alive and accordingly still entitled to the benefit or pension]). The agreement does not cover a Certificate of Continuing Liability (a certification issued by the SSS regarding continuing coverage under the Philippine SSS in relation to a bilateral agreement that the Philippines has with the country of temporary assignment or employment). (f) This agreement will enter into force on the exchange of diplomatic notes of ratification.
D. Tax filing and payment procedures
The tax year in the Philippines is the calendar year. An income tax return must be filed, and the tax due paid, on or before 15 April for income derived in the preceding year. If the tax due exceeds PHP2,000, it may be paid in two equal installments, the first at the time of filing the return and the second on or before 15 October following the end of the relevant tax year. If the dead line falls on a Saturday, Sunday or holiday, the return is due the next business day. Filing and payment extensions are not allowed. Failure to file the income tax return and pay the taxes by the due date, if required, exposes the taxpayer to a 25% surcharge,
interest and a compromise penalty not exceeding PHP50,000. The amount of interest to be paid is computed based on double the legal interest rate for loans or forbearance of any money, in the absence of an express stipulation, set by the Bangko Sentral ng Pilipinas from the date prescribed for payment until the amount is fully paid. Currently, this rate is 12%.
In prior years, the BIR allowed the manual filing of income tax returns. However, with the issuance of RR No. 5-2015, which amends RR No. 6-2014, it is now mandatory for taxpayers enu merated under RR No. 6-2014 to use the eBIR Forms facility. This means that the tax returns, including individual income tax returns (BIR Forms 1700 and 1701), must be prepared using eBIR Forms. This provision is supported by RMC 28-2017, which reiterates the mandate of electronic filing of tax returns. Such RMC provides the guidelines on how and where to file the returns, and which attachments are required to be filed with the tax return. RMC No. 25-2020 provides further guidelines on the payment options available for taxpayers filing through the eBIR Forms facility. A penalty of PHP1,000 is imposed for each return not filed electronically if electronic filing is required. The taxpayer is also liable for a civil penalty amounting to 25% of the tax due to be paid for filing a return in a manner not in compli ance with existing regulations, thus tantamount to wrong-venue filing. Other individual taxpayers who do not fall in the catego ries in RR No. 6-2014 or are exempted may still file manually by using the printed BIR Form or using the form generated from the Offline eBIR Forms either manually or electronically by online submission or e-Filing.
The Philippines has the Pay-As-You-File system. Tax payments can be made over the counter on manual filing of the tax return or electronically using the online banking facilities of some banks. Tax payments also can be made through credit cards or GCash.
Minimum wage earners (MWEs) who work in the private sector and are paid the Statutory Minimum Wage (SMW), as fixed by the Regional Tripartite Wage and Productivity Board (RTWPB)/ National Wages and Productivity Commission (NWPC), applicable to the locations where they are assigned, are not subject to income tax and, consequently, to withholding tax on compensation. Likewise, employees in the public sector with compensation income of not more than the SMW in the nonagricultural sector, as fixed by RTWPB/NWPC, applicable to the locations where they are assigned, are also exempt from withholding tax on compensation.
Holiday pay, overtime pay, night shift differential pay and hazard pay earned by the MWEs mentioned above are also covered by the above exemption.
Employees do not qualify as MWEs if they earn additional com pensation such as commissions, honoraria, fringe benefits, ben efits in excess of the allowable statutory amount of PHP90,000, taxable allowances and other taxable compensation. Such addi tional compensation does not include the SMW, holiday pay, overtime pay, hazard pay and night shift differential pay.
Consequently, such employees’ entire earnings are subject to income tax and, accordingly, withholding tax.
MWEs receiving other income, such as income from the conduct of trade, business, or practice of profession, except income subject to final tax, in addition to compensation income are not exempt from income tax on their entire income earned during the tax year. Notwithstanding this rule, such MWEs are exempt from withholding tax on the SMW, holiday pay, overtime pay, night shift differential pay and hazard pay.
