Philippines corporate tax rate, incentives, filing dates, and compliance explained

Why expand to the Philippines?

Counted among the best-performing Asian economies, the Philippines ranks first in high-tech exports and fourth in high-tech imports. It is 50th among 139 countries on the Global Innovation Index 2025, where it's also reported to be among the fastest climbers since 2013.

When business leaders think of the Philippines, they think about its young and English-speaking workforce, economic and political stability, and strategic location. Not only does it grant access to economies like China, Japan, and South Korea, it also serves as a gateway to the 600 million-plus ASEAN market. What's more, it's the access point to major global shipping and air routes for US and European corporations.

What is perhaps less known about the Philippines is its world-class infrastructure, culture of innovation, strong banking systems, and a foreign investment policy that welcomes the establishment of 100% foreign-owned companies. Global businesses with plans to expand are also drawn to its amended tax rules that promote easy tax compliance at the least cost.

Philippines corporate tax

In the Philippines, all companies are subject to corporate income tax (CIT) with resident companies taxed on worldwide income and foreign companies on income derived from the Philippines.

The standard corporate income tax rate is 25%. Small businesses benefit from a preferential rate. A minimum corporate income tax—levied at 2% of gross income—takes effect from a company's fourth taxable year. If the corporate income tax payable at the rate of 25% is less than the minimum corporate tax amount, then the company must pay the latter instead.

The Bureau of Internal Revenue handles tax administration in the Philippines.

Corporate tax rates and structures

Domestic corporations and resident foreign corporations alike are taxed at the regular corporate income tax rate of 25%.

Small domestic corporations with assets not exceeding PHP 100 million and net taxable income not more than PHP 5 million are taxed at a lower rate of 20%. Resident foreign corporations are generally taxed at the same corporate income tax rate as domestic corporations, but their eligibility for the 20% small business tier is more restrictive and subject to BIR interpretation and compliance requirements.

A preferential tax rate of 10% applies to proprietary educational institutions and non-profit hospitals if their gross income from unrelated business activities doesn't exceed 50% of total gross income from all sources.

Non-profit organisations, including non-stock educational institutions, may be exempt from corporate income tax provided they meet specific Bureau of Internal Revenue requirements, such as operating strictly on a not-for-profit basis and ensuring that no part of their net income benefits any member or officer. Most organisations must also secure a formal Certificate of Tax Exemption to maintain their tax-exempt status.

The tax treatment of resident foreign corporations is the same as for domestic corporations, the only difference being that the former are taxed on income derived from Philippine sources while the latter pay tax on worldwide income.

What is taxable income?

Taxable income is the difference between gross income and allowable deductions. Expenses that are essential to operating and developing a business are deductible. They include:

• Ordinary and necessary expenses
  
• R&D expenses
  
• Depreciation and depletion
  
• Bad loans
  
• Taxes
  
• Interest charges
  
• Losses
  
• Permitted charitable contributions
  
• Special deductions for specific businesses (petroleum, mining, insurance, etc).
  

Expenses that are non-deductible include:

• Fines, penalties, and surcharges for late payment of taxes
  
• Taxes, including corporate income tax, income tax levied by a foreign country, donor's tax, and estate tax.
  

Instead of using itemised deductions (as shown above) to calculate corporate income tax, businesses in the Philippines can instead use an optional standard deduction system where they deduct 40% of their gross income. Companies that opt for this method must do so while filing their first quarterly tax return. It remains applicable for the rest of the tax year and cannot be changed. The optional standard deduction method is largely beneficial to companies with relatively low expenses, as it results in a lower taxable income. It also requires minimal record-keeping.

Historical tax rates and recent reforms

The Philippines corporate tax rate has remained constant at 25% since 2021, when it was reduced from 30% with the signing of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. In the decades before, the corporate income tax rate hovered between a high of 35% (1997) and 30%.

In 2024, the Philippines passed the CREATE MORE (Maximise Opportunities for Reinvigorating the Economy) Act, which expanded on its predecessor by enhancing the scope of tax incentives and allowable deductions for Registered Business Enterprises (RBEs).

Under the law, qualifying businesses engaged in government-approved projects and activities can opt into either a Special Corporate Income Tax (SCIT) regime of 5% on gross income in lieu of most taxes, or an Enhanced Deductions Regime (EDR) that applies a reduced 20% corporate income tax rate alongside additional allowable deductions.

