Corporate tax is a tax that must be paid by a corporation based on the amount of profit generated. In Philippines, taxation system is governed by the Tax Reform Act 1997, passed into law on December 11, 1997 and became effective on 01 January 1998. The law was aimed at the expanding the country's tax base and maintaining the healthy fiscal standing of the government.
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Tax Type
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Rates
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Corporate Income Taxes
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Domestic/Resident Foreign Corporations Regular Income Tax Rate
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32% of net taxable income
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Non-Resident Corporation Regular Income Tax
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32% of the gross amount of Philippine-source income such as dividend, rents, royalties, compensation, and remuneration for technical services
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Income Tax Rates as Passive Income of Domestic/Resident Corporation
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Dividends received from domestic corporations
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Not subject to tax
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Interest on any currency bank deposit and yield or other monetary benefit from deposit substitutes and from trust fund and similar arrangements
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20% of final tax
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Interest from foreign currency deposits with foreign currency deposit units (FCDUs)
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7.5% of final tax
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gains from sale or exchange of shares of stock not listed and traded in the local stock exchange
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5% capital gains tax (CGT) on net gains not exceeding Peso 100,00 and 10% on the excess.
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Gains from sale or exchange of land or buildings not actually used in business and treated as capital issue
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6% CGT on gross selling price or fair market value, whichever is higher
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Royalties
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20% final tax
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New Taxes for Corporation under the Tax Reform Act of 1997
Minimum Corporate Income Tax (MCIT)
A 2% MCIT on gross income on an annual basis is imposed on corporations whose regular corporate income tax liability is less than the MCIT beginning the fourth taxable year following the year they commenced business operation. Any excess of the MCIT over the normal tax shall be carried forward and credited against the normal tax for the three (3) immediately succeeding taxable years.
Fringe Benefits Tax
Fringe benefits granted to supervisory and managerial employees are subject to 32% tax on the grossed-up monetary value of the fringe benefit. Fringe benefits given by Off Shore Banking Units (OBU), regional operating headquarters of multinational companies, petroleum contractors and subcontractors to qualified alien employees and in certain cases, to Filipino employees, are taxed at 15% of the grossed-up monetary value of the fringed benefit.
Improperly Accumulated Earnings Tax
A 10% tax is imposed on the improperly accumulated earnings of a corporation, except in the case of publicly held corporations, banks, and other non-bank financial intermediaries and insurance companies. When a corporation allows its earnings or profits to accumulate beyond its reasonable needs, it shall be assumed that the purpose is to avoid tax on stockholders, unless proven to the contrary.
