Complete Guide to Tax Reporting in the Philippines

As a business owner in the Philippines, you have multiple tax obligations from corporate taxes to VAT and DST across different government levels to consider. Each of these has its own filing schedules and requirements. 

As such, new businesses often miss specific deadlines or overlook certain taxes entirely, triggering penalties that start at a 25% surcharge plus 20% annual interest.

This article breaks down exactly what you need to file, when it’s due, and how to stay compliant, to save you a few surprises down the road.

Overview of the Tax Structure in the Philippines

When you operate in the Philippines, you have to deal with two separate tax authorities that don’t always coordinate well. National taxes go to the Bureau of Internal Revenue (BIR), while local taxes go to your city or municipality’s Local Government Unit (LGU). Both of these have their own registration process, filing systems, and penalties for non-compliance.

A. Bureau of Internal Revenue (BIR)

The BIR handles the major revenue generators such as income tax, VAT, and withholding taxes that fund national government operations. These follow standardized rules nationwide, so once you understand the system, it applies no matter where you’re located.

Your BIR Revenue District Office (RDO) becomes your primary point of contact for most tax matters.

B. Local Government Unit (LGU)

Your local government collects business permit fees, real property taxes, and local business taxes that fund city services. These vary dramatically between locations. For instance, something that costs PHP 5,000 in one municipality might cost PHP 50,000 in another. 

If you’re planning multiple locations, it is advisable to research local tax rates early, as they can significantly impact profitability and operations.

Registration Requirements Before You Can Operate

Before you can generate your first peso of revenue, you need both BIR and LGU registrations completed. The sequence matters here. You’ll typically need your BIR registration first, then use those documents to apply for your LGU business permit.

BIR Registration Checklist:

• Taxpayer Identification Number (TIN) for the company
• Registration of books of accounts (manual or computerized)
• Authority to print receipts and invoices
• Certificate of Registration (BIR Form 2303)

LGU Requirements Include:

• Business permit (renewed annually)
• Fire safety inspection certificate
• Sanitary permit (if applicable to your business)
• Barangay clearance
• Zoning clearance

If you miss any of these components, it will delay your operations. Many businesses discover too late that their location violates zoning rules, or that getting authority to print invoices takes 2 to 3 weeks. We recommend you start your registration process at least 60 days before you plan to begin operations.

If you are new to the market, our local experts can help you prepare the necessary documents and handle the registrations on your behalf. 

Income-Based Taxes in the Philippines

Income-based taxes are levied on earnings from employment, business, or investments, as well as on payments made to others. These directly reflect a taxpayer’s income or the income they facilitate on behalf of others.

1. Corporate Income Tax

Corporate income tax is one of the Philippines’ primary revenue sources and applies to both domestic and foreign-owned corporations. The standard corporate income tax rate is 25% of the next taxable income. A reduced rate of 20% is granted for small corporations that have a net taxable income not exceeding PHP 5 million and total assets not exceeding PHP 100 million (excluding land).

Additionally, the Bureau of Internal Revenue (BIR) enforces a Minimum Corporate Income Tax (MCIT) to ensure consistent revenue collection. The MCIT is 2% of gross income and applies from the fourth taxable year of a corporation’s operations, but only when it is higher than the regular corporate income tax due.

For compliance purposes, corporations must:

• Register with the BIR and secure a valid Taxpayer Identification Number (TIN).
• Maintain a registered book of accounts and issue BIR-registered invoices or receipts.
• File quarterly and annual income tax returns via eBIRForms or eFPS (if mandated)
• Observe strict reporting deadlines: Quarterly reports submitted within 60 days after quarter-end, annual reports on or before the 15th day of the fourth month after year-end.

2. Individual Income Tax

This income tax applies to both citizens and foreign nationals earning income within the country. The Philippines follows a progressive tax system, with rates depending on the individual’s income bracket as stipulated under the TRAIN Law:

Net Taxable Income (PHP)	Tax Rate
Up to PHP 250,000	0% (Exempt)
PHP 250,001 – PHP 400,000	15% of the excess over PHP 250,000
PHP 400,001 – PHP 800,000	PHP 22,500 + 20% of the excess over PHP 400,000
PHP 800,001 – PHP 2,000,000	PHP 102,500 + 25% of the excess over PHP 800,000
PHP 2,000,001 – PHP 8,000,000	PHP 402,500 + 30% of the excess over PHP 2,000,000
Over PHP 8,000,000	PHP 2,202,500 + 35% of the excess over PHP 8,000,000

As an individual, you must register with the BIR and secure a valid Taxpayer Identification Number (TIN). This is for filing quarterly and annual income tax returns. For self-employed individuals and professionals, it is necessary to maintain a registered book of accounts and issue official receipts for your services. 

3. Withholding Taxes

Withholding tax is a collection mechanism that allows the government to secure revenue in advance by requiring a portion of payments to be withheld at source and remitted directly to the Bureau of Internal Revenue. This tax system applies to salaries, supplier payments, professional fees, rentals, dividends, and other income categories.

