Open regulation has allowed 100% foreign ownership in almost all sectors, with companies in the Special Economic Zone enjoying low tax rates. Low business costs and natural resources in the Philippines have further attracted investors.  

The Philippines boasts one of the highest literacy rates in Asia and has one of the world's largest English-speaking populations, providing skilled labour to support increasing investment and entrepreneurial opportunities.  

Corporate Treasury in the Philippines 

The Philippines is one of the fastest-growing economies in Southeast Asia. In this section, we highlight some of the key factors relevant to treasury and cash management.  

 Financial Market Development  

• Manila is ranked 79th in the 2021 Global Financial Centres Index by Z/Yen Group, 27 places higher than in 2020.  
• The Philippines offers good business infrastructure, an educated, English-speaking, highly competent and cost-effective workforce, and a sound legal environment.  
• The Philippines has foreign-exchange controls. Companies must submit supporting documents to the central bank before purchasing foreign exchange above USD1 million.  

 Sophistication of Banking Systems  

• The Philippines has 46 universal and commercial banks, of which three are government-owned and 26 are branches or subsidiaries of foreign banks. A further 11 foreign banks have representative offices.  
• The Philippines' debt market consists mainly of short-term and long-term government bonds. The corporate bond market is small, although it is growing rapidly. Outstanding local currency bonds stood at PHP9,122 billion at the end of March 2021.   

Regulatory Bodies  

• The banking industry is regulated by Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines. Regulations are in line with international standards. BSP also regulates foreign-exchange controls.  

Tax  

• The corporate income tax rate is 25%.  
• Resident companies are taxed on worldwide income. Foreign companies with permanent establishments in the Philippines are generally taxed on income that is received or generated in the Philippines. 
• A company is considered a resident if it is incorporated in the Philippines or licensed to carry out business there. 
• A Philippine branch’s after-tax profits remitted or deemed remitted to its foreign head office are subject to an additional 15% branch remittance tax (except for those activities registered with the Philippines Economic Zone Authority and other companies within special economic zones).  
• The standard rate for Value Added Tax (VAT) is 12%, with certain transactions being zero-rated or exempt.  
• For non-resident companies, withholding tax rates are 15% or 25% on dividends and 20% on interest if no tax treaty is in place. Withholding tax ranges from 5% to 25% for dividends and is 10%, 12.5% or 15% on interest, where a treaty is in place and the non-resident company can provide a Certificate of Residence.  
• Documentary stamp duty is payable on a number of transactions, including certain debt instruments. Some of the instruments are subject to ad volarem whilst others are fixed in nature.  
• Interest income, depending on the source, is subject to a final tax of 10%, 15% or 20%, and such interest income will not be included in the corporate income tax returns.  
• Allowable deductions for interest expenses are reduced by an amount equal to 20% of the interest income that is subject to final tax. There are no thin capitalisation rules in the Philippines.  
• Tax incentives are available for export companies and those located in special economic zones, including exemption from corporate income tax for specific periods of time if certain conditions are met.  
• Regional operating headquarters of multinational companies that derive income in the Philippines are subject to a reduced corporate income tax rate of 10% on their taxable income, although this will rise to 25% from 1 January 2022.  
• Regional or area headquarters of multinational companies that do not derive income from the Philippines and act as supervisory, communication and coordinating centres for their overseas-related companies are not subject to corporate income tax.  
• The Philippines has tax treaties with more than 40 countries and territories.  

  Benefits for Shared Service Centres 

• The Philippines is located in the heart of the fast-growing Southeast Asia region. 
• The country's low-cost, highly skilled and competent English-speaking workforce makes it a popular base for Shared Services Centres. 
• The Philippines is a member of the Asian Payment Network, a common payment settlement platform within Asia Pacific. 
• Cash concentration is permitted between resident and non-resident companies but is not widely practiced due to reporting requirements and cross-border transfer limits. 
• Notional pooling is not permitted in the Philippines.