How corporate tax works in Philippines
A domestic corporation is generally taxable on worldwide income. A foreign corporation is generally taxable only on Philippine-source income, with a resident foreign corporation or branch usually taxed on net Philippine-source income and a non-resident foreign corporation generally taxed on gross Philippine-source receipts.
The regular domestic corporate income-tax rate is 25%. A domestic corporation with total assets not exceeding PHP 100 million, excluding land where the business entity is situated, and net taxable income not exceeding PHP 5 million may use the 20% rate.
The minimum corporate income tax is generally 2% of gross income beginning in the fourth taxable year after operations commence when it exceeds the regular corporate income tax. Special rules apply to banks, insurance companies, proprietary educational institutions, non-profit hospitals, international carriers and other regulated sectors.
CREATE MORE can provide income-tax holidays, enhanced deductions, a 5% special corporate income tax or a 20% reduced rate for qualifying registered business enterprises. VAT, withholding tax, local business tax, transfer pricing and payroll compliance remain separate workstreams.
Tax rates at a glance
- Standard domestic corporate tax
- 25%Regular rate
- Qualifying small domestic company
- 20%
- Minimum corporate income tax
- 2% of gross income
- Non-resident foreign corporation
- 25% of gross income
- Qualifying NRFC dividend rate
- 15%
- VAT
- 12%
Who benefits most
These profiles tend to benefit most when the rules match their real residence, payroll and business setup.
FoundersRegional operatorsBPO and service businessesForeign investorsRegistered enterprises
Watch out for
- The 20% small-company rate has two tests: total assets and net taxable income. A company cannot use the rate simply because it is privately owned or has a small headcount.
- The MCIT is not an extra 2% charged on top of the regular corporate tax. It is a minimum comparison that can become payable when the regular tax is lower, subject to the applicable start-year and loss rules.
- CREATE MORE incentives are activity-, registration- and location-dependent. Export sales, economic-zone operations and registered business enterprises need a project-specific incentive analysis.
- A Philippine company can face several layers beyond corporate income tax: 12% VAT, withholding taxes, local business taxes, real property tax, documentary stamp tax and employer payroll contributions.
Frequently asked questions
What is the corporate tax rate in the Philippines?
The standard domestic corporate income-tax rate is 25%. A qualifying domestic corporation with assets up to PHP 100 million and net taxable income up to PHP 5 million may use 20%.
What is the Philippine minimum corporate income tax?
The minimum corporate income tax is generally 2% of gross income beginning in the fourth taxable year after operations start, when that minimum exceeds the regular corporate income tax.
Do foreign companies pay Philippine corporate tax?
Yes, when they have Philippine-source income. A branch or resident foreign corporation is generally taxed on net Philippine-source income, while a non-resident foreign corporation is generally subject to withholding or final tax on gross Philippine-source receipts.