There are three main types of withholding taxes:

• Withholding Tax on Compensation: Deducted from employee salaries based on graduated income tax rates (0% to 35%), depending on income levels. Employers are responsible for accurate calculation and timely remittance.
• Expanded Withholding Tax (EWT): Imposed on certain payments to suppliers, contractors, professionals, and other service providers, usually at rates ranging from 1% to 15%, depending on the transaction. This ensures that suppliers and service providers prepay a portion of their income tax.
• Final Withholding Tax (FWT): Withheld on income such as dividends, royalties, and interest, which is considered the final tax liability of the payee. Rates vary depending on the type of income and the residency status of the recipient.

To stay compliant, taxpayers responsible for withholding must:

• Register with the BIR and update their registration to reflect withholding obligations.
• File monthly withholding tax returns and annual information returns.
• Issue Certificates of Withholding (Forms 2316, 2307, etc.) to payees.
• Deduct and remit withheld taxes on time, according to the following deadlines:
  • Monthly remittance is on or before the 10th of the following month (manual filing) or the 15th (eFPS users).
  • The annual reporting deadline is on January 31 (Form 1604C) and March 1 (Forms 1604E and 1604F).

Businesses that neglect proper withholding and remittance may face surcharges, penalties, and disallowance of expenses.

Transaction and Sales-Based Taxes in the Philippines

These taxes apply to the sale, exchange, or use of goods and services, as well as specific transactions.

A. Value-Added Tax (VAT)

VAT is a 12% consumption tax that is applicable to the sale of goods, services, and imports. Although businesses act as collection agents, the cost ultimately passes on to the end consumer. Registration is mandatory once your annual gross sales or receipts exceed PHP 3 million.

In terms of compliance, you must:

• Register for VAT and issue VAT-registered invoices or receipts.
• File for VAT returns (Form 2550Q) quarterly, submitted via eFPS or eBIRForms. The filing and payment deadline is within 25 days after the close of each taxable quarter.
• Submit the Summary Lists of Sales and Purchases (SLSPs) to the BIR. This document provides the BIR with a detailed record of your business’s VAT-related transactions. Must file electronically through eFPS or the BIR’s electronic submission system. 

Non-compliance, such as late filing and payment, will result in a 25% surcharge on the tax due, increasing to 50% in cases of willful neglect or fraud. Unpaid amounts will accrue interest at 20% per annum (or higher, if adjusted by law), until fully settled. 

The BIR may also impose compromise penalties, which vary based on the amount of tax involved. Beyond monetary penalties, businesses that fail to issue VAT invoices, keep accurate records, or submit SLSPs may lose their ability to claim VAT.

B. Percentage Tax

For businesses below the PHP 3 million VAT threshold, percentage tax offers an easier alternative. Rather than calculating input and output VAT, taxpayers pay a tax based on their gross sales or receipts.

To do so, proper registration as a percentage tax filer is necessary, along with the filing of quarterly percentage tax returns (Form 2551Q) within 25 days after the end of each quarter. Keep in mind that the BIR may scrutinize revenue declarations if it suspects any underreporting, which can result in the disallowance of deductions or further audits.

C. Excise Taxes

Excise tax is designed to both measure revenue and as a regulatory tool applied to the manufacture, sale, or import of specific goods such as alcohol, tobacco, petroleum products, and motor vehicles. 

Rates vary depending on the product category, and each product requires registration with the BIR before manufacture or importation. Monthly excise tax return filings must be done per product type, with a deadline on or before the 10th day of the month following the production, sale, or import. 

The BIR has the authority to suspend operations of manufacturers and importers that consistently fail to meet excise tax obligations, especially in regulated industries.

D. Documentary Stamp Tax (DST)

DST applies to legal documents and transactions such as loan agreements, property transfers, and stock issuances. This tax validates and formalizes agreements, making it an unavoidable cost in corporate transactions, as you must pay it at the time of execution.

Filing of monthly DST returns through Form 2000 within 5 days after the end of the month in which the document was executed is mandatory for compliance. Note that improperly stamped documents may be deemed inadmissible in court or unenforceable, which can disrupt transactions and create legal complications.

Filipino Municipal and Property-Related Taxes

The local government units (LGUs) collect municipal and property-related taxes to fund essential services, infrastructure, and community projects. These obligations are separate from national taxes and must be managed carefully to maintain compliance.

Local Business Taxes (LBT)

Businesses operating within an LGU are subject to a Local Business Tax, and evaluation is based on gross sales or receipts. Payment of this tax is a prerequisite for renewing your annual business permit, alongside compliance with zoning, sanitation, and local clearances.

All taxes must be settled annually on or before January 20, or in quarterly installments paid before the start of each quarter. Failure to pay on time will result in a 25% surcharge on the unpaid amount, with an additional monthly interest charge until settlement. 

In serious cases, non-payment will lead to suspension or revocation of your business permit, and even closure orders issued by the LGU.

Real Property Tax (RPT)

The Real Property Tax is an annual levy on the assessed value of land, buildings, and other improvements. The revenue from this tax helps fund local schools, infrastructure, and public services in the Philippines. Payments are made directly to the local treasurer’s office, supported by an updated tax declaration filed with the assessor.

