Before concluding 2024, here are the key taxation changes in the Philippines that every business should know before entering 2025.
The year 2025 is poised to usher in significant developments in Philippine taxation, which is reflective of the government’s ongoing efforts to streamline tax administration, stimulate economic growth, and promote equitable fiscal policy.
With that in mind, this article seeks to provide you a comprehensive overview of the critical updates across various tax categories for the upcoming year.
Overview: Philippine Taxation in 2025
For a brief overview, key changes include reduced personal income tax rates for middle-income earners under the TRAIN Law, expanded corporate incentives through the CREATE MORE Act, and simplified tax compliance for MSMEs. Notably, the government will impose taxes on digital services, cryptocurrencies, and single-use plastics, reflecting efforts to modernize tax frameworks and address environmental concerns. Estate tax processes will also be streamlined, with extended amnesty provisions easing the burden on families. These reforms emphasize fiscal equity, economic recovery, and adaptability to technological advancements, encouraging businesses and individuals to stay informed and proactive for 2025.
Higher BIR & BOC Revenue Collection Targets for 2025
Finance Secretary Ralph Recto said that the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) are set to tackle ambitious double-digit revenue growth targets for 2025. Based on the Budget of Expenditures and Sources of Financing (BESF), the BIR is targeting to collect P3.23 trillion next year, while the BOC is aiming to collect about P1.06 trillion in revenues in 2025.
Recto said achieving these goals would require improved efficiency and robust economic growth. As to benefits, experts said the passage of new tax measures next year could also provide much-needed additional revenue streams. By the end of the Marcos administration in 2028, revenues are expected to grow to P6.25 trillion, equivalent to 17 percent of gross domestic product (GDP).1
Income Tax in 2025: Implications of TRAIN Law & Ease of Paying Taxes Act
The Philippine government has been implementing progressive measures to ease the tax burden on individuals, as mandated by the Tax Reform for Acceleration and Inclusion (TRAIN) Law. By 2025, taxpayers can expect the continuation of reduced personal income tax rates, benefitting low- and middle-income earners.
- Rates for Middle-Income Earners
As of 2023, individuals earning ₱250,000 or less annually remain exempt from income tax. The income tax brackets for 2025 remain the same—keeping in mind that such changes are intended to reduce the tax burden on middle-income earners while ensuring that higher-income individuals contribute a higher percentage of their earnings.
a. Income over PHP 250,000 up to PHP 400,000: 15% of the excess over PHP 250,000;
b. Income over PHP 400,000 up to PHP 800,000: PHP 22,500 + 20% of the excess over PHP 400,000.
2. Rates for Individuals Earning Above PHP 8M Annually
Considered to be the highest bracket by the TRAIN Law, the tax rate for individuals earning above PHP 8 million remains at 35%, reflecting the government’s approach to taxing the highest earners at a higher rate.2
3. Ease of Paying Taxes Act
2024 saw the signing of President Ferdinand Marcos Jr. of R.A. No. 11976, also known as the “Ease of Paying Taxes Act,” into law—said law continues to seek improved revenue collection through digitization initiatives, modernizing and increasing the efficiency and effectiveness of tax administration and strengthening taxpayer rights in the process.
Among the law’s salient features include classification of taxpayers into micro, small, medium, and large; electronic or manual filing of returns and payment taxes either to the BIR, through any authorized agent bank or authorized tax software provider; option to pay internal revenue taxes removal to the City or Municipal Treasurer; and elimination of the distinction between documentation and basis of sales of goods and services; and classification of value-added tax (VAT) refund claims into low, medium, and high-risk, among others.3
Corporate Income Tax Rate in 2025: CREATE MORE Act
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act has set the stage for sustained competitiveness in the corporate sector.
Notably, however, the newly-signed Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) Act in November 2024 seeks to make the Philippines as a “destination of choice for investments.”
The new law is guided by five overarching objectives:
- Improving ease of doing business;
- Increasing the competitiveness of tax incentives;
- Strengthening governance and accountability;
- Clarifying value-added tax rules; and
- Transitory for pre-CREATE Registered Business Enterprises (RBEs).
