In the Philippines, sole proprietors and professionals are subject to progressive income tax rates ranging from 0% to 35%, but those with gross sales below PHP 3 million can opt for a simplified 8% flat tax on gross income. Meanwhile, corporations and partnerships are required to pay a Regular Corporate Income Tax (RCIT) of 25%, while businesses with low taxable income are subject to a Minimum Corporate Income Tax (MCIT) of 2%.
Businesses in the Philippines with annual sales exceeding PHP 3 million are required to register as VAT taxpayers and file monthly and quarterly VAT returns with the Bureau of Internal Revenue (BIR). Meanwhile, non-VAT businesses with annual sales below PHP 3 million are subject to Percentage Tax, ranging from 1% to 3%, which must be filed quarterly using BIR Form 2551Q.
Businesses in the Philippines are required to comply with withholding tax regulations, including Expanded Withholding Tax (EWT), which ranges from 1% to 15% and applies to payments for professional services, rent, and commissions. Employers must also deduct Withholding Tax on Compensation, which varies from 0% to 35% based on employee salaries. Additionally, businesses must adhere to monthly and annual tax filing schedules, ensuring timely submission of required tax returns to the Bureau of Internal Revenue (BIR) to avoid penalties.
Employers in the Philippines are required to register and remit monthly contributions for their employees to the following government agencies:
✔ SSS (Social Security System) – Provides retirement, disability, and maternity benefits.
✔ PhilHealth – Covers medical and hospitalization benefits.
✔ Pag-IBIG Fund – Offers housing loans and savings programs.
Additionally, employers must issue BIR Form 2316 annually, summarizing employee earnings and withheld taxes. This document serves as proof of income tax payment and is required for tax filing and clearance.
