Do you have to pay tax on Forex in Philipines?

Philippines Forex tax rates for individual and institutional traders

Forex trading in the Philippines is becoming increasingly popular due to increased accessibility, development of modern technology and rise of online Forex education. Financial trading is authorized and regulated by the Securities and Exchange Commission (SEC) of Philippines and the Bangko Sentral ng Pilipinas (BSP), which is the central bank of the country. 

While currency trading offers many benefits such as high liquidity, 24/5 active market, widely available information on currency pairs and educational material, it should be mentioned that the number of available pairs is limited compared to stocks, and trading currency pairs using high leverage carries risks. Profitable traders need to plan their trades thoroughly, and take into consideration various factors, such as trading commissions, spreads, and taxes.  

In the Philippines, income made from currency trading is subject to taxation. The tax rules for Forex trading in Philippines classifies the profits under the “ordinary income” category, in addition, there is capital gains tax. Let’s further expand this topic to give you a clearer picture of what to expat when starting the trading journey from the Philippines.

FX trading tax in Philippines

As already mentioned, currency trading is taxed in the country. The Bureau of Internal Revenue (BIR) in the Philippines carries out the tax regulations and makes sure that the tax laws are followed. Forex tax rate in Philippines depends on various factors, such as: residency, trading purpose, and frequency. 

Forex tax Philippines residents are required to pay is 6%. Which means that traders that make profit from currency trading, are required to pay 6% on the net gains as capital gains tax. 

There is no tax on trading FX in Philippines for non-resident traders. The country classifies traders who do not meet the residency requirements for tax purposes as non-residents. 

Forex tax rules Philippines residents face

Retail forex traders and institutional traders are treated differently by the Bureau of Internal Revenue. If you engage in currency trading activity as a retail investor, gains made from the activity might be subject to Capital Gains Tax (CGT). 

Institutional traders that trade as a job,  working prop firms, investment funds, banks, and mutual funds are subject to ordinary income tax.

Ordinary Forex income tax in Philippines is progressive. Meaning, the amount that traders need to pay to the government depends on their level of income. Here are the applicable tax rates for ordinary income in the Philippines:

  • When traders make less than PHP 250,000 in profits, the tax rate is 0%.
  • Profits range from PHP 250,000 to PHP 400,000 are taxed at 20% rate. It should be noted that PHP 250,000 is excluded from the calculations and only 20% of the excess over PHP 250,000 is taxed.
  • Income from PHP 400,000 to PHP 800,000 is taxed at a fixed rate of PHP 30,000, +25% of the excess over PHP 400,000.
  • Income range over PHP 800,000 to PHP 2,000,000 is taxed by PHP 130,000, in addition, 30% of the excess over PHP 800,000 is added to the tax.
  • Profits from PHP 2,000,000 to PHP 8,000,000 are taxed by PHP 490,000. In addition, excess over PHP 2,000,000 is taxed at 32% rate.
  • If traders make over PHP 8,000,000, the tax rate is PHP 2,410,000 + 35% of the excess over PHP 8,000,000. 

It should be noted that these rates are not for regular retail traders. They are applied to institutional traders. In addition, keep in mind that the tax rates are subject to change according to government policies. 

How to pay taxes to BIR online in the Philippines 

You can pay taxes to the Bureau of Internal Revenue online. In order to do that, you need to take a few steps:

  • Open the main page of the Bureau of Internal Revenue and create an account. You will need a tax identification number to register. 
  • Once registered, log into the Electronic Filing and Payment System (eFPS). The platform enables BIR to digitally collect taxes in the country. 
  • Pick the correct form to fill. The forms are available on the platform. Provide BIR with honest information about your trading income. Hiding taxes is illegal and punishable by the law.
  • Calculate the tax due using an online calculator offered by the BIR. 
  • After the filling out and calculations are done, you can submit the form through the sFPS platform. 
  • The final stage is to make the payment. The platform enables you to use various payment methods, such as online banking, credit and debit cards, Over the counter banking, and electronic wallets.

Key takeaways

To sum everything up, currency trading in the Philippines is a legal and highly popular activity. Trading is taxed by the Bureau of Internal Revenue (BIR). Forex trading tax rates depend on various factors. Retail and institutional traders are treated differently. Retail traders are charged a fixed rate of 6% Capital Gains Tax (CGT), while institutional traders pay ordinary taxes. There’s a progressive taxation system in the Philippines. Which means that the more traders make, the higher tax rate will be. This is something that everyone who is thinking of starting Forex trading should know. In order to pay taxes online, traders need to go to the main page of BIR and register on the Electronic Filing and Payment System (eFPS). The sFPS platform accepts payments from multiple options. 

FAQs on Forex taxation in Philipines

What is Forex tax rate in Philippines?

Forex tax rates depend on whether you are an institutional trader or a retail trader. Retail traders may be charged 6% Capital Gains Tax (CGT), while Forex trading tax Philippines institutional traders pay is ordinary. There’s progressive taxation system in the Philippines, and the tax amount depends on the taxpayers bracket. 

  • When traders make less than PHP 250,000 in profits, the tax rate is 0%.
  • Profits range from PHP 250,000 to PHP 400,000 are taxed at 20% rate. It should be noted that PHP 250,000 is excluded from the calculations and only 20% of the excess over PHP 250,000 is taxed.
  • Income from PHP 400,000 to PHP 800,000 is taxed at a fixed rate of PHP 30,000, +25% of the excess over PHP 400,000.
  • Income range over PHP 800,000 to PHP 2,000,000 is taxed by PHP 130,000, in addition, 30% of the excess over PHP 800,000 is added to the tax.
  • Profits from PHP 2,000,000 to PHP 8,000,000 are taxed by PHP 490,000. In addition, excess over PHP 2,000,000 is taxed at 32% rate.
  • If traders make over PHP 8,000,000, the tax rate is PHP 2,410,000 + 35% of the excess over PHP 8,000,000. 

Can you avoid Forex taxes in Philippines?

Forex trading and tax in PH is well-regulated. Taxes are collected by The Bureau of Internal Revenue, and avoiding taxes by illegal means such as hiding the information can result in penalties. One legal way to avoid paying taxes on currency trading is to acquire dual citizenship of countries that do not have any fees on currency trading and open accounts from that country.

How do you pay Forex tax in Philippines?

You can pay taxes to the Bureau of Internal Revenue online (BIR). In order to do that, you need to take a few steps, such as: register an account with BIR, select the correct form, fill out the form, calculate the tax due, submit the form, choose a payment method, and make the payment.

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