Individuals deriving business income may credit against income tax due the creditable expanded withholding tax withheld from the income by the payers of the income (see Section A).
Although spouses may compute their individual income tax liabil ities separately based on their respective total taxable incomes, they must file joint returns. However, spouses (both husband and wife) that would qualify under the “substituted filing” of income tax returns (see below) may not be required to file income tax returns.
For the sale of shares not traded through a local stock exchange and the sale of real property considered to be a capital asset, the filing and payment of the tax due must be made within 30 days after the sale or disposition, using BIR Forms Nos. 1707 and 1706, respectively. For the sale of real property considered to be an ordinary asset, the remittance of tax withheld must be made on or before the 10th day following the month of the transaction, using BIR Form No. 1606.
The BIR has implemented a “hassle-free” method of filing indi vidual income tax returns (BIR Form No. 1700). Under certain circumstances, this method recognizes the employer’s annual information return (BIR Form No. 1604CF) as the “substitute” income tax return filed by the employee, because the employer’s return contains the information (amount of income payment, the tax due and tax withheld) included in an income tax return ordi narily filed by the employee. Under “substituted filing,” an indi vidual taxpayer who is required under the law to file an income tax return does not need to personally file an income tax return, and the employer’s filed annual information return is considered the “substitute” income tax return of the employee. On or before 31 January of the year following the tax year, the employer must issue BIR Form No. 2316 to the employee. This form must be certified by both parties under the penalty for perjury.
A taxpayer may qualify under the substituted filing method of the BIR provided that all of the following qualifications and require ments are met:
• The employee receives purely compensation income during the taxable year.
• The employee receives income from only one employer in the Philippines during the taxable year.
• The amount of tax due from the employee at the end of the year is fully covered by the amount of tax withheld by the employer.
• The employee is not classified as a nonresident alien engaged in trade or business (that is, the employee is a citizen or a resi dent alien). In practice, to be considered as a resident alien, his or her Philippine assignment should exceed two years.
• If the employee is married, his or her spouse also complies with all three aforementioned conditions, or otherwise receives no income.
• The employer files BIR Form No. 1604CF.
• The employee has BIR Form No. 2316 or BIR Form No. 2306 issued by his employer.
Under RR No. 2-2015, the employer is required to scan the dupli cate copies of BIR Form No. 2316 and save them in a digital versatile disk-recordable (DVD-R disk) and submit them to the BIR no later than 28 February following the end of the calendar year. RMC No. 24-2019 mentions that a universal storage bus (USB) memory stick or other similar storage devices may be used in the absence of DVDs, provided that the scanned copies of the forms are made in an uneditable format.
The following individuals do not qualify for substituted filing:
• Individuals deriving compensation income from two or more employers during the calendar year
• Employees deriving compensation income during the calendar year from whom the tax due is not equal to the tax withheld, resulting in a collectible or refundable return
• Individuals deriving other income, in addition to compensation that was not subjected to final tax
• Individuals deriving purely compensation income from only one employer and said income has been correctly subjected to withholding tax, but said individual’s spouse is not entitled to substituted filing
• Nonresident aliens engaged in trade or business in the Philippines
For income subject to final withholding tax, the taxpayer is not required to file a tax return if such income is his or her sole income from the Philippines. The withholding agent is responsi ble for reporting the income and remitting the tax withheld.
E. Double tax relief and tax treaties
Foreign taxes paid or incurred in connection with a taxpayer’s profession, trade or business may be deducted from gross income, subject to exceptions. Resident Filipino citizens may claim a credit for income tax due to any foreign country; the credit may not exceed the Philippine income tax payable on the same income multiplied by a fraction, the numerator of which is tax able income from foreign countries and the denominator of which is worldwide taxable income.
The Philippines has entered into double tax treaties with the fol lowing jurisdictions.
