I run a small hosting biz here in the Philippines, and based on how things are going, I may be closing down soon.

I had a really dumb dream when I started this biz 8 years ago, I told myself I will report proper taxes and do what is honest and 'legit'. Even though our entire government system is corrupt to the bone.

Running my hosting biz.. we had to (legally) pay

12% Tax
12% Extended Tax
5% Annual Municipal Tax
12% Tax for our salary
3-5% for our SSS Insurance (required)
3% pag-ibig fund (I have no idea what this is..)
30% Import Tax (since the server is outside the country-recently added law)
We also had to pay $250 - $300 worth of filing fee or whatever quarterly paperwork fee...

Illegally, I also need to do 'lagay'. In english its bribes.
Government inspectors and local officials wont approve or cooperate unless you pay them a hefty fee under the table.

We can't get any tax reductions either, they don't respect our expenses receipts from our servers or domain registrations. Our office rent cant be reported as expenses because our landlord doesn't want to report to the government at all.

And after all that, just recently.. I found out that our Government SSS people insist that we didn't pay our 'share' for our first 3 years, and that we need to pay them another $7,500.

We didn't even have salary those 3 years.. and even skip monthly salaries 6 times a year just to keep the business floating. And they just demand more.. Also, this so called loan is my money. Why should I be penalized for my own share?

I have seen our SSS, as people flock over like they are begging for money that is their's to begin with. I am disgusted at how rude they treat us commoners, and every now and then we hear scandals of our funds in SSS and agricultural funds used for campaigning and personal politician expenses. Its no wonder no one wants to pay proper taxes here...

And so here I am, concluding the impossibility of my plight. And may just go freelance instead. I so hate my government to the bone. Our politicians live like kings while children here beg on the streets. Street vendors barely making a dollar a day had to pay our police officers 'protection fee'.

Hopeless, so hopeless here..

So in a word, like us from FRANCE you are working for your government... Sad but true!

Yes, but is France as corrupt as us? I think we ranked #1 in asia for corruption just recently..

Thats a lot of tax, close up and setup shop in the US, you dont even have to have a location there anymore and yo ucan still get a US bank account ect.

Taxes are needed to run a country, the less economically stable the county is the more tax the people living in it have too pay. Its simple to understand. You must have known about the high tax when you decided to enter into starting up a business there.. so you have yourself to blame i am afraid

Yeps, I know that. And your taxes goes somewhere too.. instead of a politician's pocket.

And you are right, it is indeed my fault. I was too naive when I started out, I thought that the taxes would be feasible and that one can actually run a decent company here in the Philippines while reporting taxes.

It was only afterwards that I found out our government is anti-entrepreneur. They demand every penny they can grab.. everything and everyone else is expendable..

Taxes are needed to run a country, but read our news.. you will see where exactly are our taxes going.

Sorry if I sounded ticked, but your opinion from a first world country's perspective is somewhat insulting from my end. Your system works, we don't.

Those are some pretty high rates but understandable as certain countries might have higher tax rates. Although, it is pretty corrupt for the government to be taking money from under the table. The worst part is that they are not just taking small amounts but big amounts. I believe you would be better off just free lancing.

Taxes are needed to run a country, the less economically stable the county is the more tax the people living in it have too pay. Its simple to understand. You must have known about the high tax when you decided to enter into starting up a business there.. so you have yourself to blame i am afraid

That's kind of harsh, and its unfortunate that the OP's country is whacking him with legal and illegal taxes. Yes he probably should have investigated the tax implications before starting but throwing up a "you have only yourself to blame" while he's losing his business is a tad rough.

haha
thats nothing compared to tax in russia!
50% -100% import tax
40% corportation tax
9% salary tax
+ $100's of bribes to approve

There are always ways to get around such high taxes:
-Set up an offshore company and get some of your company finances through that offshore company.
-Under-report revenues (not that I recommend it but if even your rent isn't deducted, why should you report your revenues if they are going to be taxed entirely as profit!)
-Give discounts to customers who don't require receipts (quite widespread here in China where we operate).

Wow, sounds like you got hit badly.

