Worldwide Tax Summaries--PHILIPPINES（1999-2000）(part1)（二）
Worldwide Tax Summaries--PHILIPPINES（1999-2000）(part1)（二）
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Depreciation and depletion/Depreciation is generally computed on a straight-line basis, although any reasonable method may be elected if the aggregate amount of depreciation plus salvage value at the end of the useful life of the property will equal the cost of the property. Gain on the sale of depreciated property is taxable as ordinary income. Generally, book depreciation should conform with tax depreciation, unless the latter includes incentives. Properties used in petroleum operations may be depreCIAted over a period of ten years using the straight-line or declining-balance method at the option of the service contractor.
Properties used mining operations may be depreciated over any number of years between five years and the expected life if the latter is more than ten years, and the depreCIAtion thereon is allowed as a deduction from taxable income.
A cost depletion allowance is available as follows.
1. For oil and gas wells-Based on actual reduction in flow and production ascertained not by flush flow but by the settled production or regular flow.
2. For mines-An amount not to exceed the market value as used for purposes of imposing the mining ad valorem taxes on the products mined and sold during the year.
Net operating loses/A net operating loss for any taxable year immediately preceding the current taxable year that had not been previously offset as a deduction from gross income may be carried over as a deduction from gross income for the next three consecutive taxable years immediately following the year of this loss(except losses during the period when the taxpayer was tax exempt), provided there has been no substantial change in the ownership of the business or enterprise. Previously, loss carryovers were allowed only for enterprises registered with the Board of Investments under the incentives law prior to 1987 as pioneer or preferred enterprises and contractors in mineral agreements and finanCIAl or technical assistance agreements under the Philippine Mining Act of 1995.
Loss carrybacks are not allowed.
Payments to foreign affiliates/A Philippine corporation can claim a deduction for royalties, management service fees and interest charges paid to foreign affiliates, provided such amounts are equal to what it would pay an unrelated entity and the appropriate withholding taxes are withheld and remitted. The registration of licensing and management agreements, now
known as technology transfer arrangements (TRAs), has been leberalized.
Only TRAs not conforming with certain provisions of the Intellectual Property Code require approval by and registration with the Documentation, Information and Technology Transfer Bureau of the Intellectual Property Office (formerly Bureau of Patents, Trademarks and Technology Transfer) to render the contracts enforceable.
Taxes/Corporate taxpayers can claim a deduction for all taxes paid or accrued within the taxable year in connection with their trade or business except for the following.
1. Income tax.
2. Income taxes imposed by authority of any foreign country.
3. Estate and donors taxes.
4. Taxes assessed against local benefits of kind tending to increase the value of the property assessed.
In the case of foreign corporation, deductions for taxes are allowed only if they are connected with income from sources within the Philippines.
SpeCIAl deductions/A resident foreign corporation is allowed to claim allocated head office expenses as a deduction, subject to compliance with certain requirements.
Other significant items/The deduction for charitable contributions ordinarily may not exceed 5% of taxable income. However, contributions to certain institutions are 100% deductible, subject to certain conditions.
SpeCIAl deductions are allowed for certain businesses, e.g., insurance, mining and petroleum. The allowable deduction for interest expense is reduced by an amount equal to 39% of interest income subject to final tax, beginning January, 1,1999(38% beginning January 1,2000).
Group taxation is not permitted.
Inward investment/See "Capital investment" below.
Capital investment/Tax incentives available to export enterprises registered with the Board of Investments are as follows.
1. Income tax holiday giving full exemption from corporate income tax for six years for pioneer firms and those locating in less-developed areas and four years for nonpioneer firms from the date of commerCIAl operation or target date of operation, whichever is earlier; expanding export-oriented
firms are given three years. Subject to certain exceptions, new and expansion projects located in the National Capital Region (NCR) or Metro Manila are no longer entitled to the income tax holiday and to incentives on capital equipment.
2. Full exemption from taxes and duties on imported capital equipment and accompanying spare parts up to December 31,1999 for firms registered with the Board of Investments on or before December 31,1994 and located outside the NCR.
3. Tax and duty exemption on imported spare parts and supplies for export producers with a customs bonded manufacturing warehouse exporting at least 70% of production.
4. Full deduction of the cost of major infrastructure undertaken by enterprises in less-developed areas.
5. Additional deduction of 50% of the incremental labor expense if the prescribed ratio of capital assets to annual labor is met; 100% of the incremental labor if located in less-developed areas within five years from date of registration. (This incentive cannot be availed of simultaneously with the income tax holiday).
6. Ten-year exemption from taxes and duties on importation of and tax credit on breeding stock and genetic materials.
7. Exemption form wharfage, any export tax, impost, or fees.
8. Tax credits equivalent to taxes and duties paid on purchases of raw materials, supplies and semimanufactured products forming part of the products for export.
Other incentives/Other incentives available are as follows.
1. Export and free-trade enterprises and speCIAl economic zone
developers/operators registered with the PEZA are endtitled to an income tax holiday of six years for pioneer firms and four years for nonpioneer firms. Foreign articles brought into the pioneer firms and four years for nonpioneer firms. Foreign articles brought into the zones will be exempt from import duties and taxes. Local purchases of goods from VAT-registered
entities are either exempt form VAT or zero rated, as approved by the Bureau of Internal Revenue. After the lapse of the income tax holiday incentives, enterprises registered and operating within speCIAl economic zones/export processing ones will pay only 5% final tax on gross income earned in lieu of paying all local and national taxes, including import duties and internal revenue taxes. Exporters registered under the Export Development Act are entitled to tax credit ranging from 5% to 10% on incremental export revenue and other tax incentives.