Another major reform followed in 2024 with the passing of the Ease of Paying Taxes Act, which amended the National Internal Revenue Code in a bid to modernise tax administration and ease tax compliance. One of the reforms introduced was the file and pay anywhere mechanism, allowing corporate taxpayers to pay taxes electronically or manually at the time of filing returns through any Authorised Agent Bank, Revenue District Office, or Authorised Software Provider. Another was the categorisation of companies into micro, small, medium, and large for the purpose of tax administration.

Tax incentives and exemptions

The Philippines offers businesses tax relief in the form of income tax holidays, preferential tax rates, tax credits and other incentives. Some examples:

• Domestic corporations are eligible for a tax credit on income tax paid to foreign countries, as long as the taxes aren't claimed as deductions. This tax incentive is not open to foreign corporations.
  
• Registered projects and activities in special economic zones may qualify for an income tax holiday of four to seven years, followed by either a 5% Special Corporate Income Tax (SCIT) regime or enhanced deductions for up to 10 years. These incentives are subject to registration, approval, and ongoing compliance with the relevant investment promotion agency, such as the Philippine Economic Zone Authority (PEZA).
  
• Under the CREATE MORE Act, Registered Business Enterprises can opt into an Enhanced Deductions Regime, which applies a reduced 20% corporate income tax rate together with additional allowable deductions, such as increased deductions for power expenses, labour costs, and research and development. The availability and duration of these incentives—which can extend for up to 17 years—depend on the nature of the registered project and the terms approved by the relevant investment promotion agency.
  

Most tax incentives in the Philippines aren't automatic and require formal registration, government approval, and ongoing compliance with performance and reporting obligations. Businesses that fail to meet these conditions risk losing their incentive status and being subject to back taxes, penalties, and interest.

When to file tax returns

Domestic corporations and resident foreign corporations are required to file three quarterly tax returns and a final annual tax return within a 12-month taxable year. Each quarterly return must be filed within 60 days of the end of the quarter, while the annual return is due by the 15th of the fourth month after the end of the tax year. For most companies in the Philippines, the financial year ends in December or March.

Under the file and pay anywhere system, quarterly and annual corporate income tax payments are due on the tax filing dates. Any balance tax due after the quarterly payments must be settled in the final payment, while any excess can be refunded or claimed as a tax credit.

Taxes must be paid in PHP, with foreign currency transactions converted at spot exchange rates. This means that exchange rates have direct tax implications for foreign corporations as they affect their tax liability.

Reducing tax burden with double taxation agreements

The Philippines has double taxation agreements with 44 countries, including Singapore. These treaties aim to prevent income from being taxed twice in two countries, facilitate the exchange of information between contracting states to ensure tax compliance, reduce trade barriers, and attract more foreign investors.

The Singapore-Philippines DTA, which dates back to 1977, is currently in the process of being revamped to reflect current-day economic conditions and boost investment. The treaty outlines the tax treatment of business profits as well as passive income such as dividends, interest, royalties, and capital gains.

For example, under the Singapore–Philippines tax treaty, the withholding tax on dividends paid by a Philippine company to a Singapore company may be reduced to 15% if the Singapore company meets the required ownership thresholds. Withholding tax on interest income and royalties may also be capped at 15%, subject to treaty conditions and procedural requirements.

The actual rate applied depends on the specific treaty article, beneficial ownership status, and approval from the Philippine tax authorities.

Tax treatment of dividends in the Philippines

Dividends received by a domestic or resident foreign corporation from another domestic corporation are exempt from corporate income tax in the Philippines.

However, dividends received by a non-resident foreign corporation from a domestic corporation must pay a final withholding tax at the rate of 25%. Such a company can benefit from a reduced withholding tax rate of 15% if its home country doesn't impose income tax on dividends or allows a 10% deemed-paid tax credit. The final withholding tax on dividends can be reduced further to 10% under double taxation agreements.

Other taxes in the Philippines

Apart from corporate income tax and withholding tax, businesses in the Philippines may be subject to the following taxes:

VAT

A 12% value added tax (VAT) is applicable on the sale of most goods, services, and imported products. Certain transactions are zero-rated, such as exported commodities and the provision of services outside the country. Companies with actual gross sales or receipts below PHP 3 million are generally not required to register for VAT, but are instead subject to a 3% Percentage Tax on gross quarterly sales, unless they voluntarily opt into VAT registration.

Customs duties

Imports into the Philippines invite customs duties, the rates for which depend on the goods' tariff classification. Higher tariffs (between 20% and 50%) are reserved for agricultural products such as meats, vegetables, sugar, and coffee. Businesses from countries that have free trade agreements with the Philippines benefit from lowered tariffs.