All property owners, including foreigners (in cases where ownership is legal), must pay this tax. Taxpayers can opt to pay in full on or before January 31, or in quarterly installments due respectively on March 31, June 30, September 30, and December 31.

Any delinquency will result in a 2% monthly interest, capped at 72% of the basic tax. Continued failure to pay will result in a levy or auction of the property. 

Summary of the Philippine Tax Filing Schedule for Businesses

To make things easier, the table below summarizes the key filing frequencies, deadlines, and responsible taxpayers for the most common national and local taxes encountered by businesses in the Philippines:

Tax Type	Filing Frequency	Due Date	Who Must File
Income Tax (Corporate)	Quarterly and Annual	Quarterly: Within 60 days after quarter-end. Annual: On or before the 15th day of the 4th month after fiscal year-end.	All corporations, domestic and foreign.
Income Tax (Individual)	Quarterly and Annual	Quarterly: April 15, Aug 15, Nov 15 Annual: April 15 of the following year.	Self-employed individuals and individuals with business or professional income.
Withholding Tax on Compensation	Monthly	On or before the 10th of the following month (manual), 15th for eFPS users.	All employers
Expanded Withholding Tax (EWT)	Monthly	On or before the 10th of the following month (manual), 15th for eFPS users.	Businesses making payments subject to expanded withholding (services, contractors, etc.).
Value-Added Tax (VAT)	Quarterly (monthly is optional)	Within 25 days after quarter-end.	VAT-registered businesses.
Percentage Tax	Quarterly	Within 25 days after quarter-end.	Non-VAT registered businesses.
Excise Tax	Monthly	On or before the 10th of the month following the sale, production, or importation of excisable goods.	Manufacturers of excisable goods.
Documentary Stamp Tax (DST)	Monthly	Within 5 days after the end of the month in which the document was executed.	Parties executing taxable documents (loans, transfers, etc.)
Local Business Tax (LBT)	Annual or Quarterly Installments	Annual: On or before January 20 Quarterly: Before each quarter begins in jurisdictions where installments are allowed.	All businesses operating within an LGU’s jurisdiction.
Real Property Tax (RPT)	Annual or Quarterly	Annual: On or before January 31 Quarterly: March 31, June 30, September 30, December 31	All property owners, including foreigners (in allowed cases).

Available Tax Filing Methods in the Philippines

Filing taxes in the Philippines can be done through several channels, each designed for different types of taxpayers and business structures. The BIR provides both traditional and digital options to make compliance accessible for all. 

Below is an overview of the available tax filing methods in the Philippines:

Method	Who Can Use	How It Works
Manual Filing	Small taxpayers or those without online access.	Submit paper forms to the Revenue District Office (RDO); pay at Authorized Agent Banks (AABs) or through the RDO’s collection officer if no AAB is available.
Electronic Filing and Payment System (eFPS)	Large taxpayers, government offices, corporations with over PHP 10 million paid-up capital, and e-commerce businesses.	File and pay electronically via accredited banks.
eBIRForms	Individuals, small businesses, and professionals who are not required to use eFPS.	Fill out and submit returns using BIR-provided software; some payments may still need AABs.
Third-Party Platforms	Small businesses, self-employed, and individual taxpayers.	Pay selected taxes via apps like GCash, Maya, and Landbank Link.Biz.

General Compliance Requirements for Taxation in the Philippines

Compliance with Philippine tax laws requires you to follow both national and local requirements, supported by accurate record-keeping and readiness for potential audits. Key obligations include:

1. BIR Registration:

• Obtain a Taxpayer Identification Number (TIN).
• Register books of accounts (manual, loose-leaf, or computerized).
• Register official receipts, invoices, and other accountable forms.

2. LGU Registration:

• Secure and annually renew a business permit with the local city or municipality.
• Comply with applicable local tax ordinances, such as business taxes and regulatory fees.

3. Record-Keeping, Reporting, and Audit Readiness:

• Maintain BIR-registered books of accounts and all supporting documents, including sales invoices, official receipts, contracts, and payroll records.
• Retain all tax-related records for a minimum of 10 years as required by law.
• Ensure that the latest BIR-prescribed forms are used for filings and submissions.
• Be prepared for potential BIR audits with proper documentation and accurate reporting.

Emerhub’s Tax and Accounting Service in the Philippines

Emerhub offers tailored tax and accounting services specifically designed for foreign-owned businesses navigating Philippine compliance requirements. Our local experts understand both the written rules and the practical side of BIR and LGU requirements across different cities and provinces.

Here’s what our comprehensive tax and accounting services include:

• Business and Tax Registration: Assistance with BIR registration, securing permits, and setting up compliant invoicing.
• Bookkeeping and Tax Filing: Maintaining accurate records and handling monthly, quarterly, and annual tax returns.
• Withholding, VAT, and Percentage Tax Compliance: Calculating, remitting, and filing all applicable taxes on time.
• Tax Incentive Support and Audit Assistance: Applying for PEZA or BOI incentives and providing representation during BIR audits.

Contact us below to discuss your Philippine tax situation and receive a compliance review tailored to your business structure.