In this page I am sharing the list of tax exemptions in the Philippines this 2016 taken from the Tax Code and Philippine Constitution. What should be taxed and what shouldn’t? The list includes exemptions for income tax, donors, tax and estate tax. As a bonus I gave tips to easily master and memorize what are included under each category. Thought you might find it helpful if you are looking for a reviewer or if you are taking the CPA exam or BAR exam. Anyway, this list is for everyone interested to know what and who are exempted in paying taxes.
According to the Philippine Constitution, the following are exempted from taxes:
- Charitable institutions, churches, convents, mosques, non-profit cemeteries, lands and buildings and improvements – actually, directly, and exclusively used for religious, charitable and educational purposes (according to Article VI, Section 28)
- All income, revenues, assets of non-stock and non-profit educational institutions used actually, directly and exclusively for educational purposes and all grants, endowments, donations, contributions (subject to conditions prescribed by law) used actually, directly and exclusively for educational purposes (according to Article XIV Section 4)
Tip: If properties, assets, revenues derived are related from religious, educational, and non-profit organizations – they may be exempted for taxes.
Income Tax Exemptions in the Philippines 2016
I have listed the exemptions for income taxes below. Note that if you don’t need to file income tax return doesn’t mean you are exempted from tax. IT and ITR are two different things. Income derived from the following are exempted:
- Non-stock and non-profit educational institution and government educational institution
- Non-stock corporation and organization operated exclusively for religious, charitable, scientific, athletic or cultural purposes
- Non-profit civic league or organization
- Non-profit business league, chamber of commerce or board of trade
- Cemetery company-owned and operated exclusively for the benefit of its members
- Mutual savings bank and cooperative banks without capital stock and shares organized and operated for mutual purposes without profit, and development banks
- General professional partnership formed by persons for the sole purpose of exercising their common profession; no part of the income is derived from engaging in any trade or business
- A minimum wage earner or an individual pursuant to the provisions of the National Internal Revenue Code Section 51 (2)
- A Non-resident citizen of the Philippines:
- who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein
- who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis
- who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year
- who has been previously considered as a non-resident citizen and who arrives in the Philippines at any time during the year to reside permanently in the Philippines will likewise be treated as a non-resident citizen during the taxable year in which he arrives in the Philippines, with respect to his income derived from sources abroad until the date of his arrival in the Philippines.
- Income from bonds and securities for sale in the international market
- Prizes and winnings from a charity horse race sweepstakes from the Philippine Charity Sweepstakes Office
- SSS and GSIS Benefits
- Benefits received from the US government through the US Veterans Administration
- Annual taxable income of Senior Citizens or those at least 60 years old who have income of not more than P60,000 per year, subject to review by NEDA
- Exemption for a limited period of new and necessary industries (RA No. 901)
- Exemption of pioneer and registered enterprises under the Investment Incentives Act (RA No. 5186)
Tip: Studying the above list, income and revenues derived from outside the Philippines, derived from non-profit, purely educational, and government institution are usually not taxable.
Tax Exemptions for Estate Tax in the Philippines
Estate Tax is simply the tax we pay when a person died and they made us their beneficiary or heir of their properties and assets. On the transfer of these assets and properties, we may pay estate tax. However, there are exemptions:
- The merger of the usufruct in the owner of the naked title
- The transfer or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary
- The transfer or transmission from the heir, legatee, or done in favour of another beneficiary, in accordance with the desire of the predecessor
- All bequests to social welfare, cultural and charitable institutions, subject to certain conditions
Estate tax just like other laws is broad. If you are an heir or you have inherited something, it can be very helpful and wise to have a trusted lawyer to transfer all your inheritance for you legally. Geez look at those unfamiliar terms and you know what I am talking about here.
Donors Tax Exemption in the Philippines
- Donations to the Philippine government for scientific, engineering and technological research, invention and development
- Donations to the International Rice Research Institute (IRRI)
- Donations to the social welfare, cultural and charitable institutions
- Donations to the Ramon Magsaysay Award Foundation
- Donations to the National Museum, National Library and the archives of the National Historical Institute
- Donations to the Southern Philippines Development Administration
- Donations to the Museum of Philippine Costumes
- Donations to the Intramuros Administration for the purpose of restoring and administering the development of Intramuros
- Other donation exemption stated on the Tax Code Section 34 and PD No. 762
- Gifts made on account of marriage by resident of the Philippines parents to each of their legitimate, recognized natural or adopted children to the extent of the first P10,000
- Gifts made to or for the use of the national government or any entity created by any of its not-for-profit agencies or to any of its political subdivision
- Gifts in favor of educational or charitable, religious, cultural or social welfare corporation, accredited non-government organization, trust or philanthropic or research organizations or institutions
Tip: Donations and gifts related to educational and government research and development projects are usually not taxed. Likewise with donations to national museums.
Who are exempted in filing Income Tax return or ITR?
Again, that’s another topic and it is discussed in another page.