Makes me glad I live in the United Kingdom. Yeah we have some high taxes, but most of our government isn't that corrupt and we don't have to pay bribes to police or inspectors.

Good luck with it,
Mike

Ye.. a lot of luck.

If things don't go well.. I will have to use my wedding money to pay our stealing government. :( I'm glad my girlfriend understands.. Also need to get a night shift job to make back the money that was stolen from me.

My dad was right.. You can never survive here in the Philippines if you pay proper taxes.. they will eat you alive. sigh..

Really wish we have good vigilantes here to even the odds.. a Dark Knight perhaps.. hehe..

I cannot give you any advice but if it were me, I'd choose using the wedding money for marriage and not the business. If what you say is true and you'll be closing up shop at some point, why give away more money to the government.

Businesses can come and go but family and relationships are what is important - just my $.02

I cannot give you any advice but if it were me, I'd choose using the wedding money for marriage and not the business. If what you say is true and you'll be closing up shop at some point, why give away more money to the government.

Businesses can come and go but family and relationships are what is important - just my $.02

I defiantly agree with you. From the sounds of it you're sitting on a sinking ship thats going to sink at some point. You may as well cut your losses now and enjoy your wedding :)

Why not transfer your company to the US (close shop then open elsewhere - moving your customers)?

I've heard rumors that some places tax on gross revenue and not profit, seems really illogical to me as it should to anyone who understands basic business... That said, the law is the law. You should perhaps consider moving to another location that is more friendly to businesses?

Sorry about your situation.

Dan

Thanks for all your tips..

I really agree with 'not paying the government' more of my money and just enjoy my wedding.. though I am not entirely sure how safe I can be with the government hounding me down. These guys have a lot of muscle, esp under the table.

And yes, we are taxed on gross profit here, not net.

I just hope the tax collector is willing to accept a 'bribe' for the sake of lower pay. Either way, I'm closing shop.. even reporting for bankruptcy here still requires a large amount of 'filing fee'. These guys are thieves to the bone.

I have a friend who even has to hire a driver and a car for our tax collectors with extra cash just for their inspection services..

I may just move my clients (most of em) with me while I go freelance for the time being, and maybe entertain the off-shore option (though I have no clue how, at the moment).

Also, some of my clients are big companies, so they require an Official Receipt, so I may well lose em. But compared to the amount I am paying the government, this is cheap losses.

70% of my income goes in tax one way or another.

Sad but true.

That's kind of harsh, and its unfortunate that the OP's country is whacking him with legal and illegal taxes. Yes he probably should have investigated the tax implications before starting but throwing up a "you have only yourself to blame" while he's losing his business is a tad rough.

business is a rough game :)

Your english are pretty good, have you thought about migrating to another country?

Wow, that is a scary tax structure. Thanks for sharing.

-mike

Don't spend your wedding money on that, believe me, you will regret it, your girlfriend and family should come first, money comes and goes.

I also run a hosting business and since legally the company is US based, we don't need to pay taxes here ( Panama ) :p

Are you a native?

If not you are stupid to try to start a business in a 3rd world country (I've seen so many of my country boys tyring to do this in south east asia - 98% fail).

If you are native you learned something more about your country.

I screwed up two companies in the home country of my girl friend (an Internet Shop and a Restaurants - both 100% run by my girl friend - i was only her private ATM) because of bribes, high taxes and insane laws. But this was Thailand not the philippines.

Unfortunately i do not know about a solution other then being small enough to stay under the radar.

Your english are pretty good, have you thought about migrating to another country?

I thought of that everyday.. :) but migrating isn't that easy. No window of opportunity, But im working on that too.

My english is my primary language, second is the filipino native, then chinese...

Australia will have you - shouldn't be too hard to get a passport.

I thought of that everyday.. :) but migrating isn't that easy. No window of opportunity, But im working on that too.

My english is my primary language, second is the filipino native, then chinese...


So, you are not a filipino?

I agree that government is corrupt in the philippines but I don't think the amount of taxes to pay is that high unless you missed to pay your taxes for the past years and if you did, then you will get penalized and you ended up paying more...

