Corporate Income Tax (CIT) Rates and Filing
Updated June 13, 2026
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Definition
Corporate Income Tax (CIT) is the income tax imposed on the net taxable income of domestic corporations and of foreign corporations doing business in the Philippines. The regular rate is 25%. Domestic corporations with net taxable income of ₱5,000,000 or less and total assets of ₱100,000,000 or less, excluding the land on which the office, plant and equipment stand, pay 20%.
Corporate Income Tax is the tax on the profits of corporations. Under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, RA 11534 of 2021, the regular rate for domestic corporations under Section 27(A) and for resident foreign corporations under Section 28(A)(1) was cut from 30% to 25% effective July 1, 2020. Domestic corporations whose net taxable income does not exceed ₱5,000,000 and whose total assets, excluding land for the office, plant and equipment, do not exceed ₱100,000,000 pay 20%. The 20% rate covers the whole net taxable income of a qualifying corporation; it is not a rate on the first ₱5,000,000 of a larger income. The tax is computed on net taxable income, which is gross income less allowable deductions such as ordinary and necessary business expenses. Corporations file quarterly returns (BIR Form 1702Q) within 60 days after the close of each of the first three quarters and a final adjustment return (BIR Form 1702-RT, 1702-MX or 1702-EX) on or before the 15th day of the fourth month after the close of the taxable year, which is April 15 for calendar-year corporations (NIRC §77).
Detailed explanation
Overview of Corporate Income Tax
Corporate Income Tax (CIT) is the income tax imposed on the net taxable income of corporations in the Philippines. Under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act (RA 11534), the regular rate for domestic corporations and resident foreign corporations is 25% of taxable income, effective July 1, 2020 (NIRC §27(A), §28(A)(1)). Domestic corporations with net taxable income of ₱5,000,000 or less and total assets of ₱100,000,000 or less, excluding land on which the office, plant and equipment are situated, pay 20%.
Who Must Pay CIT
CIT applies to domestic corporations and to foreign corporations engaged in trade or business in the Philippines. Domestic corporations are taxed on their income from all sources, while foreign corporations are taxed only on income from Philippine sources (NIRC §27, §28). A nonresident foreign corporation not doing business in the Philippines pays 25% on its gross Philippine-source income.
Regular CIT Rate: 25%
The 25% rate replaced the earlier 30% rate under the CREATE Act, effective July 1, 2020. It applies to domestic corporations that do not meet the small corporation limits and to resident foreign corporations, on net taxable income, which is gross income minus allowable deductions.
Small Domestic Corporation Rate: 20%
Under the CREATE Act, a domestic corporation pays 20% if its net taxable income does not exceed ₱5,000,000 and its total assets, excluding land on which the office, plant and equipment are situated, do not exceed ₱100,000,000 (NIRC §27(A), proviso). The rate applies to the corporation's whole net taxable income. It is not available to foreign corporations.
Net Taxable Income Calculation
CIT is computed on net taxable income, calculated as gross income minus allowable deductions. Gross income includes income from business operations, such as sales less cost of goods sold, service fees, rental income, and other business income. Allowable deductions include ordinary and necessary business expenses, depreciation, salaries and wages, rent, utilities, and other operating costs, or the 40% optional standard deduction on gross income (NIRC §34). Personal expenses are not deductible, and wagering losses are deductible only up to wagering gains.
Minimum Corporate Income Tax
From the fourth taxable year after a corporation begins operations, it compares its regular income tax with the minimum corporate income tax of 2% of gross income and pays the higher amount (NIRC §27(E)). The MCIT rate was 1% from July 1, 2020 to June 30, 2023.
Filing and Payment Requirements
Corporations file quarterly returns (BIR Form 1702Q) and pay the tax within 60 days after the close of each of the first three quarters. The final adjustment return (BIR Form 1702-RT, 1702-MX or 1702-EX) is due on or before the 15th day of the fourth month following the close of the taxable year, which is April 15 for calendar-year corporations, and quarterly payments are credited against the annual tax (NIRC §75, §77).
Incentives
Registered business enterprises with projects or activities in the Strategic Investment Priority Plan may receive incentives under the CREATE Act, such as an income tax holiday followed by other incentives, through investment promotion agencies like the Board of Investments and PEZA (RA 11534).
Compliance and Penalties
Failure to file the return or pay CIT on time results in a surcharge of 25% of the tax due (50% for willful neglect or a fraudulent return) plus interest at 12% a year from the due date until full payment (NIRC §248, §249). Micro and small taxpayers pay a 10% surcharge and 6% interest. Corporations must preserve books of accounts and accounting records for five years (NIRC §235).
Why it matters
CIT directly affects corporate profitability and investment decisions. Understanding CIT rates, deductions, and filing deadlines is essential for corporations to comply with tax law, avoid penalties, and keep their tax as low as the law allows. Small domestic corporations that meet the income and asset limits benefit from the 20% rate, which improves cash flow. A corporation also needs to compare its regular income tax with the 2% minimum corporate income tax from its fourth taxable year, because it pays whichever is higher.
