The ProGRESS Tax Bill: What a ₱350,000 Threshold Would Change for Foreign Residents

The Philippines is preparing its next round of tax reform, and the headline number is a friendly one. The Department of Finance wants the annual personal income tax exemption threshold raised from ₱250,000 to ₱350,000.

For a Filipino employee on a middle income, that is a straightforward gain. For a foreigner living in Davao, the answer depends on a question that comes before any threshold: what kind of taxpayer are you in Philippine law, and do you have any Philippine income at all? Many foreign residents will find the change makes no difference to them. Some will save real money. A few will feel the bill mainly through what it costs, not what it gives.

What the Department of Finance has proposed

The package is called the Promoting Growth, Revenue, and Equity towards Socio-Economic Sustainability Bill, ProGRESS for short. On 3 September 2026 the Department of Finance (DOF) opened nationwide stakeholder consultations on it in Manila, with around 300 representatives of business, government, academe, civil society and the media.

According to the DOF release, the proposal contains:

• •A higher personal income tax threshold, from ₱250,000 to ₱350,000 a year, which the department says could save individual taxpayers up to ₱17,500 per bracket.
• •An exemption for micro and small enterprises from the minimum corporate income tax.
• •Higher excise tax on vehicles valued above ₱8 million, and a higher tax on other non-essential goods, with coverage extended to private sea vessels and aircraft.
• •A 15% global minimum tax on large multinational enterprise groups.
• •An update of the Motor Vehicle Road Users' Charge, whose rates the DOF says have not changed in more than two decades.
• •Revenue measures on products with social, environmental and health costs, with the money earmarked for the Universal Health Care Act and other programmes.

Where the bill stands

It is a proposal, not a law. The DOF describes the consultations as a way to gather inputs "in refining the ProGRESS Bill", and its release named a second leg in Batangas City on 11 September, with further stops around the country to follow. At the launch, Karlo Fermin Adriano, the DOF undersecretary for fiscal policy and monitoring, said: "We will continue to dialogue with our stakeholders and carefully consider their concerns as we refine ProGRESS." Up to the end of September the DOF published no further release on the bill.

Nothing about your tax changes until Congress passes a law, the President signs it, and the BIR issues the regulations that tell taxpayers and withholding agents how to apply it. Details can move at every one of those steps. The DOF release does not publish the full proposed rate schedule, only the new threshold and the headline saving, so any exact calculation today would be a guess. We will not make one.

What you can do now is work out whether the threshold would touch you at all.

The first question: which kind of taxpayer are you?

The Philippine Tax Code sorts individuals into categories, and the category decides what is taxed and how. Our guide to resident alien versus non-resident status goes through this in depth. The short version, from the text of the National Internal Revenue Code:

A resident alien is "an individual whose residence is within the Philippines and who is not a citizen thereof" (Section 22(F)). Most foreigners who have moved here on a residence visa and actually live here fall into this group.

Every alien individual, resident or not, is taxable only on Philippine-source income. Section 23(D) says so in one line: an alien individual, "whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines." Your foreign pension, your foreign dividends and your foreign rental income are outside the Philippine income tax, whether or not you bring the money into the country.

A non-resident alien engaged in trade or business is taxed "in the same manner as an individual citizen and a resident alien individual" on Philippine-source income (Section 25(A)(1)). The same section adds that a non-resident alien who stays in the Philippines for an aggregate of more than 180 days in a calendar year is deemed to be doing business here.

A non-resident alien not engaged in trade or business, the NRA-NETB of the BIR forms, pays a flat 25% on gross Philippine-source income (Section 25(B)). There is no exemption threshold in that rule, and no deductions.

The ₱250,000 threshold, and the proposed ₱350,000, live in the graduated schedule of Section 24. That schedule applies to citizens, resident aliens and non-residents engaged in trade or business. It does not apply to the 25% flat tax on NRA-NETBs, and it does not apply to income that is taxed through final withholding at source, such as interest on a Philippine bank deposit.

Who would feel a higher threshold

Here is today's schedule, in force since 1 January 2023, as set out in the BIR's digest of Revenue Regulations No. 8-2018:

• •Up to ₱250,000: no tax.
• •Over ₱250,000 to ₱400,000: 15% of the excess over ₱250,000.
• •Over ₱400,000 to ₱800,000: ₱22,500 plus 20% of the excess over ₱400,000.
• •Over ₱800,000 to ₱2,000,000: ₱102,500 plus 25% of the excess over ₱800,000.
• •Over ₱2,000,000 to ₱8,000,000: ₱402,500 plus 30% of the excess over ₱2,000,000.
• •Over ₱8,000,000: ₱2,202,500 plus 35% of the excess over ₱8,000,000.

On that schedule, the ₱100,000 between ₱250,000 and ₱350,000 is currently taxed at 15%, which is ₱15,000. The DOF's own figure for the saving is "up to ₱17,500 per bracket", which suggests the proposal touches more than the bottom line of the table. Until the proposed schedule is published, treat ₱15,000 as what the threshold alone is worth on today's rates, and the DOF figure as the department's claim.