CREATE MORE also addresses local taxation during the Income Tax Holiday and Enhanced Deductions Regime, clarifying areas previously unaddressed by the CREATE Act. This aims to create a fair and balanced local tax system, giving businesses “greater certainty” while ensuring that local communities benefit from their presence. In view thereof, the new law establishes a more efficient approval process by raising the investment capital threshold for Investment Promotion Agencies from PHP 1 billion to PHP15 billion.4
Thus, it is possible to see the following changes and/ or updates to taxation rules come 2025:
- For Businesses
Registered business enterprises (RBEs) under the enhanced deductions regime will benefit from a reduced corporate income tax rate of 20 percent. The new law also grants a 100-percent additional deduction on power expenses to cut the costs for the manufacturing sector. It likewise simplifies local taxation by imposing a local tax on RBEs in lieu of all other local taxes, fees, and charges.5 - Incentives for Startups
New startups may benefit from additional tax holidays or preferential rates in line with the government’s commitment to nurturing entrepreneurial ventures. Expect clearer guidelines on the application of these incentives, which include exemptions from minimum corporate income tax (MCIT) and value-added tax (VAT). - Digital Economy Taxation
The government has signaled its intent to finalize frameworks for taxing the digital economy. For corporations operating e-commerce platforms, cloud services, or other digital businesses, compliance requirements may include detailed reporting of digital transactions and withholding taxes on online sales.
Tax Type | 2025 Tax Rate | Impact |
Standard Corporate Income Tax | 25% | Reduced Tax Rates for Corporations. |
Registered Business Enterprises (RBEs) | 20% | Lower Tax Rates for RBEs under the CREATE MORE Act |
Enhanced Deductions for RBEs | 100% additional deduction on power expenses | Manufacturing sectors benefits from reduced power costs. |
Local Tax for RBEs | Single local tax in lieu of all other local taxes, fees, and charges | Simplifies local taxation for RBEs |
Tax Holidays for Startups | Tax holidays, preferential rates, and exemptions (including VAT and MCIT) | Supports new startups with tax relief and simplification |
Tax Exemptions in 2025: Broadening the Scope
Tax exemptions have always played a crucial role in providing relief to specific sectors.
By 2025, businesses can expect updates to existing exemptions and the introduction of new provisions.
- Expanded Tax Holidays
Under the CREATE MORE Act, the maximum duration of tax incentives availment is extended by 10 years to 27 years from 17 years, to attract strategic and high-quality investments. - Climate-Responsive Incentives
Companies investing in sustainable practices, such as renewable energy projects or energy-efficient technologies, are likely to receive enhanced tax benefits. This aligns with global trends in addressing climate change through fiscal policies. - Updated VAT Thresholds
MSMEs can anticipate adjustments to the VAT registration threshold, potentially raising the minimum gross annual sales required for VAT liability. This change is expected to alleviate compliance burdens for smaller businesses. The CREATE MORE Act further streamlines the value-added tax (VAT) refund process by limiting the documentary requirements and addressing the VAT concerns raised by export-oriented enterprises.
Estate Tax: Simplified Processes and Incentives
Estate tax reforms introduced under the TRAIN Law aim to simplify compliance while reducing the tax burden on Filipino families.
Moving into 2025, the following developments are noteworthy:
1. Unified Flat Rate
The flat estate tax rate of 6%, introduced in 2018, remains unchanged. However, the government has emphasized improving the ease of estate tax settlements through digital platforms and streamlined processes.
2. Amnesty Extension
Finance Secretary Benjamin E. Diokno welcomed the Senate’s approval of Senate Bill No. 2219 extending the period of availment of the estate tax amnesty until June 14, 2025, and it covers the estates of persons who passed away on or before May 31, 2022. Penalties and interests have been waived and the estate tax rate is set at 6%6. This measure helps families resolve long-standing tax liabilities while unlocking assets tied up in legal disputes. Secretary Diokno states:
“The timely enactment of this measure is crucial, as it will provide much-needed relief to individuals and families facing extraordinary circumstances, while supporting the national government’s efforts to spur development by incentivizing the regularization of assets.”