Australia Indonesia Romania
Austria Israel Russian Bahrain Italy Federation
Bangladesh Japan Singapore
Belgium Korea (South) Spain
Brazil Kuwait Sri Lanka (b)
Canada Malaysia Sweden
China Mainland Mexico (a) Switzerland
Czech Republic Netherlands Thailand (c)
Denmark New Zealand Turkey
Finland Nigeria United Arab
France Norway Emirates
Germany Pakistan United Kingdom
Hungary Poland United States India Qatar Vietnam
(a) The treaty with Mexico entered into force on 18 April 2018 and took effect on 1 January 2019 with respect to income arising from sources in the Philippines.
(b) The treaty with Sri Lanka entered into force on 14 March 2018 and took effect on 1 January 2019 with respect to income arising from sources in the Philippines.
(c) The treaty with Thailand has been renegotiated. The renegotiated treaty entered into force on 5 March 2018 and took effect on 1 January 2019 with respect to income arising from sources in the Philippines.
The Philippines is negotiating tax treaties with Brunei Darussalam, Cambodia, Iran, Laos, Myanmar, Oman, Papua New Guinea, Saudi Arabia (air transport only) and Tunisia.
Benefiting from tax treaty relief in the Philippines is not auto matic. A Tax Treaty Relief Application Form (TTRA) must be filed with the International Tax Affairs Division (ITAD) of the BIR at least 15 days before the transaction, in accordance with the provisions of Revenue Memorandum Order (RMO) No. 1-2000. This requirement was further reiterated in RMO No. 72-2010, which states that the TTRA and the supporting documents must be submitted and received by the ITAD. If they are filed with any other office, the application is considered improperly filed. The submission must be done before “the first taxable event,” which is defined as the “first or the only time when the income payor is required to withhold the income tax thereon or should have with held taxes thereon had the transaction been subjected to tax.” Consequently, the TTRA must be filed before the first income payment is made.
However, in the case of Deutsche Bank AG Manila v. Commissioner of Internal Revenue (G.R. No. 188550, 19 August 2013), the Supreme Court of the Philippines ruled that a failure to comply with the requirement under RMO No. 1-2000 — that is, to file a TTRA 15 days in advance — should not deprive the taxpayer of the benefit of the tax treaty. Nevertheless, it is advisable to file a TTRA for protection purposes, such as in the event of a BIR audit, and for confirmation of the tax implications of the relevant trans action.
The BIR has adopted a self-assessment system and the automatic withholding of taxes on nonresidents deriving dividends, interest and royalties from sources in the Philippines at the applicable tax treaty rates. The guidelines are contained in RMO No. 8-2017, dated 24 October 2016. They were issued to provide new proce dures for claiming preferential tax treaty benefits. These proce dures were originally contained in RMO No. 72-2010. These new procedures provide that a TTRA should no longer be filed with the ITAD. Instead of filing the TTRA, the withholding agents apply and use outright the preferential treaty tax rates for divi dends, interests and royalties on submission of a Certificate of Residence for Tax Treaty Relief (CORTT) form by the nonresi dent to the ITAD and Revenue District Office No. 39 within 30 days after payment of final withholding tax (FWT). Failure to submit a CORTT form to the withholding agent or income payer
means that the nonresident is not claiming any tax treaty relief and therefore such income is subject to the normal rate.
For income other than dividends, interest and royalties, the provi sions in RMO No. 72-2010 continue to apply, and obtaining a ruling continues to be required.
F. Types of visas
Not all foreign nationals desiring entry to the Philippines are required to submit a medical certificate to the Philippine embas sy when applying for an entry visa, or to the immigration officer at the border upon arrival. However, nationals of certain countries (see the list below), particularly those who arrived in the Philippines on or after June 2014 and are applying for specified visas (these visas are listed in Annex B of Operations Order No. SBM-2014-059-A), are required to obtain a medical clearance from the Bureau of Quarantine (BOQ). The BOQ provides such clearance on the presentation of a medical report resulting from a medical examination conducted by a duly authorized physician.
The following is the list of jurisdictions whose nationals are required to obtain the above medical clearance (this list is con tained in Annex A of Operations Order No. SBM-2014-059-A).