Excise taxes

These are imposed on imports, services, and goods manufactured in the Philippines for domestic sale and consumption.

Capital gains tax

The sale, exchange, or disposition of capital assets invites a final capital gains tax of 6%, applicable on gross selling price or fair market value, whichever is higher. If the capital assets sold, exchanged, or transferred are shares that aren't traded through a local or foreign stock exchange, the capital gains tax rate is a flat 15%.

Fringe benefits tax

Company owners pay a final tax of 35% on the grossed-up monetary value of fringe benefits – housing, vehicles, club memberships, foreign travel, interest on loans below market rates, etc, provided to supervisory and managerial employees. Certain fringe benefits are tax-exempt, including those exempted under special laws, employer contributions to employee retirement, insurance, and hospitalisation plans, and benefits to employees who don't hold managerial or supervisory positions.

Donor’s tax

Property transfers intended as gifts are subject to the donor's tax, imposed at the rate of 6% on total gifts in excess of PHP 250,000 made during a calendar year. The tax doesn't apply to property sales, transfers, or exchanges made in the ordinary course of business.

Local government taxes

Domestic and foreign corporations with business operations in the Philippines may also be required to pay local taxes imposed by cities, municipalities, and provinces. Local taxes in the Philippines include local business taxes, real property taxes, and community tax. Tax rates vary from place to place. For example, the local business tax rate depends on location but usually doesn't exceed 3%.

Tax compliance and registration

• Tax compliance in the Philippines starts with obtaining a tax identification number (TIN) from the Bureau of Internal Revenue within 30 days of incorporation.
  
• The next step is to determine the net taxable income and the corporate income tax rate applicable on it. An MSME structured as a domestic corporation may avail of the 20% preferential rate instead of the standard 25%, subject to meeting asset and income thresholds. Resident foreign corporations should confirm eligibility with the Bureau of Internal Revenue before applying this rate.
  
• All companies must dutifully fulfil their tax filing responsibilities. The due date for filing annual returns is the 15th day of the fourth month after the tax year ends, while quarterly returns must be submitted within 60 days of the end of each quarter.
  
• Remember that tax filing deadlines are also when corporate income tax payments are due.
  
• Companies that meet certain conditions, including some types of foreign corporations, may require an annual statutory audit by the Securities and Exchange Commission.
  
• Late filing of returns, non-payment of taxes, and even using the wrong forms can lead to a penalty, such as a 25% surcharge on late payment or filing plus interest, and, in severe cases of non-compliance, even imprisonment.
  
• It's also important to keep accurate and complete records to stay audit-ready.
  
• Companies subject to value-added tax must also pay VAT and file quarterly VAT returns to remain tax-compliant.
  

How Aspire can help your expansion to the Philippines

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• The Aspire business account supports 30+ major currencies across more than 130 countries. Plus, you'll get unlimited virtual corporate cards that enable fast and widespread purchases and payments in a secure manner.
  
• All our products come with zero activation charges, low and transparent fees, market-leading exchange rates, and even cash backs, leading to genuine savings no matter the size of your business.
  
• You'll also benefit from our accounting integrations, which automate processes and reduce errors, allowing you to close your books twice as fast and retrieve invoices, proof of payment, and other supporting documents in just a few clicks.
  

Frequently asked questions

What is the corporate tax rate in the Philippines 2025?

The Philippines corporate tax rate in 2025 was 25%, and remains the same in 2026.

What is corporate tax in the Philippines?

The Philippines levies corporate tax on net income at the rate of 25%, with reduced rates available for small businesses (20%) and eligible educational institutions and non-profit hospitals (10%).

What is the minimum corporate income tax in the Philippines?

Companies must pay a minimum corporate income tax at the rate of 2% of gross income from the fourth taxable year if this amount is higher than their liability under corporate income tax at 25%.

How to compute corporate tax in the Philippines?

To compute corporate income tax, take gross income and deduct allowable expenses. The result is net taxable income, to which the appropriate corporate income tax rate can be applied.

How much tax for small businesses in the Philippines?

A preferential tax rate of 20% is applicable primarily to small domestic corporations that meet the asset and income thresholds. Resident foreign corporations are generally taxed at the regular corporate income tax rate and should confirm with the Bureau of Internal Revenue whether they qualify for the small business tier.

Is the Philippines a tax haven?

The Philippines isn't a tax haven, but it offers significant tax incentives to attract foreign investors.

How much income is taxable for a small business in the Philippines?

Small businesses are taxed at 20% if their net taxable income doesn't exceed PHP 5 million. Anything above attracts the regular corporate income tax rate of 25%.