BIG tax rises on the way

It is reported that there is likely to be big tax rises for the following:

1. Capital gains Tax - this will mostly affect ex-pats when they are house buyers. In fact, it s NOT a CGT anyway - there is not a tax on gain (unless you sell one house and buy another within 6 months (I think) as long as they are the principal residence) but on the whole selling price.Thus it is actually a Property Transfer Tax. This also applies to stocks and shares and possibly other transactions.
2. Donor (Gift Tax). This has to be paid by the Donor - so how they collect it if the Donor is not reachable (e.g. abroad) I do not know. There are double taxation treaties between many countries and the Philippines but I still think this is not easy to collect. I believe that the recipient is the one who has to fill out a tax form and the tax-free limit is P250,000 p.a. (I have not checked if this is the total per donor to one recipient or to all recipients). There are some exemptions for donations to charities and some other bodies.
3. Estate Duty (called Inheritance Tax in the UK). This is the duty paid on the value of an Estate inherited upon death.

The proposed rise if it happens will be from the current 6% to 10% - a 67% rise! I was not aware inflation was at that rate.

I have not read all the MASSIVE amount of rules and forms required in these taxation processes; as you can imagine they are extremely lengthy and I cannot be arsed - I am writing this primarily from what I already know.

In some (?all) countries tax avoidance is legal (to arrange your financial affairs to reduce your tax bills by LEGAL means) but tax evasion is NOT legal (that is evading taxes by ILLEGAL means).

I think tax avoidance is more difficult in The Philippines as they look into the 'spirit' of the law:

https://www.respicio.ph/bar/2025/me...principles/escape-from-taxation/tax-avoidance.

There are some thoughts I have, but people would need to check for themselves if they are accepted by the BIR as legal tax avoidance:

1. I guess people may offer less for a property if they have to pay 10% CGT (although the seller is the legal entity required to pay this, it is often the buyer who pays as that ensures it is actually paid). So there could be a short to medium term decline in house values. People evade some of this tax by under-valuing but, to be clear, that is ILLEGAL. So I see no purely legal avoidance other than setting the sale of one principal residence to purchase another:

https://www.bir.gov.ph/capitalgainstax

(There are other costs to purchasing a house in The Philippines and I once calculated the total cost at about 8% of the purchase price - that would now rise to 12%).

2. I need to check if the 250,ooo exemption is per donor p.a. or per donor's recipients p.a. If the latter then one could send money/give gifts to various family members rather than to just one. One can also send money to oneself as that is not a gift. But will the BIR ever question what happened to that money - raising the question: If you buy a house, car, household goods and groceries for you and others then are the "others" recipients of Gifts?

3. There is a P5million exemption on an Estate before Estate Duty has to be paid (but like everything, you would need to check this yourselves). So if your Estate (House(s), car(s), investments, etc.) will be over 5 million then the only tax avoidance (the legal one) I can think of is not to die.

I think that if your Estate is located overseas but is bequeathed to your spouse and/or other family members in The Philippines then Estate Duties will be due in your country and in The Philippines (but a double-taxation agreement should avoid having to pay full taxes in both countries).

And, in general, the way to avoid these very high tax rates on finances that in many countries do not exist - or have more exemptions and perhaps lower tax rates - and to avoid the HUGE bureaucracy involved, is to not live in The Philippines. There are many other countries with far better taxation policies and less cumbersome processes and so if you are able to live in those countries, it seems a good idea to do so.

 

You could sell your property for 1 peso and the BIR will still charge you on the zonal value