Company Formation & Tax in the Philippines
Asia's English-speaking services hub — 25% corporate tax with a 20% small-company rate, 12% VAT, and CREATE MORE incentives built for BPO, manufacturing and export businesses.
The Philippines pairs a young, English-proficient workforce with a tax regime rebuilt around investment: 25% regular corporate income tax, a 20% rate for smaller domestic corporations, and the CREATE MORE Act's enhanced incentives — tax holidays, a special rate in lieu of all taxes, and expanded deductions — for registered enterprises in the economic-zone system. Recent liberalisation has opened retail, telecoms and renewables to full foreign ownership.
The headline numbers
| Tax | Rate |
|---|---|
| Regular corporate income tax (RCIT) | 25% |
| Small domestic corporations (income ≤ ₱5m, assets ≤ ₱100m) | 20% |
| Minimum corporate income tax (from 4th year) | 2% of gross income |
| VAT (standard) | 12% |
| Branch profit remittance tax | 15% |
VAT registration becomes mandatory above ₱3 million of annual sales; exports and certain economic-zone sales are zero-rated, and the 12% VAT now also captures foreign digital service providers selling into the Philippines. The 20% small-company rate is tested annually — failing either the income or asset test reverts the company to 25%.
CREATE MORE — the incentive engine
- Income tax holiday — 4–7 years for registered business enterprises (RBEs) with PEZA, BOI or other investment promotion agencies, depending on activity and location.
- Special corporate income tax — after the holiday, export enterprises may elect a 5% tax on gross income in lieu of all national and local taxes.
- Enhanced deductions regime — an alternative track with a 20% RCIT rate plus super-deductions for power, labour, training and R&D expenses.
- Flexible work rules — CREATE MORE confirmed incentive eligibility for zone-registered BPOs operating hybrid work arrangements.
Forming the company
Incorporation runs through the SEC's electronic registration system, followed by BIR tax registration and local business permits — typically three to six weeks in total. A standard stock corporation needs at least two incorporators (the One Person Corporation allows a single stockholder); a majority of directors must be Philippine residents. Domestic-market enterprises that are more than 40% foreign-owned face a US$200,000 minimum paid-in capital, reduced to US$100,000 for ventures using advanced technology or employing 15+ Filipinos — export enterprises (70%+ export sales) are exempt from this floor.
Frequently asked questions
What is the Philippine corporate tax rate in 2026?
25% regular corporate income tax. Domestic corporations with taxable income up to ₱5 million and assets up to ₱100 million pay 20%, and a 2% minimum corporate income tax applies from the fourth year.
What is the VAT rate in the Philippines?
12%, with mandatory registration above ₱3 million of annual sales. Exports and qualifying economic-zone sales are zero-rated; foreign digital services are now within scope.
Can a foreigner own 100% of a Philippine company?
Yes in most activities — including export enterprises, retail above the capital floor, telecoms and renewables. Constitutional limits keep land, mass media and strict public utilities majority-Filipino.
What does CREATE MORE offer registered enterprises?
Income tax holidays of 4–7 years, then either a 5% special tax on gross income in lieu of all taxes (for exporters) or a 20% rate with enhanced deductions.
Official sources
- Bureau of Internal Revenue — tax
- Securities and Exchange Commission — incorporation
- PEZA — economic-zone incentives
This guide is general information prepared by ARM Management and is current as at July 2026. It is not legal or tax advice; incentive eligibility, ownership rules and capital floors carry conditions and change. Confirm against the BIR and SEC, or with an advisor, before acting.
Structure a Philippine company the right way.
ARM Management advises BPO groups, exporters and founders on Philippine incorporation, CREATE MORE incentive positioning, ownership structuring and compliance. Begin with a confidential conversation.