One of the most important taxes companies need to pay is the corporate income tax. But don’t worry—understanding how corporate income tax rates work and how the CREATE Act affects your tax rate can help you make better decision and save money, and plan ahead more strategically.
What is Corporate Income Tax?
Corporate income tax is the tax imposed on a corporation’s net income, or total earnings after expenses. It applies to:
- Domestic corporations (those organized under Philippine laws)
- Resident foreign corporations (foreign companies doing business in the Philippines)
- Non-resident foreign corporations (earning income sourced from the Philippines)
💡 Corporate tax is separate from individual income tax and is different from taxes like VAT or percentage tax.
Corporate Income Tax Rates in the Philippines for 2025
Here’s a quick guide to the current rates:
- 25% – Regular corporate income tax rate
- 20% – For corporations with:
- Net taxable income not more than PHP 5 million
- Total assets not over PHP 100 million (excluding land)
- 2% MCIT (Minimum Corporate Income Tax) – Applied on gross income, starting the 4th year of operations (only if higher than regular tax due)
Corporation Tax on CREATE ACT
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act was signed in 2021 to help businesses recover from the effects of the pandemic. It made several important changes:
✅ Reduced tax rates from 30% to 25%, and to 20% for small businesses
✅ Provided incentives for businesses registered under PEZA, BOI, and other investment promotion agencies
✅ Allowed additional deductions for labor, training, and infrastructure expenses
However, a recently a proposed amendment called CREATE MORE Act (CREATE to Maximize Opportunities for Reinvigorating the Economy) is drafted to further strengthen CREATE—the government aims to make the tax incentive system more transparent and efficient by:
📌 Enhancing the fiscal incentives framework
📌 Encouraging green and digital economy investments
📌 Introducing performance-based incentive schemes
CREATE and CREATE MORE work together to promote long-term investments, encourage innovation, and make the Philippines more competitive for local and foreign investors.
There are forms that you need to file for your corporate income taxes, such as:
- BIR Form 1702Q – Filed every quarter
- BIR Form 1702-RT – For Regular Corporations (subject to regular income tax rate)
- BIR Form 1702-EX – For corporations exempt from income tax (e.g., non-stock, non-profit)
- BIR Form 1702-MX – For corporations with mixed income (taxable and exempt)
But if you have limited time to prepare these forms, with Taxumo you can easily prepare & file these forms, and pay your taxes within minutes.
