Annual income tax returns for companies in the Philippines
Every company registered with the BIR files an annual income tax return, reconciling its quarterly payments and settling the year’s tax by 15 April. We prepare the return, the audited statements behind it, and file it electronically, for domestic and foreign-owned companies alike.
The corporate annual income tax return
Under Section 76 of the National Internal Revenue Code, every corporation files an annual income tax return that reports its net taxable income for the year, reconciles the quarterly payments it has already made, and settles the final tax due. It is the return that closes the company’s tax year with the Bureau of Internal Revenue.
The rates and the rules sit under the CREATE Act and the more recent CREATE MORE Act, which set the 25 percent standard rate, the lower rate for smaller domestic companies, and the incentives for registered enterprises. What a given company pays comes down to its size, where its income is earned, and which deductions it takes.
Corporate income tax rates
What each kind of company pays on its income.
| Regime | Rate | Applies to |
|---|---|---|
| Regular corporate income tax | 25% | Most domestic and resident foreign corporations, on net taxable income |
| Preferential rate for MSMEs | 20% | Domestic corporations with net taxable income up to PHP 5M and total assets up to PHP 100M, excluding land |
| Minimum corporate income tax | 2% of gross income | All corporations, from the 4th year, when it exceeds the regular tax |
| Non-resident foreign corporations | 25% | Philippine-sourced gross income, with no deductions |
The 20 percent MSME rate is not automatic. Both the income and the asset tests are checked each year, so a company can move between 20 and 25 percent as it grows.
How taxable income is worked out
A company’s tax is built from its net taxable income, which is gross income less allowable deductions, taxed at the rate that applies to it, unless the minimum tax comes out higher.
Gross income is your total business receipts less the cost of sales or services, before VAT, returns, and discounts. From it you take either itemised deductions, the documented business expenses such as salaries, rent, interest, and bad debts, or the Optional Standard Deduction, a flat 40 percent of gross income that needs no receipts. The OSD is simpler, but once you elect it for the year it cannot be changed.
Two rules sit on top. The minimum corporate income tax, 2 percent of gross income, applies from your fourth year and is paid whenever it exceeds the regular tax, with the excess creditable against the regular tax for the next three years. And a non-resident foreign corporation is taxed on its gross Philippine income at 25 percent, with no deductions at all.
BIR forms and documents
Which return your company files, and what goes with it.
| Form | Used by |
|---|---|
| 1702-RT | Corporations on the regular 25% or 20% rate only, whether they take itemised deductions or the 40% OSD |
| 1702-MX | Corporations with income under multiple or special rates, or with part-exempt income |
| 1702-EX | Exempt corporations, or those with no taxable income |
| 1702Q | The quarterly return for the first three quarters, reconciled in the annual return |
Filed with the annual return are your audited financial statements, required once gross annual sales exceed PHP 3 million, the schedule of itemised deductions where you use them, the trial balance and general ledger behind the figures, and your Certificate of Registration, BIR Form 2303.
Deadlines and filing
The annual return is due on or before 15 April for a calendar-year company, the 15th day of the fourth month after the year-end. Before it, you file a quarterly return on Form 1702Q within 60 days of the end of each of the first three quarters, and those payments are credited against the annual tax. A return is required even for a year with no income or no tax due, so a nil return still has to be filed.
Filing is now electronic. Corporate annual returns go through the BIR’s eFPS, eBIRForms, or an accredited tax software provider, with manual filing allowed only where the BIR confirms its system is unavailable. Late or missed filing, nil returns included, draws a 25 percent surcharge, 12 percent annual interest, and a compromise penalty.
The deadline does not move, and the surcharge for missing it is mechanical. Let our Manila team prepare and file the AITR off your audited accounts, on time.
Your AITR, handled by Emerhub
A BIR-accredited team that has filed for foreign-owned companies for over a decade.
Full BIR compliance
Your filing kept in line with the current BIR rules, the CREATE and Ease of Paying Taxes changes included, to keep audit risk and penalties down.
Lower your tax, legally
Every deduction and incentive you are entitled to, applied in full, so you pay the minimum the law requires and no more.
Every deadline met
Your quarterly and annual returns tracked and filed on time, so late-filing surcharges and interest never arise.
Electronic filing
The whole return run through the BIR’s eFPS or eBIRForms, filed and acknowledged, with the paperwork kept for you.
Philippines corporate tax questions
What company owners ask before they file.
What is the corporate income tax rate in the Philippines?
The standard rate is 25 percent of net taxable income for most domestic and resident foreign corporations. A reduced 20 percent rate applies to domestic MSMEs with net taxable income up to PHP 5 million and total assets up to PHP 100 million (excluding land).
Who gets the 20% MSME rate?
A domestic corporation with net taxable income of PHP 5 million or less and total assets (excluding land) of PHP 100 million or less. Both tests are checked each year, so a company can move between 20 and 25 percent as it grows.
What is the minimum corporate income tax (MCIT)?
2 percent of gross income, applied from the company’s fourth year of operation when it exceeds the regular corporate income tax. Any MCIT paid in excess of the regular tax can be carried forward and credited against the regular tax for the next three years.
When is the annual return due?
On or before 15 April for calendar-year companies, the 15th day of the fourth month after the fiscal year-end. The quarterly returns (1702Q) are due within 60 days of the end of each of the first three quarters.
Itemised deductions or the Optional Standard Deduction?
Either. Itemised deductions are the documented business expenses (salaries, rent, interest, bad debts). The OSD is a flat 40 percent of gross income that needs no receipts. The OSD is simpler but once elected for the year it cannot be changed.
Which BIR form do I file?
Form 1702-RT for corporations on the regular 25 or 20 percent rate, 1702-MX for those with income under multiple or special rates, and 1702-EX for exempt corporations or those with no taxable income. Quarterly returns use 1702Q.
Do I need audited financial statements?
Yes, once your gross annual sales exceed PHP 3 million. The audited statements are filed together with the AITR, with the auditor signing the supporting schedules.
What are the penalties for late filing?
A 25 percent surcharge on the tax due, 12 percent annual interest on the unpaid amount, and a compromise penalty. Nil returns are not exempt — failure to file still draws a penalty even when no tax was owed.
Talk to our Manila team
Tell us your fiscal year-end and where your books stand. Our Manila team will run the quarterly 1702Q returns, coordinate the audit, and file the annual 1702 by 15 April with the BIR.
2 26th St, Taguig
1634 Metro Manila, Philippines