Import Procedures

All imported articles invite import taxes, even those having been previously exported (except special mention envisaged in the Tariff and Customs Code or another regulation). The entry form must be filled in at the Customs Office in the 30 days following the unloading of the last package, failing to do which amounts to abandonment of the goods and ipso facto confiscation of the cargo.
The importation of certain commodities is regulated or prohibited. Imports are classified as follows:

• Freely Importable Commodities;
• Regulated Commodities;
• Prohibited or Banned Commodities, see the list here

The importation status of any commodity (whether prohibited, regulated, or freely importable) may be checked/verified with the Bureau of Customs (BOC), the Bureau of Import Services (BIS) of the Department of Trade and Industry (DTI). The Department of Agriculture (DA) may verify the importation status of agricultural products, as well as indicate whether a Minimum Access Volume (MAV) Import Certificate is required, such as for the importation of swine, chicken, etc.

Import documents required for shipments to the Philippines include:

• Commercial invoice/Pro forma invoice;
• Bill of lading (for sea freight) or air waybill (for air freight);
• Certificate of origin (if requested);
• Packing list;
• Special certificates/import clearance/permit depending on the nature of goods being shipped and/or requested by the importer/bank (see below);
• Commercial Invoice of Returned Philippine Goods.

Documents as may be required by rules and regulations, such as:
- Import Permit or Clearance, if the commodity is regulated
- Authority to Release Imported Goods
- Copy of an Advance Ruling, if the ruling was used in the goods declaration
- Load Port Survey Reports or Discharge Port Survey Reports for bulk or break bulk importations
- Document evidencing exemption from duties and taxes, if applicable
- Others, e.g., Tax Credit Certificate or Tax Debit Memo, if applicable

Specific Import Procedures

Some products such as animals, plants, foodstuffs, medicines, chemicals, etc. require a special certificate. For a full list of prohibited/restricted imports, click here.
Tariff-Rate Quotas (TRQs) still remain on a number of sensitive products such as corn, poultry meat, pork, sugar and coffee. Minimum Access Volumes (MAV) have been established for these commodities.

Distribution channels

The retail industry in the Philippines continues to rely heavily on traditional grocery stores and general trade, as the geographical conformation of the country makes it impossible for modern retailing to serve many areas. The Philippines retailing market suffered from the Covid-19 pandemic, but with loosened quarantine protocols a recovery is expected in 2022. According to data from USDA, sales of the Philippines total retail sector in 2021 amounted to around USD 54.87 billion, and food and beverage retail sales reached USD 24.36 billion, with modern retail accounting for half the total.

There is increasing competition between formats such as discounters and hypermarkets, and convenience stores and supermarkets. Rapid growth in retail sales are creating new opportunities for imported food and beverage products, already widely recognised by Philippine consumers. Modern retail markets such as supermarkets, hypermarkets and convenience stores (including 'minimarts) have become more essential especially to those living in Metro Manila and other large cities as customers demand more convenience and flexibility. These modern markets have expanded both in urban and rural areas, close to residential and commercial communities. Actually, they are usually cleaner, more comfortable, spacious and well-maintained. Moreover, supermarkets offer a wider range of choices for consumers, including both perishable and non-perishable goods. Wet markets retain an advantage in fresh product, including meat and seafood, but especially fresh fruit and vegetables.

Furthermore, retailers increasingly adopted multi-channel strategies in order to take advantage of the growing consumer demand for the convenience provided by e-commerce, and particularly mobile e-commerce. This is particularly true since the start of the COVID-19 outbreak, which prompted a growing number of middle- to upper-income consumers to shift to home delivery of grocery items. Based on interviews with the key players, 25 to 30% of their shoppers have shifted to online platforms (USDA).

Distribution market players

Domestic players continue to dominate the rankings in the Philippine retailing market. However, in 2019, the House of Representatives approved a bill that eased the way for foreign retailers to enter the market. Three supermarket chains dominate the Philippines food retail scene, but account for only a third of total sales, as traditional retail establishments still account for the majority of sales.

•    Robinsons is the market leader, with USD 1.164 billion sales in 2021 (11% market shares) and 151 supermarkets
•    SM Markets follows closely with USD 1.163 billion sales (11% market shares) and 63 outlets.
•    Save More Supermarkets realised USD 1.082 billion sales (11% market shares) and counts 217 outlets
•    PureGold is the fourth brand with USD 354 million sales (4% market shares) and 100 outlets (USDA).

Other supermarket chains include WalterMart, Metro Retail and Marketplace.

In terms of supermarkets, PureGold is the leader, followed by SM Hypermarket, Super8 Grocery Warehouse, Super Metro Supermarket, Prince Hypermart and Shopwise.

Retail Sector Organisations

Supply Chain Management Association of the Philippines (DMAP)
Philippine Retailers Association
Department of Trade and Industry

Consumption Taxes

Nature of the Tax

VAT (Value-Added Tax)

Tax Rate

12%

Reduced Tax Rate

Certain items are zero-rated, including export sales, including goods exported from the Philippines, raw/packaging materials sold to nonresident buyers for delivery to resident exporters or to exporters with over 70% export sales (subject to 12% VAT upon meeting refund system conditions), goods/supplies/equipment/fuel for international shipping/air transport, services to foreign businesses paid in foreign currency, transport of passengers/cargo by domestic vessels to foreign countries, power/fuel from renewable energy, services to international shipping/air transport operators, contractor services for exporters with over 70% export sales, and local sales to entities with indirect tax exemptions under special laws/international agreements.