How it works
Calculate Gross Income
Sum all income from sales, services, rentals, and other sources. For manufacturing and trading companies, gross income from sales is sales less cost of goods sold. For service providers, include fees earned. Exclude items that the law excludes from gross income, such as gifts and inheritances (NIRC §32).
Deduct Allowable Expenses
Subtract ordinary and necessary business expenses, including salaries, rent, utilities, depreciation, and professional fees, or elect the 40% optional standard deduction on gross income. Maintain supporting documents (invoices, payroll records) for each deduction. Foreign income taxes may be deducted or, for domestic corporations, claimed as a tax credit, but not both (NIRC §34).
Determine Net Taxable Income
Net taxable income equals gross income minus allowable deductions. This is the base on which CIT is applied. A domestic corporation may then credit income taxes paid to foreign countries against its Philippine tax, up to the statutory limit; foreign corporations cannot claim this credit (NIRC §34(C)(3) and (4)).
Apply CIT Rate and File Return
Multiply net taxable income by 25%, or by 20% if the corporation is a domestic corporation within the ₱5,000,000 income and ₱100,000,000 asset limits. Compare the result with the 2% minimum corporate income tax on gross income from the fourth taxable year and pay the higher amount. File quarterly returns within 60 days after each of the first three quarters, and the final adjustment return by the 15th day of the fourth month after year-end, crediting quarterly payments (NIRC §27, §77).
Examples
Regular Corporation with ₱5,000,000 Revenue
Juan's Manufacturing Corp. has total assets of ₱150,000,000 and earns ₱5,000,000 in annual sales. After deducting ₱3,200,000 in cost of goods sold, ₱800,000 in salaries, and ₱400,000 in operating expenses, net taxable income is ₱600,000. Because its assets exceed ₱100,000,000, the 25% rate applies: CIT is ₱150,000. This is higher than the 2% MCIT on its ₱1,800,000 gross income (₱36,000), so it pays ₱150,000, less quarterly payments, with the final return due April 15 (NIRC §27(A), §27(E)).
MSME Qualifying for 20% Rate
Maria's Tech Solutions Inc., a domestic corporation with total assets of ₱10,000,000 (excluding land), earns ₱2,000,000 and deducts ₱1,200,000 in expenses, yielding ₱800,000 net taxable income. Its net taxable income is not over ₱5,000,000 and its assets are not over ₱100,000,000, so CIT at 20% is ₱160,000, saving ₱40,000 compared with the 25% rate (NIRC §27(A), as amended by RA 11534).
Foreign Corporation with Philippine Branch
ABC International Corp., a foreign corporation with a Philippine branch, earns ₱3,500,000 from its Philippine operations. After deducting ₱2,100,000 in expenses, net taxable income is ₱1,400,000. As a resident foreign corporation it pays 25% on its Philippine-source taxable income, or ₱350,000; the 20% small corporation rate is for domestic corporations only (NIRC §28(A)(1)).
Corporation with Foreign Tax Credit
XYZ Trading Inc., a domestic corporation, has net taxable income of ₱2,500,000, of which ₱1,000,000 comes from its branch in Singapore, where it paid ₱150,000 in income tax. Philippine CIT at 25% is ₱625,000. The credit limit is ₱625,000 × (₱1,000,000 ÷ ₱2,500,000) = ₱250,000, so the full ₱150,000 foreign tax is creditable, leaving ₱475,000 due (NIRC §34(C)(3) and (4)).
Common misconceptions
- Myth: All corporations pay the same 25% CIT rate regardless of size or type.
- Fact: Domestic corporations with net taxable income of ₱5,000,000 or less and total assets of ₱100,000,000 or less (excluding land for the office, plant and equipment) pay 20%, and registered business enterprises may receive income tax holidays or other incentives under the CREATE Act (RA 11534).
- Myth: CIT is computed on gross revenue without deducting business expenses.
- Fact: CIT is computed on net taxable income, which is gross income minus allowable deductions such as ordinary and necessary business expenses and depreciation. The 2% MCIT on gross income applies only when it is higher than the regular tax (NIRC §27(A), §27(E), §34).
- Myth: Corporations can deduct personal expenses and also take both a deduction and a credit for foreign taxes.
- Fact: Personal expenses are never deductible. Foreign income taxes may be either deducted or, by a domestic corporation, claimed as a tax credit, but not both, and the credit is subject to statutory limits (NIRC §34(C)).
- Myth: Filing the annual ITR is optional if the corporation pays quarterly estimated taxes.
- Fact: All corporations must file a final adjustment return by the 15th day of the fourth month after year-end, even if they paid quarterly. Late filing or payment incurs a 25% surcharge plus 12% annual interest (NIRC §77, §248, §249).
