Regulatory Framework

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TAXATION

Income Tax Rates for Domestic and Foreign-Owned Domestic Corporations
The corporate income tax rate is 30% of net taxable income. Royalties, interest, dividends, and other passive income of domestic and foreign-owned domestic corporations are subject to different rates.

There are also some special income tax rates for certain types of corporations like, for example, educational institutions, non-profit hospitals, offshore banking units, foreign deposit units, and international carriers.

There are many different kinds of taxes to consider. Some of these include:

• branch profit remittance tax
• minimum corporate income tax 
• improperly accumulated earnings tax
• minimum corporate income tax (MCIT)
• fringe benefits tax 
• excise tax
• tax documentary stamp tax
• customs tax
• local taxes

Tax on Non-domestic Corporations
Generally, non-domestic foreign corporations are taxed at 30% of the gross amount of Philippine sourced income such as dividends, rents, royalties, compensation, and remuneration for technical services. This tax is withheld at source. There are preferential income tax rates for some types of non-domestic corporations, as well as those entities that fall within the scope of specific tax treaty rates entered into by the Philippines.

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LABOUR REQUIREMENTS

Labour laws are governed by the Labour Code of the Philippines, which is supplemented, from time to time, by additional legislation. Some important aspects of the employment conditions covered by the Philippine labour laws include:

Hours of Work
Eight hours per day or 48 hours per week is the maximum period an employee may be required to work for a regular rate of pay. Workers are entitled to a 24-consecutive hour rest period after every six consecutive normal work days. Some exceptions are managerial employees, field personnel, and workers who are paid based on results.

Work Day
A day is a 24-hour period which begins from the time the employee regularly starts to work. Any work in excess of eight hours within the 24 hour period is considered overtime work regardless of whether the work covers two calendar days.

Meals and Rest Periods
Every employer is obliged to give his employees not less than one hour time-off for regular meals, except in the following cases when a meal period of not less than 20 minutes a day may be given, provided that such shorter meal period is credited to the employee as compensable hours worked:
(1) where the work is non-manual in nature and does not involve strenuous physical exertion;
(2) where the establishment regularly operates not less than 16 hours a day;
(3) in cases of actual or impending emergencies or where there is urgent work to be performed on machinery, equipment, or installations to avoid serious loss which the employer would otherwise suffer;
(4) where the work is necessary to prevent serious loss of perishable goods. Rest periods or coffee breaks running from five to 20 minutes shall be considered as compensable working time.

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SOCIAL SECURITY

Employees’ Compensation Program
The coverage under the Social Security System (SSS) program is compulsory for every employer with one or more employees. Government employees are covered under the Government Service Insurance System (GSIS).

National Health Insurance
All citizens of the Philippines are covered by the National Health Insurance Program (NHIP), which is administered by the Philippine Health Insurance Corporation (PHIC). All members of NHIP contribute to the National Health Insurance Fund in accordance with a reasonable, equitable, and progressive contribution schedule to be determined by PHIC.

Emergency, Medical, and Dental Services
Every employer is required to keep in his establishment first-aid medicine and equipment stipulated by the Department of Labour and Employment (DOLE).

Maternity Benefits
A female employee is entitled to maternity benefits. Subject to certain conditions, the employee is entitled to maternity leave with pay for 60 or 78 days. The maternity benefit (which companies advance to the employee and is subsequently reimbursed by the SSS) is a fraction of the employee’s monthly salary computed according to specific guidelines. Many companies advance the employee’s full salary and shoulder the amount that is not reimbursed by the SSS.

Paternity Leave
Effective August 1996, every married male employee both in the private and public sectors shall be entitled to a paternity leave of seven days with full pay for the first four deliveries of the legitimate spouse.

Termination of Employment
The state guarantees the rights of all workers to security of tenure and protects all workers to arbitrary deprivation of employment. Therefore, an employer may not terminate the services of an employee except for a just cause or when authorised by the Labour Code.

Unions
The right of workers to form labour unions is recognised and respected by the government. Workers may engage in concerted activities for collective bargaining purposes for their mutual benefit or protection.