Philippines Investment Income Guide 2026

Overview — Taxation of Investment Income

Investment income in the Philippines is subject to final withholding taxes (FWT) under the National Internal Revenue Code. The key principle is that the tax is withheld at source by the entity making the payment (bank, corporation, broker) and remitted to the BIR. The recipient does not need to file a separate return for these types of income, as the tax is considered final. However, certain types of investment income may need to be reported if not subject to final withholding. The rates vary depending on the type of income, the residency status of the recipient, and whether the recipient is an individual or a corporation.

Dividend Income

Resident individuals (citizens and aliens): Dividends from domestic corporations are subject to a 10% final withholding tax. This is the final tax — the dividends are not included in the individual's regular income tax return. The 10% rate applies regardless of the amount of dividends received.

Non-resident individuals: Dividends paid to non-resident alien individuals are subject to 15% final withholding tax (or 25% if not engaged in trade or business in the Philippines). These rates may be reduced under applicable double tax treaties.

Domestic corporate shareholders: Intercorporate dividends received by a domestic corporation from another domestic corporation are fully exempt from tax (0%). This exemption applies regardless of the percentage of shareholding.

Non-resident foreign corporate shareholders: Dividends paid to a non-resident foreign corporation are subject to 15% final withholding tax, unless a lower rate is available under a tax treaty.

Interest Income — 20% Final Withholding Tax

Interest income earned by resident individuals from the following sources is subject to a 20% final withholding tax:

• Bank deposits: Interest on peso and foreign currency deposits (except certain exempt accounts)
• Government bonds: Interest on Treasury bills, Treasury bonds, and other government securities
• Corporate bonds: Interest on bonds, debentures, and other debt instruments issued by domestic corporations
• Money market instruments: Interest from money market placements and commercial paper

Exempt interest:

• Interest on deposits with the Philippine Veterans Bank (under certain conditions)
• Interest on long-term deposit or investment certificates (held for at least 5 years, with varying rates: 5% for 4+ years, 12% for 3-4 years, 20% for less than 3 years per TRAIN amendments)
• Interest income of non-resident individuals from deposits is generally exempt from Philippine tax (unless the non-resident is engaged in trade or business)

Royalties — 20% Final Withholding Tax

Royalties (income from intellectual property, patents, copyrights, trademarks, franchises, and similar intangible property) are subject to a 20% final withholding tax for resident individuals. For non-resident individuals and corporations, the rate is generally 25% (or a reduced rate under an applicable tax treaty). The 20% FWT on royalties is a final tax, meaning the royalty income is not included in the recipient's regular income tax return.

Capital Gains on Shares — 15% CGT

Gains from the sale of shares of stock not listed on the Philippine Stock Exchange (unlisted shares) are subject to a 15% capital gains tax on the net gain (selling price minus cost basis and expenses). This is a final tax separate from the regular income tax. For shares listed on the PSE, the stock transaction tax of 0.6% on the gross selling price generally applies instead. See the Philippines Capital Gains Guide for detailed information.

Tax Treatment by Investor Type

• Resident individual: Dividends 10%, Interest 20%, Royalties 20%, CGT on shares 15%
• Non-resident individual (engaged in trade/business): Dividends 15%, Interest 20%, Royalties 25%, CGT on shares 15%
• Non-resident individual (not engaged in trade/business): Dividends 25%, Interest exempt (deposits), Royalties 25%, CGT on shares 15%
• Domestic corporation: Dividends 0% (exempt), Interest 20%, Royalties 20%, CGT on shares 15%
• Non-resident foreign corporation: Dividends 15%, Interest 20%, Royalties 25%, CGT on shares 15%

Note: Non-resident rates may be reduced under applicable double tax treaties.

Tax Treaties and Foreign Investment Income

The Philippines has double tax treaties with over 40 countries. These treaties typically reduce the withholding tax rates on dividends (to 10-15%), interest (to 10-15%), and royalties (to 15-20%) paid to residents of the treaty country. For Philippine residents receiving foreign-source investment income, a foreign tax credit is available for taxes paid abroad, limited to the Philippine tax due on the same income. Foreign investment income (dividends, interest, royalties) from foreign sources received by Philippine residents is generally included in regular taxable income and subject to graduated rates, with a foreign tax credit offset.

FAQs

Are dividends reinvested in the corporation still taxable?

Yes. The 10% final withholding tax on dividends applies when the dividends are declared, regardless of whether they are paid in cash or reinvested. Stock dividends (issuance of additional shares) may be exempt in certain circumstances under BIR regulations.

How do I claim a reduced treaty rate on dividends paid to a non-resident?

The non-resident must submit a BIR-prescribed form (e.g., BIR Form 0901-I, the Treaty Application Form) along with a Certificate of Residence from their home country tax authority. The withholding agent then applies the reduced rate.

Is interest from foreign bank accounts taxable in the Philippines?

Yes. Philippine residents must report and pay tax on interest income from foreign bank accounts. Unlike domestic bank deposits (which are subject to 20% FWT), foreign interest income is generally included in the regular income tax return and subject to graduated rates, with a foreign tax credit available.

Disclaimer

This guide provides general information about Philippine investment income taxation for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Philippine tax professional or the BIR directly for advice specific to your situation. InvestmentKit does not provide tax advice.