Corporate Income Tax Return: How to File and Compute ITR in the Philippines

June 16, 2025

Filing a Corporate Income Tax Return (ITR) in the Philippines is a mandatory requirement for corporations under the regulations of the Bureau of Internal Revenue (BIR). Given the BIR’s strict compliance standards, it is essential to ensure that your ITR is accurately computed and properly filed to avoid penalties and potential audits.

To help you understand how to file a corporate ITR, we’ll guide you through the basics—how to compute taxable income, apply the correct tax rates, and where to submit the appropriate forms on time.

What is Corporate Income Tax in the Philippines

A Corporate Income Tax Return (ITR) is a document that corporations submit to report their income, expenses, and tax due to the Bureau of Internal Revenue (BIR). In the Philippines, corporations follow a territorial tax system, meaning only income earned within the country is generally taxed. However, domestic corporations are an exception since they’re taxed on their worldwide income.

The standard Corporate Income Tax (CIT) rate is 25%, but micro, small, and medium enterprises (MSMEs) may qualify for a lower 20% rate if they have:

Net taxable income below PHP 5 million, and
Total assets (excluding land) not exceeding PHP 100 million.

Recent reforms such as the CREATE MORE Act of 2024 have introduced new incentives, including a 20% CIT rate for Registered Business Enterprises under the Enhanced Deductions Regime.

Starting in their fourth year of operations, corporations may also be subject to a Minimum Corporate Income Tax (MCIT) of 2% of gross income, if this amount is higher than the regular CIT.

Step-by-Step Guide to Computing Corporate ITR

1. Gather Necessary Documents

Collect essential financial records, including:

Income Documents: Audited Financial Statements (AFS), sales invoices, and bank statements.
Deduction Documents: BIR Form 2307 (Certificate of Creditable Tax Withheld at Source), official receipts, and expense vouchers.
Tax Credit Documents: Proof of quarterly tax payments and foreign tax credits, if applicable.

These ensure accurate reporting of income and deductions.

2. Calculate Taxable Income

Taxable income is gross income minus allowable deductions. Deductible expenses, such as salaries, rent, utilities, and depreciation, must be legitimate and BIR-compliant.

Formula: Taxable Income = Gross Income – Allowable Deductions.

3. Apply the Appropriate Tax Rate

Use the correct tax rate based on the corporation’s profile:

Standard Rate: 25% on net taxable income.
Reduced Rate: 20% for MSMEs meeting income and asset criteria.
MCIT: 2% of gross income if higher than the regular CIT.

Formula: Corporate Income Tax = Applicable Rate × Taxable Income (or Gross Income, if MCIT applies and is higher)

4. Account for Tax Credits

Subtract quarterly tax payments, creditable withholding taxes (per BIR Form 2307), and excess MCIT from prior years (carried forward up to three years).

Final Tax Payable = Computed Tax – Tax Credits.

Simplified Sample Computation for ABC Corp

To illustrate, consider ABC Corp, an MSME with:

Gross Income: PHP 8,000,000 (from sales and services).
Allowable Deductions: PHP 4,500,000 (e.g., salaries, rent, utilities).
Tax Credits: PHP 200,000 (quarterly payments and withholding taxes).

Step 1: Calculate Taxable Income
Taxable Income = PHP 8,000,000 – PHP 4,500,000 = PHP 3,500,000.

Step 2: Apply Tax Rate
As an MSME, ABC Corp uses the 20% rate.
Tax Due = PHP 3,500,000 × 20% = PHP 700,000.

Step 3: Check MCIT
MCIT = 2% × PHP 8,000,000 = PHP 160,000.
Since PHP 700,000 > PHP 160,000, the regular tax applies.

Step 4: Subtract Tax Credits
Final Tax Payable = PHP 700,000 – PHP 200,000 = PHP 500,000.

ABC Corp files BIR Form 1702-RT and pays PHP 500,000 by the deadline.

Keep in mind that this is a simplified example. In reality, determining gross income, allowable deductions, and tax credits can be very challenging for corporations with numerous transactions. If your business is in need of expert accounting assistance, don’t hesitate to contact us. Our team of experienced accountants specializes in corporate accounting and compliance.

Filing the Corporate ITR

1. Choose the Correct BIR Form

Select the appropriate form:

BIR Form 1702-RT: For corporations under the regular 20% or 25% CIT rate.
BIR Form 1702-EX: For tax-exempt corporations or those with no taxable income.
BIR Form 1702-MX: For corporations with mixed income or special rates.

2. File Electronically (or Manually for certain exemptions)

Corporate Income Tax Returns must be filed online. Manual filing is allowed only for exemptions (e.g., system issues) at the Revenue District Office (RDO). File via BIR’s online portals here:

eFPS (https://efps.bir.gov.ph/): Mandatory for large taxpayers and BIR-notified entities.
eBIRForms (https://www.bir.gov.ph/ebirforms): For non-eFPS filers, available on the BIR website.

Submit AFS and other documents within 15 days of the filing deadline.

Online filing can be convenient, but getting support while filing this way is more difficult. This may lead to mistakes or incomplete filings. Thankfully, our team is here to help ensure your corporate income tax returns are completed accurately and submitted on time.

3. Meet the Filing Deadline

The ITR is due on the 15th day of the fourth month after the fiscal year-end (e.g., April 15, 2025, for a calendar year). Late filings incur surcharges, annual interest, and possible penalties.

4. Pay the Tax Due

Pay via eFPS-authorized banks, online gateways (e.g., Landbank), or RDOs under the Ease of Paying Taxes Act. The “pay-as-you-file” system requires settling any balance at filing.

Summary

Computing and filing a corporate ITR in the Philippines requires careful preparation, from gathering documents to applying the correct tax rate. Use the right BIR form and file electronically before the deadline. Stay informed about BIR regulations and incentives like the CREATE MORE Act to optimize tax strategies. Late submissions and errors can result in costly penalties, so don’t hesitate to get professional assistance.

Need to Ensure Your Business is Compliant? Our Expert Assistance Is Ready to Support You.

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