“In this world nothing can be said to be certain, except death and taxes.”

And with this I have to agree with Benjamin Franklin.

It appears the Philippines has regulations on taxes that’s different from what I learned during the course of my MBA. Businesses have three basic types of taxes here:

  1. Value Added Tax – is a business tax imposed on and collected from the seller in the course of trade or business on the sale of properties, lease of goods or properties, or rendering of services. The business is charged the difference between the percentage tax on the gross sales amount and the percentage tax on┬áCost of Goods Sold/Costs incurred to deliver the service. Thus, this tax is directly proportional to the margin a business sets to make profit and is also an indirect form of tax that can be transferred to the buyer.
  2. Percentage Tax – is a business tax imposed on persons or entities whose gross annual sales or receipts do not exceed Php 1,500,000 and are not VAT-registered. You can look at this as the barrier to entry for small entrants, as they get taxed on the gross sales amount of their receipts (not their Net Income) and simply says they get taxed regardless of whether the business is earning or losing money.
  3. Excise Tax – apply to goods manufactured or produced in the Philippines for domestic sales or consumption, and is imposed in addition to the Value Added Tax.

Bottom-line: Tax rules are different for every location.