Employment taxes

The Philippines taxes its citizens on their worldwide income, while non-resident citizens and aliens who are not residents in the Philippines are taxed only on income from sources within the Philippines.

Paying salaries and taxes

Most companies pay their employees twice a month – usually on the 15th and 30th. Income tax is paid on every salary payment.

Personal income tax rates

The Philippines uses a progressive personal income tax system based on the annual income of the employee. The tax brackets are as follows:

• Php 250,000 or less – 0% 
• Php 250,000 to 400,000 – 20% 
• Php 400,000 to 800,000 – 25% 
• Php 800,000 to 2,000,000 – 30% 
• Php 2,000,000 to 8,000,000 – 32%
• Php 8,000,000 above – 35%

From January 1, 2023, the Philippines will apply new tax rates which will be slightly lower (up to five percentage points) for the middle brackets.

Fringe benefits tax

Fringe benefits paid to managerial and supervisory employees by the employer are subject to a final tax of 35%, payable on a quarterly basis. Managerial and supervisory employees are defined as follows:

• Managerial employees are those who may mandate and execute management policies to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees;
• Supervisory employees are those who effectively recommend such managerial actions if the exercise of authority on behalf of the employer is not merely routine or clerical in nature but requires the use of independent judgment. 

Fringe benefits are not considered as part of the employee’s annual income and thus will not get taxed twice.