The foreign residents who would notice the change are those with Philippine-source income taxed at graduated rates. In practice that means four groups.

Owners of a rented-out condo. Rent from a unit in Davao is Philippine-source income. Suppose your taxable income from it, after deductions, comes to ₱300,000 a year. On today's schedule ₱50,000 of that sits in the 15% band, so the tax is ₱7,500. With a ₱350,000 threshold, that figure would drop to nothing, if the rest of the schedule stays as it is.

Foreigners employed in the Philippines. A salary paid for work done here is Philippine-source income, and the employer withholds tax from it under the graduated rates. Anyone on a local payroll would see the change in the monthly payslip once the BIR updates the withholding tables.

The self-employed and small traders. Individuals with business or professional income here are taxed on the graduated schedule, or can opt for 8% of gross receipts above ₱250,000 if they stay under the VAT threshold. The DOF release does not say whether the ₱250,000 in the 8% option would move with the main threshold. That is one detail to watch.

Your Filipino spouse. A citizen of the Philippines who lives here is taxable on worldwide income under Section 23(A). Spouses compute their income tax separately, so a Filipina or Filipino partner with a local job or business benefits on their own return, regardless of how you are taxed.

People earning the statutory minimum wage are already exempt from income tax on it, so the change does not alter the position of your household staff. Our piece on the Davao minimum wage covers what their pay rate is.

Who would not

A retiree living on a foreign pension. If your only income is a pension paid from abroad, Section 23(D) already keeps it outside Philippine income tax. A higher threshold changes nothing, because there is nothing on the Philippine return for it to apply to. Whether your home country taxes that pension is a separate matter, governed by its own rules and by any tax treaty; our overview of what happens to US, UK, Canadian, Australian and New Zealand pensions is the place to start.

A non-resident alien not engaged in business. If you spend part of the year here, stay under 180 days, and receive Philippine income, you are in the 25% flat regime on gross income. The graduated threshold does not reach you.

Income taxed at source. Bank interest and other passive income taxed by final withholding never enters the graduated schedule, so the threshold does not affect it.

This is why the same headline can be worth ₱15,000 to one foreign resident and nothing at all to the neighbour in the next unit. Our tax overview for foreign residents sets out the wider framework.

Small companies and the minimum corporate income tax

Foreigners who run a small Philippine corporation know the minimum corporate income tax, or MCIT. Under Section 27(E) of the Tax Code it is a tax on gross income that applies from the fourth taxable year after a company starts operating, whenever it is higher than the regular corporate income tax. The rate has been 2% of gross income since 1 July 2023, after the temporary 1% under the CREATE Act ended, as the BIR confirmed in Revenue Memorandum Circular No. 69-2023.

The MCIT bites hardest on a company with thin margins or a bad year, because it is calculated on gross income, not profit. The ProGRESS proposal would exempt micro and small enterprises from it. The DOF release does not define those terms, and the definition will decide who qualifies. If you own or plan a small company, and our page on company structures for foreigners explains the options, this is the part of the bill to follow most closely.

The costs that come with the relief

The relief is paid for by other taxes, and some of those will reach you whatever your tax status.

Cars. The update of the Motor Vehicle Road Users' Charge would affect every vehicle owner, foreign or Filipino. The DOF has not published the new rates in its release. If you drive here, the practicalities of driving in Davao stay the same; the annual cost may not.

Luxury purchases. The higher excise on vehicles above ₱8 million, and the extension of the tax on non-essential goods to private boats and aircraft, will concern few readers, but those few should time their purchases with the bill's progress in mind.

Everyday products. The DOF announces revenue measures on products with social, environmental and health costs, but its release names neither the products nor the rates. Whatever they turn out to be, you would notice them at the checkout, not on a tax return.

What to do now

Check your category. Resident alien, non-resident engaged in business, or non-resident not engaged in business. Everything else follows from that, and the 180-day count is the most common trap for people who split the year.

List your Philippine-source income. Rent from a local property, a local salary, business income, interest on a local account. If the list is empty, the threshold is not your concern.

Do not change anything yet. Withholding, quarterly payments and annual returns follow the law in force. Until a new law and its regulations are out, the ₱250,000 threshold is the one that applies.

Watch for three details. The full proposed rate schedule, whether the 8% option moves with the threshold, and the definition of micro and small enterprises. Those three decide what the bill is worth to foreign residents with local income.

Keep an eye on the effective date. The DOF release gives no date for the new threshold. That date will be in the law itself.

What to watch next

The next steps are the remaining consultation stops, the bill's progress in Congress, and, if it passes, the implementing regulations from the BIR. Each will say more than the headline number.

For most foreign retirees in Davao, the ProGRESS Bill is a story about other people's payslips and, at most, slightly dearer shopping. For foreigners with rental income, a local salary or a small company, it is worth following closely, because the gain is real and the fine print is still being written.