Yes, I am a filipino :-)

Note: We have our own accountant and she is doing all the taxes problem and she is really good :-)

Wow, taxed on gross and not net. Ouch. :eek2:

Australia will have you - shouldn't be too hard to get a passport.

Yea, just move in with Bob. :D

Running my hosting biz.. we had to (legally) pay

12% Tax
12% Extended Tax
5% Annual Municipal Tax
12% Tax for our salary
3-5% for our SSS Insurance (required)
3% pag-ibig fund (I have no idea what this is..)
30% Import Tax (since the server is outside the country-recently added law)
We also had to pay $250 - $300 worth of filing fee or whatever quarterly paperwork fee...

IANAL, but that tax structure doesn't seem right. AFAIK, tax rules concerning e-commerce in the Philippines aren't that comprehensive yet, so you shouldn't be paying that much. The 30% import tax in particular doesn't (or shouldn't) apply for a web hosting business — you're providing a service, not selling tangible goods.

Anyway, have you contacted a [business] lawyer regarding this? If you have, try getting a second opinion. It may be that you're paying for taxes that shouldn't apply to you.

It's shocking how quickly a nation can change over a relatively short period of time. AFAIK, it was only a few generations ago when the Philippines was a strong nation, both economically and militarily. Such a shame to see it turn into this.

Sorry if I sounded ticked, but your opinion from a first world country's perspective is somewhat insulting from my end. Your system works, we don't.

The U.S. does work, but for how long? We are nearing upon 10 trillion dollars in federal government debt, so that does not include state or local government debts. So just on a federal basis, every single person within the U.S. has a federal debt share of more than $30,000 - even a baby born just minutes ago. If you count debt based on only those who actually pay taxes to the government (so not including children, retired people and those living on government entitlement program money) it is probably somewhere around $100,000 federal debt per taxpayer. I know people who have gone bankrupt when only in debt a bit more than $20,000...... I don't see how the average taxpayer will ever be able to cover their $100,000 portion of the national debt anytime soon...

Add to that, the U.S. has our share of corruption - but it doesn't seem to be as bad as you describe in the Philippines.

IANAL, but that tax structure doesn't seem right. AFAIK, tax rules concerning e-commerce in the Philippines aren't that comprehensive yet, so you shouldn't be paying that much. The 30% import tax in particular doesn't (or shouldn't) apply for a web hosting business — you're providing a service, not selling tangible goods.

Anyway, have you contacted a [business] lawyer regarding this? If you have, try getting a second opinion. It may be that you're paying for taxes that shouldn't apply to you.


I agreed.

We are not paying that kind of taxes either.... that is too much...

Or maybe your collector is just making some money out of you :-)

Get an accountant and get a lawyer!

I would just export myself out of the country. That's a lot of work too but you'll probably be better off in the long run. That kind of government is just ridiculous.

Yes, we have a ridiculous government here. No better word to say it.. :)

I already have an auditor, were waiting for the verdict of the SSS. We have proof that we didn't have any salary in our starting years, but if they still insist we pay along with the penalty, then I am really filing for bankruptcy, and going freelance. I have had it with getting robbed by these guys..

I will still pay of course, its so sick that these guys just bark orders like these and literally 'take' money that took years of sweat and blood to save. God will bring these people to judgment someday.

Concerning Freelancing, are contracts still respected if you are a freelancer? A hosting company will always need some type of protection, though Philippines rarely get anything done with court of laws...

Can governments track money through Paypal? I would just have everyone pay for hosting through Paypal and basically use Paypal as your bank account, and make it a US account. Not sure how this would work but you'd need a non Philippine credit card tied to the Paypal account so you can transfer money to it to pay the servers + use online for shopping or whatever you spend your profits on.

Of course, for stuff like mortgage/car etc would be trickier, but guess your day job could take care of that, and the hosting would be for online purchases only, so the money always stays in Paypal and never goes to your bank account - it just gets spent. So as long as your day job makes enuogh money to pay for the big stuff like your house and car, all your other items you can buy online with the money you make from hosting, so that money technically never gets into your country, as money.

I'd be curious myself to see if this works or not though. MAybe they'd just start taxing you on shipments.... sounds like a dirty enough goverment to do that.

