Corporate - Taxes on corporate incomeLast reviewed - 25 January 2023
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.
The following corporate income tax (CIT) rates apply to domestic corporations:
|Income||CIT rate (%)|
|In general, on net income from all sources.||25|
|On net income from all sources of domestic corporations with total assets not exceeding 100 million Philippine pesos (PHP) 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 (1% from 1 July 2020 to 30 June 2023)|
|Proprietary educational institutions and hospitals that are non-profit, 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 (1% from 1 July 2020 to 30 June 2023)|
|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).
Improperly accumulated earnings tax
The improperly accumulated earnings tax of 10% imposed on improperly accumulated income is repealed under the CREATE Law.
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 to residents other than offshore business units (OBUs) or other foreign currency deposit units (FCDUs) of depository banks||10|
|Income of FCDUsof depository banks from foreign currency transactions with non-residents, OBUsor otherFCDUs, and local commercial banks (including branches of foreign banks) authorised by the Bangko Sentral ng Pilipinas (BSP; central bank) to transact business withFCDUs||Exempt|
|Regional operating headquarters (ROHQs) earning income from the Philippines||25|
|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 respectto gross income derived from sources within the Philippines:
|Tax type||Tax rate (%)|
|Income tax (in general)||25|
|Interest on foreign loans||20|
|Dividends from domestic corporationsif 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 15%or the difference (i.e. 10% beginning 1 July 2020) between the CITand 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.