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Liz Servañez
Liz Servañez serves as Branch Manager in the Philippines.
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Christine Aguilar
Christine Aguilar serves as Head of Operations in the Philippines.
Operating a business in the Philippines requires compliance with tax obligations administered by the Bureau of Internal Revenue (BIR). This includes corporate income tax, value-added tax, withholding taxes, and various filing requirements throughout the year.
This guide covers the key tax requirements for foreign businesses registered in the Philippines, including the upcoming e-invoicing requirements.
Understanding Corporate Tax Requirements in the Philippines
Corporate Income Tax
Most foreign businesses in the Philippines pay corporate income tax at 25% of net taxable income. However there are several incentives depending on jurisdiction and business scale.
For instance, smaller companies with net income under PHP 5 million and assets under PHP 100 million qualify for a reduced rate of 20%.
Similarly, if your business is registered with the Board of Investments (BOI) or operates within a Philippine Economic Zone Authority (PEZA) zone, you may have access to significantly better terms.
One thing to keep in mind here is that your fiscal year in the Philippines is determined by your date of incorporation, not the calendar year.
If your company was incorporated in June, your fiscal year runs June to May.
This is important as it affects all your filing deadlines, so make sure you’re calculating based on the right period.
Your quarterly income tax returns are due within 60 days of each quarter’s close, and your annual return is due within 60 days of your fiscal year-end.
Keep in mind that you must ensure that your legal entity has been properly registered with the BIR in the Philippines, which includes:
- Payment of the one-time registration fee
- You have been assigned a unique Tax Identification Number (TIN)
VAT in the Philippines
If your business sells goods or services in the Philippines and your gross annual sales exceed PHP 3 million, you need to register for VAT with BIR. The rate is 12%, and it applies to most commercial transactions such as sales, leases, and exchanges.
VAT can be one of the more complex areas to manage because it involves tracking both your output tax (what you charge customers) and your input tax (what you pay suppliers). The difference is what you remit to the BIR.
Moreover, this tax is the responsibility of the seller, not the buyer.
To ensure tax compliance for your business in the Philippines, you must submit VAT returns to the BIR every quarter. The due date for submissions and payments is 25 days after the close of each quarter.
For businesses that import goods, VAT is also assessed at customs. This is separate from any duties you might owe, so factor it into your landed cost calculations.
Submitting Corporate Financial Statements
In the Philippines, the Financial and Sustainability Reporting Standards Council (FSRSC) establishes tax and accounting standards that govern proper financial practices. These standards apply to all entities that have a degree of public accountability.
All Philippine corporations must submit audited financial statements to the Securities and Exchange Commission (SEC) annually. For calendar-year companies, the deadline is April 15. If you’re on a different fiscal year, you have 105 days from your fiscal year-end.
To ensure compliance with the current standards, all corporations in the Philippines are required to submit financial statements to the Securities and Exchange Commission (SEC) within 105 days following the financial year closing. These must demonstrate the current state of their assets and liabilities while ensuring that business revenue is generated per FSRSC standards.
Employee compensation and withholding tax regulations
As a potential employer in the Philippines, you must ensure that you implement proper employee compensation practices that comply with local regulations. Part of the responsibility held by employers is to ensure correct contributions by both themselves and the employee towards mandatory health and social security benefits, through payroll computation.
It is also essential to tax compliance in the Philippines that employers manage withholding taxes on certain forms of income payments, which will then be remitted to tax authorities :
- Employee compensation
- Contractor payments
- Dividends
Emerhub can assist you with calculating and deducting the withholding tax and statutory contributions for your business through our payroll services in the Philippines.
E-Invoicing: What’s Coming in 2026
The BIR is moving toward mandatory electronic invoicing, and the deadline has been set for December 31, 2026. If your business falls into certain categories, you’ll need to transition from PDF invoices to structured digital formats—specifically JSON or XML files that can be read and processed by BIR systems.
The mandate applies to businesses engaged in e-commerce or internet transactions, large taxpayers under the BIR’s Large Taxpayers Service, and any business using computerized accounting systems or invoicing software. If you’re in any of these categories, PDFs will no longer qualify as compliant invoices after the deadline.
Best Practices for Tax Compliance
What to do
- Maintain accurate records of all financial transactions with supporting documentation. The BIR can audit records going back several years.
- Set up a compliance calendar with reminders for all filing deadlines. Many penalties are triggered simply by missing dates.
- Reconcile your books before year-end to identify and resolve discrepancies before filing annual returns.
- Document eligible deductions properly. Business expenses, employee benefits, and charitable contributions can reduce your tax liability if properly supported.
- Stay informed about regulatory changes. The BIR regularly issues Revenue Regulations and Memorandum Circulars that affect filing requirements.
What to avoid
- Underreporting income or overstating deductions. This constitutes tax evasion and can result in criminal penalties.
- Missing documentation. If you cannot substantiate a deduction during an audit, it will be disallowed and you will owe additional tax plus penalties.
- Ignoring BIR notices. Failing to respond to Letters of Authority or assessment notices within the prescribed period limits your options for dispute.
- Relying on informal arrangements. Tax schemes that exploit loopholes or involve undocumented transactions create audit risk and potential legal liability.
How Emerhub Can Help
Emerhub provides tax compliance and accounting services for foreign businesses operating in the Philippines.
We handle BIR registration, tax return preparation, payroll and withholding tax management, and business permit renewals. If you’re not sure whether your current setup is compliant, or if you’d like to hand off the administrative burden, we can help.
Contact us through the form below to discuss your situation.
