Minimum Corporate Income Tax (MCIT) and Its Applicability to Partnerships in the Philippines (Updated 21 May 2025)

1. Statutory Foundations

Provision	Key Text (abridged)	Relevance
§ 22 (B), National Internal Revenue Code (NIRC)	“The term ‘corporation’ shall include… partnerships, no matter how created or organized, except general professional partnerships (GPPs) and certain joint ventures.”	Treats most partnerships as corporations for income-tax purposes. (Lawphil)
§ 27 (E), NIRC	Imposes a Minimum Corporate Income Tax of 2 % of gross income beginning in the 4th taxable year after start-up, whenever it exceeds the Regular Corporate Income Tax (RCIT). (Chan Robles Law Library)
§ 28 (A)(2), NIRC	Mirrors § 27 (E) for resident foreign corporations (RFCs). (Chan Robles Law Library)

Result: Unless expressly excepted, a Philippine partnership is subject to exactly the same MCIT rules that bind domestic corporations.

2. Which Partnerships Are (and Are Not) Covered?

Partnership Type	MCIT Status	Legal/Administrative Basis
Ordinary or Limited Partnerships (Civil or Commercial)	Covered – taxed like a corporation; therefore subject to MCIT.	§ 22 (B) NIRC; BIR Forms 1702Q/1702-RT instructions. (Bureau of Internal Revenue)
General Professional Partnerships (GPPs)	Not covered – income flows through to the individual partners; GPP itself pays no income tax, hence no MCIT.	§ 22 (B) NIRC; jurisprudence (CTA Case 7123; Commissioner v. Court of Appeals, etc.). (CTA Judiciary)
Construction or Energy Joint Ventures with the Government	Not covered – expressly excluded from corporate treatment.	§ 22 (B) NIRC; Dentons Guide. (Dentons)

Practical pointer. If a partnership files BIR Form 1702 (annual corporate return), the MCIT boxes must be completed; if it files the GPP return (Form 1702-EX), MCIT is inapplicable.

3. Mechanics of the MCIT (as it applies to partnerships treated as corporations)

Rate. Base rate: 2 % of gross income (GI). Temporary pandemic relief: reduced to 1 % from 1 July 2020 – 30 June 2023 under the CREATE Act (RA 11534); reverted to 2 % on 1 July 2023. (Lawphil, CloudCFO)
When it starts. MCIT kicks in only in the 4th taxable year after the partnership begins business, counting its first full taxable year as Year 1. (Bir CDN)
Quarterly vs. annual computation. • Compute MCIT every quarter; pay whichever is higher—MCIT or RCIT (now 25 %/20 %). • Compare again at year-end; any excess MCIT may be carried forward for 3 succeeding years (but never refunded). • Guidance is in Rev. Regs. 9-98 & 12-2007. (Bir CDN)
Gross income definition. GI = gross sales/receipts less sales returns/discounts less cost of goods sold or direct costs (for services). Passive income already subject to final tax is excluded. (Bir CDN)
Suspension for hardship. The Secretary of Finance may suspend MCIT imposition on partnerships that suffer prolonged losses due to force majeure or legitimate business reverses (same criteria as for corporations). (Chan Robles Law Library)

4. Interaction with the Regular Corporate Income Tax (RCIT)

Scenario	Effect on Partnership
MCIT > RCIT	Pay MCIT; record excess over RCIT as “excess MCIT” credit.
RCIT > MCIT	Pay RCIT; carry excess MCIT from prior years if any, up to 3-year limit.
Net loss or zero taxable income	MCIT still applies (unless within the first 3 years of operations or suspended).

CTA jurisprudence clarifies that MCIT is a distinct tax, not an alternative rate of RCIT, hence rules on deductions, treaties, and tax-sparing do not apply to MCIT liabilities. (Lawphil)

5. Compliance Checklist for Partnerships

Task	When	Form
Quarterly return & payment	60 days after quarter-end	1702Q
Annual final adjustment return	15 April (calendar year) or 15th day of 4th month after FYE	1702-RT

Tip: Ensure separate MCIT schedule is filled out; BIR audit programs routinely focus on MCIT mis-computations. (Bir CDN)

6. Recent and Pending Developments (2023-2025)

CREATE Act follow-through. Congress has not extended the 1 % pandemic rate beyond 30 June 2023, so MCIT is again 2 %. The DOF may revisit this if another calamity strikes. (CloudCFO)
RMC 21-2025. Clarifies that one-person corporations and ordinary partnerships alike must begin tallying the 4-year MCIT clock from actual start of commercial operations, not SEC registration date. (Bir CDN)
Pro-investment bill signed 11 Nov 2024 retained MCIT but introduced deeper RCIT cuts for Registered Business Enterprises; MCIT remains the “floor” tax. (Reuters)

7. Key Take-Aways for Philippine Partnerships

If you are not a GPP, you are a “corporation” for tax purposes—full stop. Expect MCIT.
Mind the 4-year clock; many start-ups forget the switch-over and incur penalties.
Track gross income meticulously. Errors here ripple through quarterly MCIT, annual true-ups, and future credits.
Use the three-year carry-forward wisely. Plan tax strategy (e.g., expense timing) so excess MCIT can actually be recovered.
Watch for relief measures. If your partnership suffers extraordinary losses, seek MCIT suspension—yes, partnerships qualify.

Disclaimer: This article is for general information only and does not constitute legal advice. For partnership-specific planning, consult Philippine tax counsel or a licensed CPA.