BIR reverts Corporate Income Tax, Minimum Corporate tax, and Percentage Tax rates in the Philippines to their original rates

20 October 2024

The Bureau of Internal Revenue (BIR) announces reversion of Regular Corporate Income Tax to 10% for proprietary educational institutions and non-profit hospitals, Percentage Tax to 3%, and Minimum Corporate Income Tax to 2%, effective July 1, 2023.

(Revenue Memorandum Circular No. 69-2023, issued on June 20, 2023)

This Circular is issued to inform the public and all concerned that pursuant to Sections 6,7 and 13 of Republic Act No. 11534, otherwise known as the "Corporate Recovery and Tax Incentives for Enterprises Act" (CREATE), as implemented by Revenue Regulations (RR) Nos. 4-2021, 5-2021 and 8-2021 and as clarified by Revenue Memorandum Circular (RMMC) Nos. 65-2021 and 67-2021, stating that the Regular Corporate Income Tax Rates, Minimum Corporate Income Tax Rates, and Percentage Tax Rates in the Philippines are now reverted to their original rates, effective July 1, 2023:

TAX TYPE

PREVIOUS TAX TYPE

TAX RATE

The rate of percentage tax (PT) shall now revert to three percent (3%) of gross quarterly sales or receipts of the taxpayer. This rate applies to corporations, self-employed individuals and professionals whose gross sales or gross receipts are not exceeding the PHP 3.0 million threshold, except for cooperatives and self-employed individuals and professionals availing of the eight percent (8%) income tax rate;                                                

The CREATE Law reduced the 3% percentage tax to 1% starting on July 1, 2020, and lasting through June 30, 2023. Due to this, taxpayers will be required to pay the initial tax rate of 3% as of July 1, 2023.

3%

The rate of minimum corporate income tax (MCIT) for domestic and resident foreign corporations, including offshore banking units and regional operating headquarters, shall now revert to two percent (2%) based on the gross income of such corporations

The Minimum Corporate Income Tax (MCIT) was reduced to 1% from July 1, 2020, to June 30, 2023, under CREATE and RR No. 5-2021. This indicates that the MCIT for corporations will return to its previous 2% rate as of July 1, 2023.

2%

The rate of regular corporate income tax (RCIT) for proprietary educational institutions and hospitals which are nonprofit shall now revert to ten percent (10%) of their taxable income.

For Non-Profit Proprietary Educational Institutions and Hospitals, under CREATE, the 10% income tax was also decreased from 10% to 1% starting July 1, 2020, to June 30, 2023. The tax rate for such institutions will once again increase to 10% as of July 1, 2023.

10%

 

Based on the sample computations provided in the RMC, the taxable year 2023 shall be computed as follows:

A. Calendar Year

   

TAX TYPE/TAX BASE

MCIT/RCIT/PT

TAX DUE

Gross income/Taxable income/quarterly sales or receipts from January 1, 2023 to June 30, 2023

1%[NL1] 

PHP XXX

Gross income/Taxable income/quarterly sales or receipts from July 1, 2023 to December 31, 2023

2%/10%/3%

PHP XXX

Total Tax Due

 

PHP XXX

B. Fiscal Year

   

TAX TYPE/TAX BASE

MCIT/RCIT/PT

TAX DUE

Gross income/Taxable income/quarterly sales or receipts from X month to June 30, 2023

1%

PHP XXX

Gross income/Taxable income/quarterly sales or receipts from July 1, 2023 to X month

2%/10%/3%

PHP XXX

Total Tax Due

 

PHP XXX

In view of this, the tax rates were reduced previously to temporarily assist taxpayers to manage their losses from the business difficulties encountered during the pandemic. The government believes that three (3) years after the commencement of the epidemic, businesses are already recovered, which is why they are reverting the tax rates to the previous rates in accordance with CREATE.
Taxpayers can adjust their decisions and strategies throughout the year by being aware of the continuous updates in the tax compliance laws in the Philippines. It can help them stay compliant despite the increased Regular Corporate Income Tax rates, Minimum Corporate Income Tax Rates, and Percentage Tax rates in the Philippines. 

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