TAX CENTER

What is a Corporate Income Tax CIT?

Corporate Income Tax is the tax a business pays based on its profits during a financial year. To compute your corporate income tax, you need to deduct the company expenses, the employees’ wages, and the equipment cost.

Types of Corporate Income Taxes in the Philippines

Domestic Corporations

Starting July 2020, net income from all sources is subject to a twenty-five percent (25%) corporate income tax rate.
Net income from all sources with total assets not exceeding P100 million and total net taxable income not exceeding P5 million is subject to a twenty percent (20%) corporate income tax rate.
Minimum corporate income tax {MCIT) of two percent (2%) is imposed starting on the fourth taxable year following the year of commencement of business operations. MCIT is imposed where the CIT at twenty-five percent is less than two percent MCIT on gross income or one percent (1%) starting on July 2020 to June 2030.

Proprietary educational institutions and hospitals which are nonprofit, on net income if gross income from unrelated trade, business, and other activities that does not exceed 50% of the total gross income from all sources shall be subject to ten percent (10%) corporate income tax rate or one percent (1%) starting from July 2020 to June 2030.
Non-stock, nonprofit educational institutions (all assets and revenues used actually, directly, and exclusively for educational purposes) and other nonprofit organizations are exempt from the corporate income tax rate.

Improperly Accumulated Earnings Tax

BIR Revenue Regulations No. 5-2021 provides that the repeal of IAET applies to the entire taxable year for all fiscal years/taxable years ending after the effectivity of CREATE.

Resident Foreign Corporations

The income of international carriers’ gross Philippine bill’s income is subject to two point five percent (2.5%) corporate income tax rate.
Interest income from foreign currency loans granted to residents other than offshore business units (OBUs) or other FCDUs and local commercial banks (including branches of foreign banks) authorized by the Bangko Sentral ng Pilipinas to transact business with FCDUs are exempt from the corporate tax income rate.
Regional operating headquarters (ROHQ) earning income from the Philippines is subject to a ten percent (10%) corporate income tax rate or twenty-five percent (25%) starting in January 2022.
Regional or area headquarters of multinational corporations that do not earn income from the Philippines and serve as communications, coordinating, and supervisory centers for their affiliates, branches, or subsidiaries in the Asia-Pacific region and other foreign markets are exempt from the corporate income tax rate.

Non-Resident Foreign Corporations

Starting January 2021, income tax is subject to a twenty-five percent (25%) corporate income tax rate.
Reinsurance premiums are exempted from the corporate income tax rate.
Interest income from foreign loans is subject to a twenty percent (20%) corporate income tax rate.
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 fifteen percent (15%) or the difference (i.e., 10% beginning 1 July 2020) between the CIT and 15% tax on dividends.
Rentals and charter fees payable to non-resident owners of vessels chartered by Philippine nationals are subject to four point five percent (4.5%) corporate income tax.
Rentals, charters, and other fees derived by non-resident lessors of aircraft, machinery, and other equipment are subject to seven point five percent (7.5%) corporate income tax.