Possible New Taxation Laws In 20257
The government scaled down its projected 2025 revenues from priority tax measures as key structural reforms for taxes on digital services, pickup trucks and single-use plastics.8
- Excise Tax on Single-Use Plastics
The Department of Finance (DOF) said the proposed excise tax on single-use plastic bags (SUPs) will not only generate more than PHP31 billion in estimated revenue but will also help address climate change, thus, the DOF said that it is proposing a weight-based rate for easier and fairer tax administration wherein a PHP100-per-kilogram excise tax on SUP bags will be imposed with a 4-percent annual indexation beginning the third year of implementation. The proposal covers SUP bags that are not recyclable, such as “ice,” “labo,” or ”sando” bag with or without handles.The PHP31.52-billion estimated revenues to be generated from 2025 to 2028 shall be earmarked for the Department of Environment and Natural Resources’ solid waste management program in municipalities. The DOF said the proposed measure seeks to curb the high volume of mismanaged plastics in the country and serves as the Philippines’ contribution to the global movement of reducing pollution and adopting more sustainable practices while raising revenues to spur economic growth.9 - Simplified Tax Compliance for MSMEs
Tax experts advocate for the government to simplify tax regimes for micro, small, and medium enterprises (MSMEs)—Asian Consulting Group chief tax advisor Mon Abrea said the Ease of Paying Taxes Law has started simplifying taxation for small businesses, but this can still be improved. According to Abrea, “[w]e may have to consider flat tax. There will be no other taxes but 10 percent, and that’s all that micro and small taxpayers should be paying,” he said.Proposed legislation could simplify compliance for small enterprises by consolidating taxes into a single return or allowing presumptive tax regimes based on gross receipts.10 - Cryptocurrency
As the Philippines’ central bank, the Bangko Sentral ng Pilipinas (BSP) is crucial in regulating the nation’s monetary policy. In an effort to embrace the evolving financial landscape, the BSP issued Circular No. 944 in 2017, acknowledging virtual currencies as a valid payment method. The Philippine government has recently implemented a capital gains tax of up to 15 percent on cryptocurrency transactions to regulate and tax the growing digital asset market. This tax applies to profits made from the sale or exchange of cryptocurrencies and purchases made using cryptocurrencies. There have been discussions by the government about implementing new taxes on crypto by 2024, causing concerns that Manila may adopt India’s approach and levy a 30 percent flat tax on all crypto earnings. 11With the growing popularity of cryptocurrencies and digital assets, new tax measures may target gains from these transactions this 2025. The government is expected to issue regulations clarifying reporting requirements and applicable rates. - Tax on Foreign Digital Services Providers (DSPs)
The Bureau of Internal Revenue (BIR) has published draft regulations for the imposition of 12% VAT on foreign digital services providers (DSPs) to consumers . This follows the October signing of Senate Bill 2528. In October 2024, the President signed Senate Bill 2528, which introduces a 12% value-added tax (VAT) on non-resident digital service providers (DSPs) in the Philippines, effective by June 2025. The phased implementation will start on July 1, 2025, with collections beginning later that year. Taxable services include online search engines, cloud services, and streaming media.12
Digital services are to be defined as any service that is supplied over the internet or other electronic network with the use of information technology and where the supply of the service is essentially automated. It shall include: Online search engine; Online marketplace or e-marketplace; Cloud service; Online media and advertising; Online platform; or Digital goods—save for exceptions such as educational services and Services of bank, non-bank financial intermediaries performing quasi-banking functions and other non-bank financial intermediaries, including those rendered through different digital platforms.
Conclusion
The Philippine tax landscape in 2025 is set to evolve with the times, balancing economic recovery, equity, and sustainability. Businesses that adapt to these changes proactively will not only ensure compliance but also capitalize on opportunities for growth. As these updates unfold, staying informed and working with trusted legal and tax advisors will be crucial.
As these tax reforms unfold, it is crucial for businesses and individuals to not only understand the changes but also to explore how they might impact their specific circumstances. Exploring legal research platforms can help access case digests related to taxation and tax law precedents, helping them better understand the real-world implications of these reforms.
Whether you’re a local entrepreneur or an international investor, understanding the implications of these taxation changes will position you to navigate 2025 with confidence and foresight. The future of taxation in the Philippines holds.
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- https://www.philstar.com/business/2024/12/26/2409803/bir-customs-face-steep-targets-2025
↩︎ - https://greatdayhr.ph/blog/train-law-income-tax-rates/ ↩︎
- https://pco.gov.ph/news_releases/pbbm-signs-ease-of-paying-taxes-act-to-boost-economy-protect-safeguard-taxpayer-rights/
↩︎ - https://pco.gov.ph/news_releases/create-more-law-to-turn-ph-into-premier-investment-hub-pbbm/ ↩︎
- https://www.pna.gov.ph/articles/1237528
↩︎ - https://business.inquirer.net/488317/estate-tax-planning#:~:text=Before%20ending%2C%20it%20is%20worth,rate%20is%20set%20at%206%25.
↩︎ - https://library.croneri.co.uk/wkus-gdn01-gdn01163578
↩︎ - https://business.inquirer.net/472374/govt-sees-lower-tax-yield-in-25-amid-delayed-reforms
↩︎ - https://www.pna.gov.ph/articles/1221474
↩︎ - https://www.abs-cbn.com/business/2024/2/19/tax-expert-wants-simplified-tax-regimes-for-msmes-1328 ↩︎
- https://fintechnews.ph/57859/crypto/understanding-cryptocurrency-regulations-in-the-philippines/
↩︎ - https://www.fiscal-requirements.com/news/3484
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