Afghanistan Equatorial Nigeria Angola Guinea Pakistan Bangladesh Eritrea Papua New Benin Ethiopia Guinea Bolivia French Guiana Paraguay Brazil Gabon Peru Burkina Faso Gambia Rwanda Burundi Ghana Senegal Cambodia Guinea Sierra Leone Cameroon Guinea-Bissau Somalia Central African Guyana Sudan Republic Indonesia Suriname Chad Iraq Syria Colombia Israel Togo Congo (Democratic Kenya Trinidad and Republic of) Liberia Tobago Congo Mali Uganda (Republic of) Mauritania Venezuela Cote d’Ivoire Myanmar Vietnam Ecuador Niger
In general, foreign nationals who are not classified as restricted or high-risk may visit the Philippines without obtaining entry visas before departure from their point of origin if they have valid passports and onward tickets or confirmed travel tickets for a return journey. Restricted or high-risk nationals must secure an entry visa from Philippines embassies or consulates to enter the Philippines.
Unless specifically exempted or excluded by law, all foreign nationals seeking long-term (at least one year) employment in the Philippines, whether residents or nonresidents, must secure an Alien Employment Permit (AEP) from the Department of Labor and Employment (DOLE). This rule applies to nonresidents who
want to work in the Philippines, to nonresidents who were admit ted under non-working visas and are seeking employment, and to missionaries or religious workers who intend to engage in gainful employment. Executives of area or regional headquarters and offshore banking units are exempt from the AEP requirement (see Section G).
Non-immigrant visas. A foreign national may be granted a non immigrant visa as provided in Section 9 of the Philippine Immi gration Act under the following categories of admission status.
Temporary visitor’s visa under Section 9(a). Temporary visitor’s visas are available to individuals coming to the Philippines for business, pleasure or health reasons. Visa-required nationals may not enter the Philippines unless they obtain entry visas from a Philippine consulate before coming to the Philippines. Visa-free nationals are not required to obtain entry visas. In general, both are allowed an initial period of stay of up to 30 days. Business visitors are foreign nationals who intend to engage in commercial, industrial or professional commerce or in any other legiti mate activity if the activity is of a temporary nature (for example, attending conferences or conventions, negotiating contracts, or attending educational or business meetings). Writers, lecturers and theatrical performers are considered business visitors. Foreign nationals seeking employment of any kind in the Philippines do not qualify as temporary visitors for business, even if they intend to stay for a few months only.
Visitors who come for pleasure include tourists, those visiting relatives or friends, those who come for recreational and amuse ment purposes, and professional athletes who compete for prizes if they do not receive compensation or salary for their services. Foreign nationals requiring medical treatment in the Philippines are also classified in the Section 9(a) category.
Under the existing immigration rules, foreigners holding tempo rary visitor visas may extend their stay in the country on a 1-, 2- or 3-month basis (or even 6 months, subject to good justifica tion) for a total stay of 16 months. Extensions of stay beyond 16 months up to 24 months need the approval of the Chief of the Immigration Regulation Division (IRD) of the Bureau of Immigration (BI). Extensions of stay beyond 24 months need the approval of the Commissioner of the BI. Some persons take the view that this privilege applies only to visa-free nationals, and that individuals on the visa required list are allowed a maximum stay of six months only. As a result of this possible uncertainty, coordination with the officers of the BI is highly recommended.
Generally, Chinese and Indian nationals are required to secure an entry visa prior to traveling to the Philippines. However, Chinese nationals with a valid American, Japanese, Australian, Canadian or Schengen (AJACS) visa or permanent residency are granted visa-free entry for an initial authorized stay of seven days. This 7-day initial stay can be extended for another 14 days. Indian nationals holding a valid American, Japanese, Australian, Canadian, Schengen, Singapore or UK (AJACSSUK) visa or a permanent residence permit from the AJACSSUK-issuing states may enter the Philippines visa-free and stay for an initial 14 days, if traveling to the country for tourism purposes. This 14-day stay
can be extended up to another 7 days. Chinese and Indian nation als are granted the privilege of applying for permanent resident visas, subject to certain conditions.
