Corporate Income Tax Philippines: Complete 2025 Guide for Businesses

Corporate income tax is an unavoidable consideration for growing businesses in the Philippines. Understanding how it works and when it kicks in helps you file correctly, avoid unnecessary costs, and plan your finances better.

This guide walks you through the essentials: current tax rates, filing deadlines, and how to calculate what your business owes. We'll explain the standard 25% rate,¹ the 20% preferential rate for smaller companies, and when the 2% minimum corporate income tax comes into play.²

If your business deals with overseas suppliers or international clients, currency exchange rates matter more than you might think. They directly affect your reported income and expenses, which means they impact your tax calculations too. We'll show you how handling foreign transactions with tools like Wise Business, keeps your numbers accurate, and helps you save on unnecessary fees commonly charged by many corporate banks.

Table of contents
What is Corporate Income Tax (CIT) in the Philippines? The impact of currency exchange rates on taxable income The corporate income tax compliance process Common corporate tax pitfalls and how to avoid them Comparing tax regimes: which is right for your business? Frequently asked questions

What is Corporate Income Tax (CIT) in the Philippines?

Corporate income tax is a direct tax on the net profits your company makes. It's based on a simple principle: if your business generates profit, the government takes a slice.

In the Philippines, different types of companies pay different rates. The system has specific thresholds and categories, so knowing where your business fits matters. Compliance isn't optional - you need to file returns and pay on time, or you'll face penalties and interest charges that add up fast.

The Bureau of Internal Revenue (BIR) oversees all corporate tax matters. They set the deadlines, process the returns, and enforce the rules. Getting familiar with their requirements early saves catching up later.

➡️Check out our guide to BIR Business Registration ⬅️

Understanding the Philippine corporate income tax landscape

Key rates and taxable base

The standard corporate income tax rate in the Philippines is 25% for domestic and resident foreign corporations.¹ This rate applies to most businesses operating in the country.

However, micro, small, and medium-sized enterprises (MSMEs) get a break - they pay just 20% on their taxable income. To qualify, your company needs to meet specific criteria around revenue and employee count; including net income of less than PHP 5,000,000 and assets of less than PHP 100,000,000.¹

Your tax bill is calculated on net taxable income, which means your gross income minus allowable deductions. This includes legitimate business expenses like salaries, rent, utilities, and supplies - anything you can properly document and justify as necessary for running your business.

There's also something called Minimum Corporate Income Tax (MCIT). This is a 2% tax on gross income that kicks in from your fourth taxable year of operations.² You pay whichever is higher: your regular corporate income tax or the MCIT. It's designed to ensure companies contribute something even in years when they report low profits.

Types of corporate income and their tax treatment

Not all income is taxed the same way. The Philippines distinguishes between regular corporate income (from your core business operations), passive income (like interest and royalties), and capital gains (from selling assets).

• Regular business income goes through your standard corporate income tax calculation.
• Passive income and capital gains often have separate tax treatments and rates, sometimes with final withholding tax applied at source.

Understanding these distinctions helps you plan better and avoid surprises when tax time arrives.

The impact of currency exchange rates on taxable income

Here's something many businesses overlook: if you deal in foreign currencies, those transactions need to be converted to Philippine pesos for tax purposes.

The exchange rate you use matters. If you're paying suppliers in USD or receiving payments in EUR, the peso equivalent of those amounts directly affects your reported income and expenses - and therefore your tax liability.

💡Using a transparent business account solution like Wise Business for international transactions means you always get the mid-market exchange rate with no hidden markups. Banks often add their own margin to exchange rates, which can quietly inflate your costs and throw off your profit calculations. When every peso counts toward your tax bill, knowing exactly what you're paying makes a real difference.

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The corporate income tax compliance process

Step 1: Determining taxable income

Start by identifying all your sources of gross income for the year. This includes sales revenue, service fees, interest income, and any other money flowing into your business.

Next, subtract your allowable deductions. These are legitimate business expenses the BIR recognises - things like employee salaries, office rent, utilities, supplies, depreciation, and interest on business loans.

For businesses with international transactions, accurate foreign currency conversion is essential here.

If you paid a supplier USD 10,000 when the rate was PHP 56.50, that expense needs to be recorded as PHP 565,000. Getting these conversions right ensures your taxable income calculation is solid.

Wise Business helps by providing transparent, real-time exchange rates for all your cross-border transactions.

Step 2: Calculating tax liability

Once you know your taxable income, apply the appropriate rate.

For most companies, that's 25%. For qualified MSMEs, it's 20%.

Don't forget about MCIT. From your fourth year of business onwards, calculate 2% of your gross income. You'll pay whichever amount is higher - your regular corporate income tax or the MCIT.

Step 3: Filing tax returns

The BIR requires both quarterly and annual corporate income tax returns. The main forms you'll need are BIR Form 1702-RT for the annual return and BIR Form 1702-MX for quarterly returns.

Quarterly returns are due within 60 days after the end of each quarter.² That means:

• First quarter: May 31
• Second quarter: August 31
• Third quarter: November 30

Your annual return must be filed on or before April 15 of the following year.

Missing these deadlines triggers penalties, so mark them in your calendar well in advance.

Step 4: Paying taxes due

You can't just file your return and walk away. The calculated tax liability must be paid through authorised channels before the deadline - or you’ll incur at least a 25% surcharge.²

The BIR accepts payments through Authorised Agent Banks (AABs), which provide machine validation, or through Revenue Collection Officers where no AABs are available. Electronic payment options are also available, including eFPS, credit/debit cards, and mobile payments.

