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Corporate Income Tax in the Philippines for Foreign-Owned Companies

How corporate income tax works for foreign-owned Philippine companies in 2026 — the 25%/20% rates, MCIT, and how Chamberlain keeps you compliant at a fixed fee.

Reviewed by Paul Chamberlain · Updated June 18, 2026

For a foreign investor setting up in the Philippines, corporate income tax is the central compliance obligation. The framework is governed by the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act (RA 11534) and its successor, the CREATE MORE Act (RA 12066, November 2024), which expanded the incentive landscape without changing the headline rates.

The Two Corporate Income Tax Rates

The Regular Corporate Income Tax (RCIT) sits at 25% of net taxable income for most companies, including:

  • Domestic corporations (incorporated in the Philippines) that exceed the small-business thresholds
  • Resident foreign corporations — branches and regional offices of foreign companies deriving income from Philippine sources

A 20% RCIT applies to domestic corporations where net taxable income for the year does not exceed ₱5 million and total assets (excluding land on which the business is located) do not exceed ₱100 million. This relief is available to qualifying domestic subsidiaries — it does not extend to a foreign branch.

Minimum Corporate Income Tax (MCIT)

From its fourth taxable year onward, a company pays whichever is higher: the standard RCIT calculation or the MCIT of 2% on gross income. The MCIT is a floor — it ensures a baseline tax contribution even in loss years or years with heavy deductions. Any MCIT paid in excess of the RCIT may be carried forward and credited against future RCIT liability for up to three succeeding taxable years.

What “Taxable Income” Means

Net taxable income is gross income (revenue from all sources) minus allowable deductions under the National Internal Revenue Code (NIRC). The most common deductions for operating companies include cost of services or goods sold, compensation expense, interest (subject to a ceiling), depreciation, and taxes paid other than income tax. Proper documentation of deductions is where compliance risk concentrates — BIR audit exposure is highest when deductions are unsupported.

How Chamberlain Helps

Chamberlain handles the full income tax compliance cycle: quarterly income tax returns (BIR Form 1702Q), the annual ITR (BIR Form 1702), book-keeping aligned with BIR requirements, and coordination with your auditor for the Audited Financial Statements required by the SEC and BIR.

Our fees are fixed — no hourly billing, no surprise add-ons at year-end. See our pricing or book a consultation to scope out your requirements.

If your company is eligible for registered incentives (PEZA, BOI), your income tax treatment changes significantly. See CREATE MORE tax incentives for details on Income Tax Holidays and the Special Corporate Income Tax rate.

For the full picture of ongoing tax obligations — VAT, withholding, BIR filings — visit the taxes hub.

Frequently asked questions

What is the corporate income tax rate in the Philippines?

Generally 25% (Regular Corporate Income Tax or RCIT), with a 20% rate available to smaller domestic corporations whose net taxable income does not exceed ₱5 million and whose total assets do not exceed ₱100 million (excluding land). This distinction is set by the CREATE Act.

What is MCIT and when does it apply?

The Minimum Corporate Income Tax (MCIT) is a 2% tax on gross income. It applies from the fourth taxable year of operations onward, and only when the MCIT exceeds the regular corporate income tax liability for that year.

Does the 20% reduced rate apply to a foreign-owned company?

Not automatically. The 20% rate applies to qualifying domestic corporations only. A branch of a foreign corporation (a resident foreign corporation) is taxed at the flat 25% RCIT rate on Philippine-source income, with no reduced-rate option.

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