Foreign nationals who will work in the Philippines on a shortterm basis (not exceeding six months) must secure a Special Work Permit (SWP). This is valid for three months. A second SWP, valid for three additional months, can be secured. An SWP can only be applied for twice in a calendar year. SWP holders should maintain a valid 9(a) visa at all times while in the country. On the day of filing an SWP application, foreign nationals should have at least 20 days of 9(a) visa validity left in his or her pass port, must be at least 25 years of age and must be able to provide supporting documents that show he or she holds expertise in the field to which he or she is temporarily assigned in the Philippines. Foreign nationals who will work in the Philippines for a period of more than six months must secure the appropriate work visa and, generally, an AEP.
Transient’s visa under Section 9(b). Section 9(b) of the Philippine Immigration Act defines a transient as a person passing in transit to a destination outside the Philippines. Transient visas may be obtained at Philippine consulates abroad.
Seamen’s visa under Section 9(c). Seamen and airmen may enter the Philippines as vessel or aircraft crew members only if their names appear on a crew list visa or if they possess an individual seamen’s visa.
International treaty trader/investor under Section 9(d). A treaty trader visa is granted to a foreign national coming to the Philippines solely to carry on substantial trade between the Philippines and his or her home country, or to direct and develop the activities of an enterprise in the Philippines in which he or she has invested, pursuant to the provisions of a treaty of commerce or navigation. An individual is considered a treaty investor if the individual seeks to enter the Philippines solely for the purpose of develop ing and directing the operations of an enterprise in the Philippines and if either of the following requirements is satisfied:
• The individual has invested in the enterprise, or is in the process of investing, a substantial amount of capital.
• The employer of the individual has invested, or is actively in the process of investing, a substantial amount of capital in the enterprise, such employer is a foreign person or organization of the same nationality as the individual, and the individual is serving in an overall supervisory or executive capacity.
For purposes of the above rule, a substantial amount of investment is at least USD30,000 for individuals and at least USD120,000 for corporations.
Treaty trader visas currently are granted only to nationals of Germany, Japan and the United States.
Diplomatic visa under Section 9(e). Pursuant to international con ventions and bilateral agreements, the government of the Philip pines accords varying degrees of privileges and immunities to various categories of foreign government officials coming to the country for official purposes.
Officials of the United States and its specialized agencies may be issued 9(e) visas, regardless of the officials’ citizenship or nationality. Officials of the United Nations and other interna tional organizations may be granted diplomatic visas under Section 9(e) on the basis of the United Nations’ laissez passer (UNLP or LP). The UNLP is a travel document issued by the UN under the provisions of Article VIII of the 1946 Convention on the Privileges and Immunities of the UN in its offices in New York and Geneva, as well as by the International Labour Organization.
Non-immigrant student visa under Section 9(f). Foreign nationals may secure student visas from the Philippine mission in their home country or they may apply to the BI to change or convert their admission status to Section 9(f). Foreign nationals with 9(f) visas may not change or convert their visas to another category unless they first depart from the country.
A student visa holder may not work or engage in any trade or occupation in the Philippines unless the completion of the degree requires it.
Prearranged employee visa under Section 9(g). Prearranged employee visas under Section 9(g) (9(g) visas) are issued to foreign nationals coming to the Philippines to engage in any lawful occupation, whether for wages or salary or for another form of compensation, if bona fide employer-employee relations exist. The visa is issued only when it has been established that no per son can be found in the Philippines willing and competent to perform the labor or service for which the foreign national is desired and that his or her admission would benefit the public interest. To prove the circumstances mentioned above, a Labor Market Test (LMT) is required. The LMT is done through the publication of the job vacancy in a newspaper of general circula tion.
These visas may also be granted to qualified dependents (legal spouse and unmarried children below 21 years of age) accompa nying the foreign nationals. Persons coming to perform unskilled manual labor in pursuance of a promise or offer of employment, express or implied, cannot be granted a 9(g) visa.
