Tax on Corporation

A domestic corporation is subject to tax on its worldwide income. On the other hand, a foreign
corporation is subject to tax only on income from Philippine sources.

Domestic corporations

The following corporate income tax (CIT) rates apply to domestic corporations:

Income CIT rate (%)

In general, on net income from all sources. 30

Minimum corporate income tax (MCIT) on gross income, beginning in the fourth
taxable year following the year of commencement of business operations. MCIT 2
is imposed where the CIT at 30% is less than 2% MCIT on gross income.

Proprietary educational institutions and non-profit hospitals, on net income if

gross income from unrelated trade, business, and other activities does not 10
exceed 50% of the total gross income from all sources.

Non-stock, non-profit educational institutions (all assets and revenues used

actually, directly, and exclusively for educational purposes) and other non-profit Exempt
organizations.

Certain passive income from domestic sources is subject to final tax rather than ordinary income
tax.

Improperly accumulated earnings tax

An improperly accumulated earnings tax of 10% is imposed on improperly accumulated income.

The tax applies to every domestic corporation formed or used for the purpose of avoiding
income tax with respect to its shareholders, or the shareholders of any other corporation, by
permitting earnings and profits to accumulate instead of being divided or distributed. Exceptions
are made for publicly held corporations, banks and non-bank financial intermediaries, and
insurance companies.

Resident foreign corporations

Resident foreign corporations (i.e. foreign corporations engaged in trade or business in the
Philippines through a branch office) are taxed in the same manner as domestic corporations
(except on capital gains on the sale of buildings not used in business, which are taxable as
ordinary income), but only on Philippine-source income.

Income CIT rate (%)

Income of international carriers on their gross Philippine billings 2.5

Interest income from foreign currency loans granted to residents other than
10
offshore business units (OBUs) or local commercial banks

Income of OBUs and foreign currency deposit units (FCDUs) of depository banks
from foreign currency transactions with non-residents, other OBUs or FCDUs,
and local commercial banks (including branches of foreign banks) authorized by Exempt
the Bangko Sentral ng Pilipinas (BSP; central bank) to transact business with
OBUs and FCDUs

Regional operating headquarters (ROHQs) earning income from the Philippines 10

Regional or area headquarters of multinational corporations that do not earn or

derive income from the Philippines, and that act as supervisory,
Exempt
communications, and coordinating centers for their affiliates, subsidiaries, or
branches in the Asia-Pacific region and other foreign markets

Non-resident foreign corporations

The following corporate tax rates apply to non-resident foreign corporations with respect to
gross income derived from sources within the Philippines:

Tax type Tax rate (%)

Income tax (in general) 30

Reinsurance premiums Exempt

Interest on foreign loans 20

Dividends from domestic corporations if the country in which the foreign

corporation is domiciled does not impose income tax on such dividends, or 15
allows a tax deemed paid credit of 15% 

Rentals and charter fees payable to non-resident owners of vessels chartered by

4.5
Philippine nationals

Rentals, charters, and other fees derived by non-resident lessors of aircraft,

7.5
machinery, and other equipment

Lower rates or exemption on the above income may be available under an applicable tax treaty.