Income Tax Rates on Corporations

I. For General Professional Partnerships

Net Income of the Partnerships 0%

II. For Domestic Corporations

Normal income tax, the taxable income of a corporation during each taxable year is
multiplied with the applicable rate of 30%. Under CREATE Act, the rate is 25% effective
July 1, 2020.

Domestic MSME corporations with a taxable income of P5M and below, and with total
assets of not more than P100M – rate is 20%.

Rates of Tax on Certain Passive Income of Corporations Tax Rate

1. Interest from currency deposits, trust funds, deposit substitutes and 20%
similar arrangements received by domestic corporations
2. Royalties from sources within the Philippines 20%
3. Interest Income from a Depository Bank under Expanded Foreign 15%
Currency Deposit System
4. Cash and Property Dividends received by a domestic corporation from 0%
another domestic corporation
5. Capital gains from the sale, exchange or other disposition of lands 6%
and/or building
6. Net Capital gains from sale of shares of stock not traded in the stock 15%
exchange
Tax on Income Derived under the Expanded Foreign Currency Deposit
System.
On Income derived by depository banks under the expanded foreign EXEMPT from
currency deposit systems from foreign currency transactions with non- all taxes, except
residents, OBUs in the Philippines, local commercial banks including net income
branches of foreign banks that may be authorized by BSP from such
transactions as
may be
specified by
SOF,
recommended
by MB, subject
to 10% tax rate
7. Inter-corporate dividends Exempt
Requisites for Exemption for Foreign-sourced Dividend
• Dividends received/remitted to PH are reinvested within the next
taxable year from receipt thereof
 • Limited to funding working capital requirements, capital
expenditures, dividend payments, investment in domestic
subsidiaries, and infrastructure projects
• DC directly holds at least 20% outstanding shares of the FC for a
minimum of 2 years

III. *Beginning on the 4th year immediately following the year in which such corporation
commenced its business operations, when the minimum corporate income tax is greater
than the tax computed using the normal income tax.

Minimum corporate income tax of two percent (2%) of the gross income

Provided, That effective July 1, 2020 until June 30, 2023, the rate shall be one percent (1%)

IV. For Resident Foreign Corporation

1) a. In General – on taxable income derived from sources within the 25%

Philippines Effective July 1,
2020
b. Minimum Corporate Income Tax – on gross income 2%
1%
Effective July 1,
2020 until June
30, 2023
c. Improperly Accumulated Earnings – on improperly accumulated REPEALED
taxable income
2) International Carriers – on gross Philippine billings 2½%
3) Regional Operating Headquarters of Multinational Companies– on 10%
taxable income Regular
Corporate
Income Tax
Rate effective
January 1, 2022
4.) Regional or Area Headquarters of Multinational Companies Exempt
5) Corporation Covered by Special Laws Rate specified
under the
respective
special laws
6) Offshore Banking Units (OBUs)
In general – Income derived by OBUs from foreign currency transactions Exempt
with non-residents, other OBUs, local commercial banks and branches of
foreign banks authorized by BSP
On interest income derived from foreign currency loans granted to 10%
residents other than offshore banking units or local commercial banks,
local branches of foreign banks authorized by BSP to transact business
with OBUs
 7) Income derived under the Expanded Foreign Currency Deposit System
Interest income derived by a depository bank under the expanded 15 %
foreign currency deposit system.
On Income derived by depository banks under the expanded foreign Exempt from all
currency deposit systems from foreign currency transactions with non- taxes, except net
residents, OBUs in the Philippines, local commercial banks including income from
branches of foreign banks that may be authorized by BSP such
transactions as
may be
specified by
SOF,
recommended
by MB, subject
to regular
income tax
On interest income derived from foreign currency loans granted by 10%
depository banks under the expanded foreign currency deposit systems to
residents other than offshore banking units in the Philippines or other
depository banks under the expanded system
8.) Branch Profit Remittances – on total profits applied or earmarked for 15%
remittance without any deduction for the tax component thereof (except
those activities which are registered with the Philippines Economic Zone
Authority)
9.) Interest from currency deposits, trust funds, deposit substitutes and 20%
similar arrangements and royalties
10.) Royalties derived from sources within the Philippines 20%
11.) Capital Gains from Sale of Shares of Stock Not Traded in the Stock 15%
Exchange

V. For Non-Resident Foreign Corporation

Effective January 1, 2021, shall pay a tax equal to twenty-five percent (25%) of the gross
income received during each taxable year from all sources within the Philippines.

Nonresident Cinematographic Film Owner, 25% of gross income

Lessor or Distributor
Nonresident Owner or Lessor of Vessels 4 ½ % of gross rentals
Chartered by Philippine Nationals.
Nonresident Owner or Lessor of Aircraft, 7 ½ % of gross rentals or fees
Machineries and Other Equipment

Tax on Certain Incomes Final Withholding Tax Rate

Interest on Foreign Loans 20%
Intercorporate Dividends (from DC) 25%
or
 Effective July 1, 2020, tax credit is the reduced to 15% (if NRFC country of
difference between regular income tax rate domicile allows credit of taxes paid in PH)
and 15% tax on dividends
Capital Gains from Sale of Shares of Stock 15%
not Traded in the Stock Exchange