Applicants for a 9(g) visa whose undertaking in the Philippines will involve the practice of a profession that is regulated by the Professional Regulation Commission (PRC) must submit to the BI, together with all the other requirements for the 9(g) visa, a Special/Temporary Permit issued by the professional board gov erning his or her profession and the PRC.
The issuance of a 9(g) visa depends on the grant of an AEP (see Section G) by the DOLE. An AEP approval is not issued if a foreign national has not obtained a Taxpayer Identification Number (TIN) from the BIR. It takes approximately two to four months to process the 9(g) visa from TIN application until the release of the Alien Certificate of Registration (ACR) I Card (this is an identification card issued to foreign nationals who have registered with the BI for purposes of working in the Philippines). An application for a Provisional Work Permit is required to allow an individual to perform services while his or her application for the issuance of the 9(g) visa is pending.
A 9(g) visa may be renewed annually for a total period not exceeding five years. It appears that this is the maximum period for holding a 9(g) visa, because labor rules state that the validity of an AEP may not exceed five years. However, if it is reasonably expected that a foreign national’s employment in the Philippines will extend beyond five years, coordination with the DOLE is advisable before filing a petition for a further extension of the AEP.
Special non-immigrant visa. The Philippine Immigration Act, specifically Section 47(a)(2), as well as several special laws, provides for special non-immigrant visas. These types of visas grant the holder multiple-entry privileges, and in some cases, exemption from registration requirements of the BI.
47(a)(2) visa. Acting through the appropriate government agen cies, the President may allow the entry of foreign personnel for the following enterprises:
• Oil-exploration companies
• Philippine Economic Zones Authority (PEZA)-registered enterprises
• Board of Investment-registered enterprises
PD 1034 visa. A PD 1034 visa is granted to foreign personnel of entities licensed by the Central Bank of the Philippines (Bangko Sentral ng Pilipinas) to operate as offshore banking entities, as well as to the foreign employees’ qualified dependents.
EO 226 visa. An EO 226 visa is granted to foreign personnel of regional or area headquarters or regional operating headquarters of multinational companies. The visa is valid for three years and may be extended for an additional three years but, in practice, the validity period for the visa may vary. Foreign nationals admitted under this type of visa and their qualified family members are granted incentives under the omnibus investment laws, including exemption from the payment of all fees imposed under immigration laws, and from requirements for all types of clearance re quired by government departments or agencies, except on final departure from the Philippines.
Special visa for employment generation. The special visa for employment generation (SVEG) under EO No. 758 is a special visa issued to a qualified non-immigrant foreigner who will employ at least 10 Filipinos in a lawful and sustainable enter prise, trade or industry. Qualified foreigners who are granted the SVEG are considered special non-immigrants with multipleentry privileges and conditional extended stay, without need of prior departure from the Philippines.
Special resident visa. Several types of special resident visas may be issued, including those described below.
Special investor resident visa. Qualified foreign nationals who are at least 21 years old, except nationals of Cambodia, Korea (North) and other restricted countries, may obtain a probationary special investor resident visa (SIRV) on proof of an inward remit tance of USD75,000 or its equivalent in acceptable foreign cur rency. On investment in specified areas, the probationary SIRV visa is converted to an indefinite visa and remains in force for as long as the investment exists.
An investor may apply for an SIRV at the Philippines consulate in his or her home country or place of residence. If the foreign national is already in the Philippines, he or she may apply to the Board of Investment for a change of visa status to special investor resident.
Special investor resident visa in tourist-related projects and tour ist establishments. Foreign nationals who invest an amount equivalent to USD50,000 in a tourist-related project or in any tourist establishment are eligible to apply for SIRVs. To obtain this type of visa, a foreign national must prove that he or she has remitted the required amount in an acceptable foreign currency to the Philippines through the Philippine banking system. A holder of an SIRV is entitled to reside in the Philippines while his or her capital remains invested. However, if the holder withdraws the investment, the SIRV expires automatically. An SIRV holder must submit an annual report to prove that he or she has main tained the investment in the Philippines.
