Investment Taxes in the Philippines

Making your money work for you means it will also work for the government. With various investment vehicles to consider, it is only appropriate to know what are the taxes involve on each investments.

Here’s some of the taxes imposed in our country.

SAVINGS ACCOUNT

In case you don’t know, average savings account in the Philippines earned around 0.30% per annum. Bank personnel are delighted to tell you this, but that’s not the end of the story. Your gains are subjected to withholding tax of 20% as per our current law.

If you deposit Php 100K in a year, you will have a gain of:

100,000 x .3% = 300 – 20% = 260

You now have Php 100,260 in your savings account.

TIME DEPOSIT

Depending on which bank you deposit your money, they can give you various interest rates as well. And the gains is subject to 20% withholding tax. But, if you will keep your money invested for minimum 5 years, it is TAX FREE. Lawmakers encourage us to save money in long term that’s why they come up with this plan.

Here’s a Regular Time Deposit (Peso) from BPI.

Let’s say you get 2% annual growth for your money. If you time deposit

Php 100K for a year, you will have a gain of:

100,000 x 2% = 2000 – 20% = 1800

You now have Php 101,800 after a year.

MUTUAL FUNDS

Investment companies offering mutual funds are already taxed from their side before declaring any net income. So whatever percentage gain you see on their website, it’s already tax free. Yes, there is no tax at all.

For the last 3 years, top equity mutual funds in the country have growth of more than 30%.Let’s use 30% for this example. If you invested Php 100K in mutual funds, you will have a gain of:

100,000 + 30% = 130000

You now hoave Php 130K after a year.

STOCKS

Tax in stock market is paid everytime you buy and sell shares. Here’s the computation from Citisec Online.

For buying and selling, VAT is 12% of the commission of the broker, COL.

For selling, there is an additional fee of Sales Tax which is computed base on below formula:

Sales Tax = No. of Shares x Price x .005

As for the divided, it is subject to 20% withholding tax.

REAL ESTATE

Here’s the standared taxes and expenses whenever a real estate transaction occurs. Both buyer and seller have to shoulder different amount or base on what you have agreed. Most important is, you give whatever that computed amount to the government.

The SELLER pays for the:

• Capital Gains Tax equivalent to 6% of the selling price on the Deed of Sale or the zonal value or the fair balue, whichever is higher.

The BUYER pays for the cost of Registration:

• Documentary Stamp Tax – 1.5% of the selling price or zonal value or fair market value, which ever is higher.
• Transfer Tax – 0.5% of the selling price, or zonal value or fair market value, which ever is higher.