Keep all your payment receipts. If there's ever a question about your filing, you'll need proof of payment.

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Common corporate tax pitfalls and how to avoid them

Misclassification of income and expenses

The BIR can disallow deductions that aren't properly documented or don't have a clear business purpose. And using a personal account instead of a business account won’t protect you from a hefty tax bill.

So, you must keep detailed records. Every expense you claim should have supporting documents - receipts, invoices, contracts. Make sure personal expenses stay separate from business ones.

Failure to account for withholding taxes

When you pay suppliers, contractors, or professionals, you might need to withhold tax from those payments and remit it to the BIR.

Different payment types have different withholding rates:

• 10% for professional fees paid to individuals,
• 5% on rental payments,
• 2% on payments to contractors.⁴

Missing these withholding obligations creates problems for both you and the people you're paying.

Overlooking international tax implications and currency exchange

Businesses with international dealings face extra complexity. Poor handling of currency exchange can lead you to misstate your profits and, therefore, your tax liability.

If you're using bank exchange rates with hidden markups, you might be recording expenses that are artificially high or income that's artificially low. Over time, these distortions add up.

Wise's transparent approach to foreign exchange removes this risk. You see exactly what rate you're getting, with no surprises. For businesses paying overseas suppliers or receiving payments from international clients, this clarity helps keep your books accurate and your tax calculations reliable.

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Comparing tax regimes: which is right for your business?

The Philippines offers different tax treatments depending on your company size and situation. Here's how they stack up:

Tax Regime	Rate	Eligibility	Calculation Method	When It's Beneficial
Regular Corporate Income Tax	25%¹	All domestic and resident foreign corporations	Applied to net taxable income (gross income minus allowable deductions)	Standard rate for most businesses; allows full deduction of legitimate business expenses
Preferential Tax Rate for MSMEs	20%²	Micro, small, and medium-sized enterprises meeting size criteria	Applied to net taxable income	Best for smaller businesses that qualify based on revenue and employee count - saves 5% compared to standard rate
Minimum Corporate Income Tax (MCIT)	2%²	All corporations from their 4th taxable year onwards	Applied to gross income when it exceeds regular tax due	Becomes applicable when your profit margin is very low or you report a loss; ensures minimum tax contribution

*Details accurate as of 9th October 2025

The MCIT applies from your fourth taxable year of operations, and you pay it only when the 2% of gross income exceeds your regular corporate income tax.

Choosing the right approach means understanding your business structure and projected income. Many MSMEs benefit significantly from the 20% rate, but you need to ensure you meet the qualification criteria. The MCIT serves as a safety net for the government - even if your business reports minimal profit, you're still contributing based on your gross receipts.

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Tax incentives and economic zones

The Philippines offers various tax incentives for businesses operating in special economic zones or engaged in certain priority sectors. These can significantly reduce your effective tax rate, sometimes down to preferential rates or even tax holidays for qualifying periods.

If you're considering setting up in a PEZA zone or pursuing Board of Investments incentives, factor these potential savings into your planning. The application process requires documentation and approval, so start early if you think your business might qualify.

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Frequently asked questions

What is the main corporate income tax rate in the Philippines for 2025?

The standard rate is 25% for most domestic and resident foreign corporations. Qualified micro, small, and medium-sized enterprises pay 20%.

How does currency exchange affect my corporate income tax calculation in the Philippines?

All foreign currency transactions must be converted to Philippine pesos for tax reporting. The exchange rate you use directly impacts your reported income and expenses, which determines your taxable income.

What are the key deadlines for filing Philippine corporate income tax?

Quarterly returns are due within 60 days after each quarter ends. Annual returns must be filed by April 15 of the following year.

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Conclusion

Getting your corporate income tax rate right, filing on time, and calculating your liability accurately protects your business from penalties and helps you plan for the future.

For businesses handling international transactions, accurate currency management becomes even more important. Exchange rate markups and poor conversion tracking can distort your financial picture and lead to tax miscalculations.

Wise Business simplifies this by giving you transparent exchange rates, low fees, and clear tracking of all your international payments. Whether you're paying suppliers overseas or receiving payments from foreign clients, you get the mid-market rate every time - no hidden costs, no surprises.

💡Are bank accounts limited to USD, EUR, or GBP options holding back your business? With a Wise Business multi-currency account, you can access over 10 local account numbers — far more currency options than the handful most banks offer. Plus, Wise makes it easy to hold, send, receive, and exchange 40+ currencies from a single account. With the freedom to send and receive payments in more currencies globally, you can focus on what matters most: growing a local business that knows no borders.

• Obtain account details to receive payments in USD, EUR, GBP, SGD, HKD and more for a one-time fee of 1,400 PHP.
• Zero fees when you get paid via ACH, FAST, InstaPay/PESONet, & other local transfers.
• Send money to pay invoices, suppliers & contractors fast, with less fees
• Always get the mid-market rate with transparent conversion fees starting from 0.57%.
• Pay your bills and ad-hoc overseas expenses using the Wise Business card without hefty foreign transaction fees.
• Seamless integrations with popular accounting software.

➡️Get started with Wise Business today

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Sources:

1 - PWC - CREATE Tax Schemes

2 - BIR - Form 1702Q

3 - BIR - Income Tax Forms

4 - BIR - Tax Withholding Form

Sources checked on 9th October 2025.