Foreign nationals wishing to obtain SIRVs must apply to the Philippine consulate in their home country or place of residence. An investor who is already in the Philippines must apply to the Department of Tourism (DOT). The BI issues the visa on DOT approval.
Special resident retiree’s visa. To obtain a special resident retiree’s visa, an individual must satisfy certain age and minimum deposit requirements. The applicant must be at least 35 years old, and the deposit requirement ranges from USD1,500 to USD50,000, depending on the circumstances. Former Filipino citizens must be at least 35 years old and make an inward remittance of USD1,500. Ambassadors of foreign countries who served and retired in the Philippines and current and former staff members of international organizations, including the Asian Development Bank, are also eligible for this program. They must make an inward remittance of USD1,500 and be at least 50 years old.
Coordination with the Philippine Retirement Authority is highly recommended.
Subic special investor’s visa. A Subic special investor’s visa entitles a qualified investor, as well as his or her qualified depen dents, to indefinite resident status in the Subic Bay Freeport Zone and to multiple entries into the Philippines if the individual makes an investment of at least USD250,000 or its equivalent in acceptable foreign currency in the Subic Bay Freeport Zone.
Subic special work visa. A Subic special work visa (SSWV) may be issued to qualified foreign nationals who are employed by Subic enterprises for a period not exceeding two years. The visa is extendible every two years. An SSWV is also issued to the applicant’s qualified dependents if they accompany the foreign national to the Subic Bay Freeport Zone within six months after the foreign national is admitted to the zone as an SSWV holder.
Temporary work permit. The Subic Bay Metropolitan Authority (SBMA) may issue a temporary work permit (TWP) to foreign expatriates in order to immediately legalize a foreign national’s status as an investor or worker in the Subic Bay Freeport Zone. The permit is issued while the foreign national’s investor or work
visa application is still in process. It is valid for three months and may be extended every three months, subject to a maximum total extension of one year.
Immigrant visa. An immigrant is classified as a foreign national admitted to the Philippines either as a quota (not in excess of 50 per nationality per calendar year) or non-quota (without numerical limitation) immigrant.
Immigrant status may be acquired on application before a competent consular office abroad or by direct application for a change of admission status before the BI. As a matter of policy, immigrant visas are issued to nationals or subjects of countries that grant similar privileges to Filipino citizens.
An applicant for quota immigrant status must clearly and beyond doubt demonstrate that his or her special qualification will advance the national interest of the Philippines. A minimum capitalization of USD40,000 in a viable and acceptable area of investment is required of each quota immigrant applicant.
The Philippines may grant the status of non-quota immigrant to the following categories of people:
• Foreign nationals who are legally married to Filipino citizens and their unmarried children below 21 years of age
• Children of foreign nationals who were born during the tempo rary visits of their parents abroad and whose mothers were previously admitted for permanent residence
• Children born subsequent to the issuance of viable, unexpired immigrant visas of the accompanying parents
• Women who were citizens of the Philippines who lost their citizenship through marriage, and their unmarried children younger than 21 years of age if accompanying or following their mothers
• People previously lawfully admitted for permanent residence returning from temporary visits abroad for unrelinquished residence in the Philippines
• Natural born citizens of the Philippines who were naturalized in foreign countries and who are returning to the Philippines for permanent residence, their spouses and their minor children
On registration, quota and non-quota immigrants are issued an I-Card by the BI.
G. Alien Employment Permit
Unless specifically exempted or excluded, all foreign nationals desiring to work in the Philippines must obtain an AEP from the DOLE. AEPs are normally valid for one year, but may be extend ed annually to cover the foreign national’s length of employment, up to a maximum of five years.
Local employers who desire to employ a foreign national must apply for the AEP on the foreign national’s behalf with the regional office of the DOLE having jurisdiction over the employee’s place of work.
