Understanding corporate income tax (CIT) is essential for any foreign company operating in the Philippines. The headline rate is competitive by regional standards, and the CREATE MORE Act (Republic Act No. 12066, effective November 2024) introduced further incentives for registered investors. Here is what you need to know for the 2026 tax year.
The standard corporate income tax rates
Domestic corporations — those incorporated under Philippine law, including foreign-owned subsidiaries — pay CIT on their worldwide income. Resident foreign corporations (branches, representative offices) pay CIT only on income sourced within the Philippines.
| Corporation type | CIT rate |
|---|---|
| Standard domestic or resident foreign | 25% of net taxable income |
| Small domestic corp (net income ≤ PHP 5M, assets ≤ PHP 100M) | 20% of net taxable income |
| Minimum Corporate Income Tax (MCIT) | 2% of gross income |
The MCIT applies from the fourth taxable year of operations onward, whenever it exceeds the regular CIT computation. It functions as a floor — ensuring companies with minimal declared net income still pay something. Newly incorporated companies are MCIT-exempt for the first three years.
CREATE MORE Act: reduced rates for registered investors
The CREATE MORE Act (RA 12066), which took effect on 28 November 2024, expanded incentives available to Registered Business Enterprises (RBEs) — companies registered with an Investment Promotion Agency (IPA) such as PEZA, BOI, CEZA, or AFAB.
Under the Enhanced Deductions Regime (EDR), RBEs pay a 20% CIT on net taxable income from their registered activities (reduced from 25%). The EDR also allows enhanced deductions including 100% of power expenses, 50% of training costs, and 50% of domestic labour costs.
Alternatively, RBEs may opt for the Special Corporate Income Tax (SCIT) at 5% of gross income earned, in lieu of all national and local taxes on the registered activity.
Both regimes are available after an Income Tax Holiday (ITH) period of 4 to 7 years, depending on project classification and location. See our PEZA vs BOI guide for a side-by-side comparison.
Filing and payment obligations
Philippine CIT follows a fiscal year basis (calendar or approved alternative year-end). Key filings:
- Quarterly income tax returns — due within 60 days after each quarter-end
- Annual income tax return (Form 1702) — due 15 April of the following year (or within 105 days of the fiscal year-end)
- Minimum corporate income tax — computed and reported on the same forms
The Ease of Paying Taxes (EOPT) Act (RA 11976, effective January 2024) simplified filing procedures: taxpayers can now file and pay at any Authorised Agent Bank or Revenue District Office regardless of venue, and e-filing through the eFPS or eBIRForms portal is mandatory for large taxpayers.
Deductible expenses
Ordinary and necessary business expenses are deductible. Common deductions include:
- Salaries, wages, and statutory benefits (SSS, PhilHealth, Pag-IBIG employer shares)
- Rent, utilities, and depreciation on business assets
- Interest on business loans (subject to a ceiling tied to interest income)
- Losses from business operations (net operating loss may be carried forward three years under the standard rules)
What foreign-owned companies should do first
Confirm your entity type, your IPA registration status (or decision to register), and your applicable CIT regime before your first quarter-end. Choosing the wrong regime or missing a filing deadline carries penalties and surcharges. Our tax compliance service covers CIT registration, return preparation, and liaison with the BIR. Book a consultation to map out your tax position.
Frequently asked questions
What is the corporate income tax rate in the Philippines in 2026?
The standard rate is 25% of net taxable income. Domestic corporations with net taxable income not exceeding PHP 5 million and total assets not exceeding PHP 100 million pay a reduced rate of 20%.
What is the Minimum Corporate Income Tax (MCIT)?
The MCIT is 2% of gross income, imposed from the fourth taxable year of operations if it exceeds the regular CIT. It was temporarily reduced during COVID-19 but reverted to 2% — confirm the current rate with your tax advisor.
Can a foreign-owned company pay a lower rate under CREATE MORE?
Yes. Registered Business Enterprises (RBEs) — including foreign-owned ones — registered with PEZA, BOI or another IPA and under the Enhanced Deductions Regime (EDR) pay a reduced CIT of 20% on their registered activities.
Official sources
Primary references this guide is checked against.