Other Consumption Taxes

Excise taxes are levied on wines and spirits, beer, cigarettes and tobacco products (including vaporizing products), lubricating oils and grease (including similar preparations and additives), processed gas, waxes, denatured alcohol, cinematographic films, saccharine, coal and coke, cars, non-essential goods (jewellery, yachts and other pleasure vessels), mineral products, naphtha and other similar products of distillation, asphalt, and petroleum and other fuel products.
In addition to real estate taxes, local governments impose a tax on nearly all businesses operating within their jurisdictions. Rates vary but are usually a small percentage of gross annual sales.

Corporate Taxes

Company Tax

The rate is 25% on net income but there are some preferential rates and exemptions

Tax Rate For Foreign Companies

A foreign corporation that is duly licensed to engage in trade or business within the Philippines is considered a "resident foreign corporation" for tax purposes.
The Philippines adopt the United Nations Model Convention (together with the OECD model) to identify a permanent establishment.

Capital Gains Taxation

Capital gains arise from the sale or exchange of 'capital assets,' which are property held by the taxpayer but exclude inventories, real or depreciable property used in business, and property that would be included in the taxpayer's inventory at the end of the year. Capital losses are deductible only against capital gains. There are no holding period requirements for corporate capital assets. A 6% final tax applies to the higher of the gross selling price or fair market value of land or buildings not used in a corporation's business. Net capital gains from the sale of Philippine shares not traded on a local stock exchange are taxed at 15%. Sales of listed shares on a local stock exchange are subject to a 0.6% stock transaction tax if the corporation meets a minimum public ownership of 10%, otherwise, a 15% capital gains tax applies. Gains from the sale of bonds or similar instruments with a maturity of over five years are tax-exempt.
For further details, consult the dedicated page on the website of the Bureau of Internal Revenue.

Main Allowable Deductions and Tax Credits

Corporations can choose between itemised deductions or an optional standard deduction computed at 40% of gross income.
Bad debts are deductible expenses when written off (conditions apply). The allowable deduction for interest expense is reduced by an amount equal to 20% of interest income that is subject to final tax. Start-up expenses are deductible when incurred.
Charitable contributions can normally be deducted up to 5% of taxable income, although those made to certain institutions are 100% deductible, subject to conditions.
A Philippine company 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. A resident foreign corporation is allowed to claim allocated head office expenses as a deduction (conditions apply). To be deductible, entertainment, amusement, and recreation expenses should not exceed 0.5% of net sales for taxpayers engaged in the sale of goods or properties, or 1% of net revenue for taxpayers engaged in the sale of services.
Special deductions are allowed for certain businesses (e.g. insurance, mining, petroleum, and real estate investment trust).
Taxes can generally be deducted, except for corporate income tax, donor's taxes, and taxes imposed by authorities of any foreign country.

A net operating loss from the taxable year immediately preceding the current year, which has not yet been deducted from gross income, can be carried forward as a deduction for the next three consecutive taxable years (excluding losses during tax-exempt periods). This is allowed provided there is no substantial change in ownership, meaning 75% of the paid-up capital or nominal share value remains with the same persons. Loss carrybacks are not permitted.

Other Corporate Taxes

Local authorities impose local business taxes, which are generally based on the gross sales or gross receipts of the prior year (the rate varies depending on the location but generally shall not exceed 3%), and real property taxes, which are levied annually on the basis of a fixed proportion of the value of the real property (rate up to 1% for real property located in a province and 2% if located in a city).
A local transfer tax on real property is levied at a rate of 0.5% to 0.75% on the gross sales price or the fair market value of the property (whichever is higher) upon the transfer or sale of the property.
A final tax of 35%, payable by the employer, is imposed on the grossed-up monetary value of fringe benefits granted by the employer to managerial or supervisory personnel (including holiday and vacation expenses, housing, foreign travel expenses, expense accounts, vehicles of any kind, household personnel, interest on loans at lower than market rates, membership dues for social and athletic clubs, educational assistance, insurance).
Gratuitous transfers of property are subject to a donation tax at 6% of the fair market value of the property at the time of the donation (for the amount in excess of PHP 250,000).
A documentary stamp tax (DST) is payable at varying rates on several documents and transactions.
Employers must make monthly contributions to the social security system based on employee salaries, with a maximum contribution of PHP 2,880 for those in the highest salary bracket. Additionally, employers must contribute monthly to the Philippine Health Insurance Corporation (PHIC) and the Home Development Mutual Fund (HDMF), with maximum contributions of PHP 5,000 for PHIC and PHP 200 for HDMF for employees in the highest salary bracket.

Other Domestic Resources

Bureau of Internal Revenue

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

List of double tax agreements signed by the Philippines

Withholding Taxes

Dividends received by resident corporations are tax-exempt, while those received by resident individuals are subject to a 10% withholding tax. For nonresident corporations, dividends face a 15% withholding tax if their home jurisdiction offers a tax credit of at least 10%; otherwise, it's 25%. Nonresident aliens engaged in trade or business (NRA-ETB) or not engaged in trade or business (NRA-NETB) face withholding tax rates of 20% or 25%, respectively.
Interest from Philippine currency deposits paid to a resident corporation or nonresident corporation incurs a 20% withholding tax. For resident individuals and nonresident aliens engaged in trade or business (NRA-ETB), the rate is also 20%, while for nonresident aliens not engaged in trade or business (NRA-NETB), it's 25%. Resident corporations and individuals receiving interest from transactions with depository banks under the expanded foreign currency deposit system face a 15% withholding tax, while nonresident corporations and individuals are exempt.
Royalties paid to resident corporations are subject to a 20% withholding tax, while the rate increases to 25% for payments to nonresident corporations. Individuals face a 20% final withholding tax on royalty payments, except for those from books, literary works, and musical compositions, which are taxed at 10%. However, a 25% withholding tax applies to any royalty payments made to a nonresident alien not engaged in trade or business (NRA-NETB).

The above rates may be reduced under an applicable tax treaty.