And I though our goverment was bad when it came to taxes... guess they're not that bad after all lol compared to yours.

Yea, just move in with Bob. :D
Bob's inn is full. :D

You should not encourage someone to participate in tax evasion.

I would suggest you look into finding a decent accountant that can help you come up with some good tax avoidance strategies. Perhaps moving your business to a different country is the best strategy in your situation.


Also, some of my clients are big companies, so they require an Official Receipt, so I may well lose em. But compared to the amount I am paying the government, this is cheap losses.


I don't see why you couldn't give them a receipt; if you must just form a company in a different country.

If you do take the bankruptcy route -- you might consider selling your clients and hardware off to a new company formed in a different country. Make sure you check with your accountant if this would be a viable way of saving yourself money.

We have an office in the Philippines, in Manila (Muntinlupa City to be exact). We are properly and legally registered with the authorities (though it did take some time to work through the bureaucracy) and we pay taxes. No bribes were paid.

Our situation is a bit different in that we don't have any customers there (just employees), so we're not running huge profits with that company. However, I would advise retaining an expert tax lawyer (you mentioned you have an auditor, but maybe it's time to look at someone even more experienced) for specific advice. For example, I believe there are tax-free developments zones like Subic Bay. Why not move your company there?

Moving my company elsewhere sounds like a lot of work.. in fact, I have no clue how to go about it at the moment. But thanks for all the advise, I am reviewing the subic bay freeport right now.

And for the tax evasion, more than 95% of business here does that. There is simply no way to give out such a high amount of income to keep our politicians fat and happy, and have enough for food on the table..

Is LLC easy to register even from the Philippines?

Is LLC easy to register even from the Philippines?

There are a few online incorporation sites that will handle all the paperwork for you.

like http://www.legalzoom.com/

Be aware that although opening a business in the US is rather easy. it is more difficult to get a US bank account for the company.

Taxes are needed to run a country, the less economically stable the county is the more tax the people living in it have too pay. Its simple to understand. You must have known about the high tax when you decided to enter into starting up a business there.. so you have yourself to blame i am afraid

Seriously. All you people seem to think that just because the government isn't in possession of the money means the money is gone. Money not being taxed for isn't a bad thing.

Hey Scout, I know that this is a very old thread but seriously you have no knowledge in running your business in your own country (if you're really a Filipino). You better learn and visit the government agencies before visiting WHT and shout all your non-sense.

I have friends in hosting business in the Philippines and none of them are paying this hefty amount of taxes.

Your comments are seriously unbelievable and even tell the world some inconsistent information. I think I'm convinced that you're not a Filipino because you do not even know this...

3% pag-ibig fund (I have no idea what this is..)

This agency provide affordable housing with millions of Filipinos just to let you know. Google it and learn and don't just rant unless your basis are solid. And if you do not like Philippines...get out! Go somewhere else because Filipinos don't need you either.

VERY, EXTREMELY, SUPER, TO THE HIGHEST LEVEL...EXAGGERATED STORY!

Makes me glad I live in the United Kingdom. Yeah we have some high taxes, but most of our government isn't that corrupt and we don't have to pay bribes to police or inspectors.

We just drown in regulation instead..

I cannot give you any advice but if it were me, I'd choose using the wedding money for marriage and not the business. If what you say is true and you'll be closing up shop at some point, why give away more money to the government.

This situation is typical for many countries. In Moldova you also have to pay pay and pay. Sometimes bribes. So, majority of companies keep a big part of business in the shadow.

Taxes are needed to run a country, the less economically stable the county is the more tax the people living in it have too pay. Its simple to understand. You must have known about the high tax when you decided to enter into starting up a business there.. so you have yourself to blame i am afraid

Did you play Sim City before? To build up a city or a country, it is very important to cut down tax rate and build up a good living/commercial enviroment first, that way is to attract people and businesses.

3rd world countries could get low interests loan from the world bank to build up the dream.

Some goverments are doing something wrong, so the small hosts should find a way to survive, something like disappearing 6 years and old debt will be cancelled?

I know in Japan, there are some companies to help people to disappear, the law said, the debt will be cancelled, but you can only come back in 6 years.