Questions people ask
What is the difference between the 25% and 20% CIT rates?
The regular CIT rate is 25% for domestic corporations and resident foreign corporations (NIRC §27(A), §28(A)(1)). A domestic corporation pays 20% instead if its net taxable income does not exceed ₱5,000,000 and its total assets, excluding the land on which its office, plant and equipment are situated, do not exceed ₱100,000,000 (RA 11534). No separate MSME registration is needed; the test is the corporation's own income and assets.
Can a corporation deduct all business expenses from gross income to compute CIT?
No. Only ordinary and necessary business expenses and other deductions allowed by law are deductible, such as cost of goods sold, salaries, rent, utilities, depreciation, and professional fees (NIRC §34). Personal expenses are not deductible, representation and entertainment expenses are subject to a ceiling, and wagering losses are deductible only up to wagering gains. Foreign income taxes may be deducted or claimed as a credit, but not both.
When is the annual CIT return due, and what happens if it is filed late?
The final adjustment return is due on or before the 15th day of the fourth month following the close of the taxable year (April 15 for calendar-year corporations) (NIRC §77(B)). Late filing or payment incurs a 25% surcharge on the tax due and interest at 12% a year from the due date until full payment (NIRC §248, §249). Micro and small taxpayers pay a 10% surcharge and 6% interest instead (RA 11976).
Are foreign corporations taxed on worldwide income or only Philippine-source income?
Foreign corporations are taxed only on income from Philippine sources. A resident foreign corporation (one doing business in the Philippines, such as through a branch) pays 25% on its Philippine-source taxable income. A nonresident foreign corporation pays 25% on its gross Philippine-source income, generally collected through final withholding. Foreign-source income of a foreign corporation is not subject to Philippine CIT (NIRC §28, as amended by RA 11534).
What is a foreign tax credit, and how does it reduce CIT liability?
A foreign tax credit lets a domestic corporation reduce its Philippine income tax by the income tax it paid to a foreign country. For example, if a corporation earns ₱1,000,000 abroad and pays ₱150,000 in foreign tax, it may claim up to ₱150,000 as a credit. The credit cannot exceed the share of Philippine tax that the foreign taxable income bears to total taxable income, and foreign corporations cannot claim it (NIRC §34(C)(3) and (4)).
When are quarterly corporate income tax returns due?
Every corporation files a quarterly income tax return (BIR Form 1702Q) and pays the tax due within 60 days after the close of each of the first three quarters of the taxable year. Tax paid in the quarters is credited on the final adjustment return, which is due on the 15th day of the fourth month after year-end. Late payment triggers a surcharge and interest at 12% a year (NIRC §75, §77, §248, §249).
Can a corporation get an income tax holiday instead of paying CIT?
A corporation registered with an investment promotion agency, such as the Board of Investments or PEZA, for a project or activity in the Strategic Investment Priority Plan may receive incentives under the CREATE Act, including an income tax holiday for a limited period. The incentives must be applied for and approved before they can be claimed (RA 11534).
In practice
- Corporations must preserve books of accounts and other accounting records for five years from the day after the deadline for the return of the year of the last entry, to support CIT deductions during BIR audits (NIRC §235).
- Small domestic corporations check two figures each year to claim the 20% rate: net taxable income of ₱5,000,000 or less and total assets of ₱100,000,000 or less, excluding land for the office, plant and equipment.
- Quarterly returns are required of every corporation; tax not paid by the quarterly deadline incurs a surcharge and interest at 12% per annum.
- Foreign corporations operating in the Philippines through a branch must file a Philippine return and pay CIT on Philippine-source income; they cannot claim the foreign tax credit, which is available only to citizens and domestic corporations.
- Registered business enterprises in priority activities may receive an income tax holiday or other incentives under the CREATE Act; these must be applied for and approved before claiming.
Next steps
Learn more
Philippine Corporate Income Tax Calculator
MSME Tax Rate Calculator
Quarterly Tax Payment Calculator
BIR Form 1702 Annual Corporate Income Tax Return
BIR Form 1702Q Quarterly Corporate Income Tax Return
BIR Form 1702RT Corporate Income Tax Return For Regular Taxpayers
Complete Guide To Corporate Tax Filing 2026
MSME Tax Benefits And Qualification Requirements
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Links open the recorded source documents or references.
- LawPhil Project (Arellano Law Foundation). “NIRC §27 as amended by RA 11534 (CREATE): 25% regular CIT; 20% on MSME (TI not over P5M and assets not over P100M).” lawphil.net. Republic Act No. 11534 (CREATE), amending NIRC Sec. 27. Source checked .
- Bureau of Internal Revenue. “BIR: Corporate Income Tax under CREATE.” bir.gov.ph. Bureau of Internal Revenue, Income Tax (Corporations). Source checked .