2. Regional or area headquarters established in the country as a supervisory, communications and coordination center for a corporations subsidiaries, affiliates and branches in the Asia-Pacific region are entitled to certain tax and nontax incentives. Regional operating headquarters undertaking training and business development, research and similar activities not involving the sale of products and services are
taxed at a preferential rate of 10%.
Corporations and individuals engaged in business and paying certain types of income to nonresidents are required to withhold the appropriate tax, which generally is 33% in 1999(32% effective 2000)in the case of payments to nonresidents foreign corporations or 25% for nonresident aliens not engaged in trade to business. For withholding taxes on resident
corporations see the discussions under "Income determination."
Tax treaty rates/For countries with which the Philippines has concluded tax treaties, the taxes to be withheld are as follows.
COUNTRY DIVIDENDS INTEREST ROYALTIES
(1,2) (3) (4)
Australia…… 15/25 Maximum of15 15/25
Austria ……… 10/25 Maximum of15 10/15
Belgium ……… 15/20 Maximum of15 15/25
Brazil ……… 15/25 Maximum of15 15/25
Canada …… 15/25 Maximum of15 25
Denmark …… 10/15 Maximum of10 Maximum of15
Finland …… 15/33 Maximum of15 15/25
France …… 15/25 Maximum of15 15/25
Germany … 10/15 10/15 10/15
Hungary … 15/20 Maximum of15 Maximum of15
India …… 15/20 10/15 15
Indonesia … 15/20 Maximum of15 15/25
Israel …… 10/15 Maximum of10 15
Italy ………… 15 Maximum of15 15/25
Japan ……… 10/25 Maximum of15 15/25
Korea, Rep.of … 10/25 Maximum of15 10/15
Malaysia … 15/25 Maximum of15 15/25
Netherlands 10/15 10/15 10/15
New Zealand 15/25 Maximum of15 15/25
Norway …… 15/25 Maximum of15 7.5/10/25
Pakistan … 15/25 Maximum of15 15/25
Romania …… 10/15 10/15 10/15/25
Russian Federation 15/33 Maximum of15 15
Singapore … 15/25 Maximum of15 15/25
Spain ………… 10/15 10/15 10/15/20
Sweden ……… 15/25 Maximum of15 (5)15/25
Thailand …… 15/33 Maximum of15 15/25
United Kingdom 15/25 Maximum of15 15/25
United States …20/25 Maximum of15 10/25
The numbers in parentheses refer to the notes below.
1. As a general rule, dividends paid by a domestic corporation to a nonresident foreign corporation are taxed at 33% in 1999(32% effective 2000),but the rate may be reduced to 15%,subject to the condition that the country in which the foreign corporation is domiciled(a) allows a credit for tax deemed to have been paid in the Philippines equal to 18% in 1999(17% effective 2000), which represents the difference between the
regular tax on corporations(33% and 32%, respectively) and the tax on dividends(15%), or (b) does not impose tax on such dividends.
2. The first rate generally applies if the benefiCIAl owner is a company that holds a certain percentage of the capital or voting shares of the paying company. For Belgium the tax is 15% when the dividend is exempt from tax in that country. For Brazil the tax is 15% of the gross amount of the dividends if the recipient is a company, including a partnership.
3. Maximum of 10% if the interest is paid by a company in respect of public issue of bonds, debentures or similar obligations. For Austria the 10% tax also applies if the paying Philippine company is engaged in a preferred pioneer area of investment and is registered with the BOI. For Germany, the Netherlands, Romania, and Spain the 10% tax also applies if
the interest is paid on a credit sale of any industrial or scientific equipment or on any loan granted by a bank. For India the 10% tax also applies if the interest is paid to a finanCIAl institution (including an insurance company). For Indonesia and Pakistan, interest is exempt if paid in respect of bonds, debentures or similar obligations of the Philippine
government. Most tax treaties provide tax exemption for nterest derived by foreign governments or finanCIAl institutions owned or controlled by them. (This exemption is also provided for in the National Internal Revenue Code.)
4. The first rate of tax generally applies if the royalties are paid by a registered enterprise engaged in preferred areas of activity. For Belgium, Brazil, Finland, France, Italy, Japan, Malaysia, Romania, the Russian Federation, Singapore, Sweden, Thailand, and the United Kingdom, tax is also 15% if royalties are paid in respect of cinematographicfilms or tapes for television or broadcasting. Furthermore, for Finland and Sweden
royalties for the use of copyrights are also subject to tax of 15% For Canada and the United States the tax is the lesser of 25%(15% for Israel)or the of Philippine tax that may be imposed on royalties of the same kind under similar circumstances. For Germany the tax is 10% if the royalties arise out of the use of patents, trademarks, secret formulas, or the right to use industrial or scientific equipment and 15% if the royalties arise from the use of copyrights of literary, artistic or
scientific work, including cine-matographic films or tapes for television or broadcasting. For Spain, tax is 20% if the royalty is paid in respect of cinematographic films or tapes for television or broadcasting and 15% in all other cases.
5. Subject to certain conditions stipulated in the treaty; otherwise, the usual rates (33% in 1999,32% thereafter for corporations; 25% for individuals) will apply.
Returns/Corporations should file their returns and compute their income on basis of an accounting period of 12 months. This accounting period may be either a calendar year or a fiscal