A domestic corporation is subject to tax on its worldwide income. On the other hand, a foreign corporation is subject to tax only on income from Philippine sources.
Domestic corporations
The following corporate income tax (CIT) rates apply to domestic corporations:
| Income | CITrate (%) |
| In general, on net income from all sources. | 25 |
| On net income from all sources of domestic corporations with total assets not exceeding PHP 100 million and total net taxable income not exceeding PHP 5 million. | 20 |
| Minimum corporate income tax (MCIT) on gross income, beginning in the fourth taxable year following the year of commencement of business operations. MCIT is imposed where the CIT at 25% is less than 2% MCIT on gross income. | 2 |
| Proprietary educational institutions and non-profit hospitals, on net income if gross income from unrelated trade, business, and other activities does not exceed 50% of the total gross income from all sources. | 10 |
| Non-stock, non-profit educational institutions (all assets and revenues used actually, directly, and exclusively for educational purposes) and other non-profit organisations. | Exempt |
Certain passive income from domestic sources is subject to final tax rather than ordinary income tax (see the Income determination section).
Resident foreign corporations
Resident foreign corporations (i.e. foreign corporations engaged in trade or business in the Philippines through a branch office) are taxed in the same manner as domestic corporations (except on capital gains on the sale of buildings not used in business, which are taxable as ordinary income), but only on Philippine-source income.
| Income | CIT rate (%) |
| Income of international carriers on their gross Philippine billings | 2.5 |
| Interest income from foreign currency loans granted by foreign currency deposit units (FCDUs) of depository banks to residents other than offshore business units (OBUs) or other FCDUsof depository banks | 10 |
| Income of FCDUs of depository banks from foreign currency transactions with non-residents, OBUs or other FCDUs, and local commercial banks (including branches of foreign banks) authorised by the Bangko Sentral ng Pilipinas (BSP; central bank) to transact business with FCDUs | Exempt |
| Regional or area headquarters of multinational corporations that do not earn or derive income from the Philippines, and that act as supervisory, communications, and coordinating centres for their affiliates, subsidiaries, or branches in the Asia-Pacific region and other foreign markets | Exempt |
Non-resident foreign corporations
The following corporate tax rates apply to non-resident foreign corporations with respect to gross income derived from sources within the Philippines:
| Tax type | Tax rate (%) |
| Income tax (in general) | 25 |
| Reinsurance premiums | Exempt |
| Interest on foreign loans | 20 |
| Dividends from domestic corporations if the country in which the foreign corporation is domiciled does not impose income tax on such dividends, or allows a tax deemed paid credit of 10% (i.e. the difference between the CIT and 15% tax on dividends) | 15 |
| Rentals and charter fees payable to non-resident owners of vessels chartered by Philippine nationals | 4.5 |
| Rentals, charters, and other fees derived by non-resident lessors of aircraft, machinery, and other equipment | 7.5 |
Lower rates or exemption on the above income may be available under an applicable tax treaty.
Local income taxes
See Local government taxes in the Other taxes section for a description of local taxes on sales or receipts.
FAQs
Corporate income tax
The CIT of 25 percent is levied on net income on all sources. Non-resident companies are taxed only on their Philippine-sourced income. Domestic companies are taxed on their worldwide income.
What is the special corporate income tax in the Philippines? ›
After ITH, export enterprises can avail a 5% Special Corporate Income Tax OR Enhanced Deductions for 10 years. Export companies availing the 5% SCIT based on gross income shall pay and remit as follows: 3% to be remitted to the National Government. 2% to be remitted to the Treasury of the host Local Government Unit.
Is a corporation that is subject to taxes on income gained in the Philippines? ›
A Philippine (domestic) corporation is taxed on its worldwide income. A domestic corporation is taxed on income from foreign sources when earned or received, depending on the accounting method used by the taxpayer.
Is corporate income taxable to the corporation as it is earned? ›
The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.
What is the basic corporate tax in the Philippines? ›
In general, the corporation tax rate is 25% for listed companies and is 35% for unlisted public and private limited companies. For Banks, insurance and other financial institutions, the corporation tax rate is 37.5% if listed and 40% if not listed. For Merchant Bank Corporatetax rate is 37.5%.
What is the formula for corporate tax? ›
Evaluate the corporation's taxable income using this formula: Taxable income = Adjusted Gross Income – All Applicable Deductions. Multiply the corporation tax percentage with the taxable income to determine the corporation tax liability: Corporate Tax=Taxable Income × Corporate Tax Rate.
What are tax exempt corporations in the Philippines? ›
Corporate Tax Exemptions
Government-Owned or Controlled Corporations (GOCCs): Most GOCCs are exempt from corporate income tax, but not all. Educational Institutions: Educational institutions which are non-profit are exempted from tax on income used for educational purposes.
What is the corporate tax rate in the Philippines 2024? ›
With respect to their taxable income (Philippine-sourced or worldwide, as applicable), local branches and local subsidiaries of non-local corporations are subject to the same tax rates: 25% corporate income tax based on taxable income; or. 2% MCIT based on gross income.
Who is exempted from tax in the Philippines? ›
The Tax Code of the Philippines lists the following individuals or organizations that are qualified for tax exemption: Individuals with no income, minimum wage earners, and those whose taxable income does not exceed PHP 250,000. Non-stock, nonprofit educational institutions.
Is 20k salary taxable in the Philippines? ›
No, a monthly income of ₱20,000 is not taxable in the Philippines. With a monthly benefit contribution of around ₱1,400 and, therefore, a taxable income of ₱18,600, the resulting amount is way below the lower range of ₱20,833 (or ₱250,000 / 12) indicated by BIR for the computation of withholding tax.
Income Tax Rate Table in 2023
| Annual Income | Tax Rate |
|---|
| PHP 250,000 and below | None (0%) |
| Above PHP 250,000 to PHP 400,000 | 15% of the excess over PHP 250,000 |
| Above PHP 400,000 to PHP 800,000 | PHP 22,500 + 20% of the excess over PHP 400,000 |
| Above PHP 800,000 to PHP 2,000,000 | PHP 102,500 +25% of the excess over PHP 800,000 |
2 more rowsEmployees earning up to ₱250,000 annually (or ₱20,833 monthly) are still exempt from paying income tax. Employees earning over ₱250,000 but not over ₱8,000,000 annually (or over ₱20,833 but not over ₱666,666 monthly) have lower tax rates ranging from 15% to 30%, from 20% to 32% previously.
What is included in corporate taxable income? ›
The principal items of corporation income include gross sales receipts, dividends and interest received, rent and royalty income, and capital gains.
What counts as corporate income? ›
Corporate Tax Base
The CIT generally taxes a business' profits, which are revenues (what a business makes in sales) minus costs (the cost of doing business). However, costs of capital investments—such as equipment, machinery, and buildings—cannot be deducted when they incur.
How do corporations avoid taxes? ›
How do profitable corporations get away with paying no U.S. income tax? Their most lucrative (and perfectly legal) tax avoidance strategies include accelerated depreciation, the offshoring of profits, generous deductions for appreciated employee stock options, and tax credits.
What is the corporate tax rate in the Philippines 2025? ›
Corporate Tax Rate in Philippines is expected to reach 25.00 percent by the end of 2024, according to Trading Economics global macro models and analysts expectations. In the long-term, the Philippines Corporate Tax Rate is projected to trend around 25.00 percent in 2025, according to our econometric models.
What is the professional tax in the Philippines? ›
The PFWT is computed at a rate of 5% to 15% of your gross payment. It will be withheld by you, the payer when you make the payment. It will then be remitted to the BIR or Bureau of Internal Revenue together with your other tax obligations.
