Guide on the Complete List of Taxes in the Philippines for Local and Foreign Businesses
In the Philippines, registered corporations are required to file taxes to two government bodies: 1) the Bureau of Internal Revenue (BIR) or the national taxation authority; and 2) the local government unit (LGU) where their business is located. Taxes filed to BIR are classified as national taxes while taxes filed to the LGU are defined as local taxes.
Corporate Tax Rates for 2023 and Beyond
Under the newly-signed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the corporate income tax (CIT) rates for certain types of corporations have been reduced. The CIT will be reduced further by 1% annually in the next six years. And shall eventually reach 20% by 2027 onwards.
There are four main types of national taxes in the Philippines for corporations, namely:
- Income Tax
- Value-Added Tax
- Excise Tax
- Documentary Stamp Tax
Under CREATE Act, the corporate income tax (CIT) rate for domestic corporations and resident foreign corporations (RFCs) is 25% and based on taxable income or 1% minimum corporate income tax (MCIT) based on gross income, whichever is higher. Non-resident foreign corporations (NRFCs) are subject to the same 25% CIT rate. Regional operating headquarters (ROHQs) are also subject to the 25% CIT rate, a relatively high increase from the previous 10% CIT rate before CREATE Act was passed into law.
Domestic corporations with net taxable income not exceeding ₱5M and total assets not exceeding ₱100M are subject to a 20% CIT rate. Subject to certain conditions, the taxpayer may request the Commissioner of the BIR suspend the MCIT.
Domestic corporations (those incorporated in the Philippines) are taxed on their local and international income. Foreign corporations (those incorporated outside the Philippines) are taxed only on their sources of income within the Philippines. Foreign corporations are further classified into two categories: a) resident foreign corporations (those engaged in trade or business in the Philippines) and b) non-resident foreign corporations (those not engaged in trade or business in the Philippines).
Income tax of domestic and resident foreign corporations is based on their taxable income, or gross income less allowable deductions, while non-resident foreign corporations are taxed on their gross income, without deductions.
Not affected by CREATE Act, the value-added tax (VAT) rate remains at 12%. This rate is applied on the taxable gross selling price of goods and properties as well as the gross value of receipts from services and lease of properties.
Companies in the Philippines that do not exceed ₱3M in actual gross sales or receipts are exempted from remitting and filing VAT. And under CREATE Act, exemptions on VAT for the following are now in effect:
- Sale or distribution, importation, printing, or publication of any educational material covered by the UNESCO agreement including digital and electronic format
- All drugs, vaccines, and medical devices prescribed and used for the treatment of COVID-19
- Capital equipment, its spare parts, and raw materials for the production of personal protective equipment for COVID-19 prevention
- Drugs for the treatment of COVID-19 approved by the FDA for use in clinical trials, including raw materials directly necessary for the production of such drugs
- Sale of prescription drugs and medicines for cancer, mental illness, tuberculosis, diabetes, high cholesterol, hypertension, and kidney disease
Other VAT exemptions can be viewed here.
Also not affected by CREATE Act, an excise tax applies to services and goods manufactured or produced in the Philippines for domestic sales, consumption, or for any other disposition. It also applies to imported goods.
Documentary Stamp Tax
Only affected by TRAIN Law, a documentary stamp tax (DST) is a tax imposed on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale, or transfer of an obligation, right, or property.
Under TRAIN law, the DST rate of ₱1.00 on loan agreements has been increased to ₱1.50 for every ₱200.00 or fractional part thereof of the issue price of the loan agreement or debt instrument. Additionally, the DST rate for other transactions or documents doubled (e.g., DST rate on original issuance of shares is now at ₱2.00 for every ₱200 par value or consideration, from the previous rate of ₱1.00 for every ₱200.00).
Local taxes are imposed and collected by local government units (LGUs). As such, the actual tax rate will depend on the LGU where the business is located. To avoid overcharges, the Local Government Code (LGC) provides for the maximum rates that local governments may impose on corporations in their jurisdiction.
There are two main types of local taxes in the Philippines, namely:
- Real Property Tax
- Business Tax
Real Property Tax
LGUs require businesses to pay real property tax (RPT) on land, buildings, and/or machinery deemed real property, and other improvements. Real property in a city or municipality in Metro Manila is generally subject to RPT of not more than 2% of its taxable value. Real property in the province, on the other hand, is generally subject to RPT of not more than 1% of its taxable value.
PRT is levied annually on the basis of a fixed proportion of the value of the real property (taxable value).
Local Business Tax
LGUs impose local business tax (LBT) based on the gross sales or gross receipts of the previous fiscal year. The actual rate varies depending on the location of the business, but generally shall not exceed 3%.
The Bureau of Local Government Finance (BLGF) exempts the following from paying LBT:
- Businesses certified by the Board of Investments (BOI) as pioneer and non-pioneer for 6-4 years, respectively, from the date of registration
- Businesses that produce, manufacture, refine, distribute, or sell oil, gasoline, and other petroleum products
- Cooperatives duly-registered with the Cooperative Development Authority (CDA)
- Philippine Economic Zone Authority (PEZA)-registered enterprises and other Special Economic Zones, as specified under applicable laws
However, PEZA or BOI-registered entities that generate income from unregistered activities may be required to pay LBT on such income.
Corporate Tax Filing Deadlines
Income Tax Deadlines
The annual income tax deadline in the Philippines is every April 15. The payment made on this date covers the period from January to December of the previous year. Besides filing income taxes annually, corporations are also required to file them quarterly.
The full list of income tax deadlines and their corresponding period covered are as follows:
|January to December of the previous year
|January to March
|April to June
|July to September
Value-Added Tax (VAT) Deadlines
Businesses that earn more than₱3M are required to file VAT. VAT deadlines are set on a monthly and quarterly basis. Monthly VAT must be filed within 20 days from the end of the specific month to which the VAT applies. Quarterly VAT must be filed within 25 days from the end of the relevant quarter.
Though VAT-exempt, those earning less than ₱3M are required to pay a percentage tax, in lieu of VAT.
The full list of VAT deadlines and their corresponding period covered are as follows:
|October to December of the previous year
|January to March
|April to June
|July to September
Excise Tax Deadline
There is no specific deadline for the filing of excise tax returns. However, excise taxes must be paid before the removal of applicable goods and services from their place of production. For more information, click here.
Documentary Stamp Tax (DST) Deadline
DST must be filed within five (5) days after the close of the month when the taxable document was made, signed, issued, accepted, or transferred upon remittance by Revenue Collection Agents of collection from the sale of loose documentary stamps.
Real Property Tax (RPT) Deadline
RPT must be paid annually in full on or before March 31, or in quarterly installments on or before the last day of each quarter. Some LGUs grant discounts for advance payments, for as much as 20% of the annual tax due.
Local Business Tax (LBT) Deadline
LBT must be paid annually on or before January 20, or quarterly, which shall be within the first 20 days of January and of the first month of each subsequent quarter.
- Business Registration Services in the Philippines
- Register a Domestic Corporation in the Philippines
- Register a Branch Office in the Philippines
- Business Permit Renewal Services
- Capital Requirements for Company Formation in the Philippines
- List of Government Agencies in the Philippines for Company Setup
- Common Types of Companies for Foreign Investors