The petitioning company must prove that the foreign national possesses the required skills for the position. Educational back ground, work experience and other relevant factors are considered in evaluating the application. The petitioning company must prove
that no Filipino is available who is competent, able and willing to do the specific job and that the employment of the foreign national is in the best interest of the public through an LMT.
The AEP is not an exclusive authority for a foreign national to work in the Philippines. It is just one of the requirements in the issuance of a work visa to legally engage in gainful employment in the country.
Companies that are listed in the “Tenth Regular Foreign Investment Negative List” must comply with the Understudy Training Program and Anti-Dummy conditions of the authorities, which require them to obtain an “Authority to Employ Alien” from the Department of Justice (DOJ) based on the DOJ Ministry Order No. 210, series of 1980.
H. Family and personal considerations
Family members. The family members, spouses and unmarried dependent children under 21 years of age of visa holders in the following categories do not need student visas or special study permits:
• Permanent foreign residents (immigrants)
• Holders of Sec. 9(d) or 9(g) or 47(a)(2) visas
• Foreign diplomatic and consular missions personnel
• Personnel of duly accredited international organizations
• Holders of special investor resident visas (SIRVs)
• Holders of special resident retirees’ visas (SRRVs)
The privileges of SVEGs (see Section F) may extend to SVEG holders’ spouses and dependent unmarried children under 18 years of age, regardless of whether the children are legitimate, illegiti mate or adopted. Dependent children of SVEG holders also do not need student visas or special study permits.
Marital property regime. Before 3 August 1988, property relations between a future husband and wife were governed by any of the following:
• Marriage settlement
• Provisions of the Philippine Civil Code
• Custom
In a marriage settlement, the future spouses agree to absolute community of property, conjugal partnership of gains, complete separation of property or any other property regime. Absolute community is a property regime under which all property of the spouses — present and future, movable and immovable, however acquired — form a single patrimony. Conjugal partnership of gains is a regime under which everything earned during the marriage belongs to the conjugal partnership, but the spouses retain ownership of their respective separate property. Whichever regime the spouses adopt may not be altered after the marriage is solem nized and continues to apply until the marriage is dissolved. In the absence of a marriage settlement or if the settlement is void, the system of conjugal partnership of gains applies.
After 3 August 1988, future spouses may elect a marital property regime of absolute community, relative community, complete separation of property or any other regime in a written marriage settlement to govern their property relations. In the absence of a
marriage settlement or if the property regime elected is void, the system of absolute community of property applies.
Philippine family law is binding on citizens of the Philippines, even if they marry and establish their residence abroad. Foreign nationals are not governed by these laws, regardless of where their marriage is solemnized and where they reside.
Forced heirship. Under the succession rules in the Philippine Civil Code, an estate is divided into the legitime and the free portion. The legitime is the part of a decedent’s entire estate that must be reserved for compulsory heirs. The distribution of the inheritance among the heirs may be effected by a will or by law.
The system of forced heirship in the Philippines applies only to citizens of the Philippines. In general, issues related to succession are regulated by the national law governing the deceased.
Driver’s permits. Foreign nationals may drive legally in the Philippines with their home country driver’s licenses for 90 days from the time of their entry into the country. Beyond 90 days, foreign nationals are required to obtain a Philippine driver’s license. An application for conversion of the home country driv er’s license to a Philippine driver’s license may be made at the Philippine Land Transportation Office (LTO).
An applicant must pass a written examination, an actual driving test and a medical examination. After completion of the examina tions, the applicant is issued a driver’s license receipt, which serves as a temporary driver’s license and is valid for 60 days. Thereafter, a driver’s license is issued to the applicant. A driver’s license is valid for three years and expires on the holder’s third birthday following the date of issuance.
An expatriate intending to secure an international driver’s permit must submit additional documents to the Automobile Association of the Philippines (AAP), a private company that deals with the issuance of International Driving Permits.
The Philippines has driver’s license reciprocity with certain coun tries.