Emerging Markets Rates and Currencies Handbook

39 Citi | Emerging Markets Currencies Handbook 2021 Philippines Item Inter-Co Debt Offshore Bank Loans Offshore Local Borrowing Derivatives Equity W/H Tax 20% WHT Under certain tax treaties typically 10-15%, with further reduction possible on country-by- country basis 20% WHT • Under certain tax treaties typically 10-15%, with further reduction possible on country-by-country basis • Exempt, if interest is derived on a loan booked under the foreign currency deposit unit (FCDU) of a bank, where counterparty is a nonresident 2% creditable WHT if borrower is designated as a “Top Withholding Agent” 10% WHT if interest income is derived on a loan booked under the FCDU of a bank, where borrower is a resident N/A 25% WHT on dividends Lower rate of 15% applies in certain circumstances • Under certain tax treaties typically 10-25%, with further reduction possible on country-by-country basis • Exempt for dividends received by a domestic or a resident foreign corporation Deductibility of interests The Philippines has no formal thin capitalization laws or regulations Allowable deduction for interest expense is reduced by an amount equal to 20% of interest income that is subject to final tax N/A N/A Deductibility of FX losses Only realized foreign exchange losses are allowable as deduction for income tax purposes N/A Other taxes, duties DST of PHP 1.50 for every PHP 200, or fractional part thereof of the loan amount N/A On original issuance of stocks, DST of PHP 2.00 on each PHP 200, or fractional part thereof, of the par value of the stock • Exempt — Equities traded in Philippine Stock Exchange (PSE) Comments N/A Interest derived by a foreign government or its agencies is typically exempt from Philippine tax It is prohibited to use onshore swap market to create ‘synthetic’ PHP borrowing, i.e. borrow USD offshore and swap to PHP onshore N/A N/A A lower WHT on treaty countries generally applies if the beneficial owner of the dividends is a company with a substantial ownership (10-25%; depending on country) in the dividend paying company Note: Citigroup Inc. and any of its affiliates do not provide accounting, tax, or legal advice. Please seek advice from a relevant licensed advisor. Source: Relevant legislation, publicly available sources. Subsidiary Funding — Tax Consideration Tax Summary — Philippines