I. Governing Framework

Taxation in the Philippines is primarily governed by the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 10963 (TRAIN Law), Republic Act No. 11534 (CREATE Act), Republic Act No. 11976 (EOPT Act or Ease of Paying Taxes Act), Republic Act No. 12023 (CREATE MORE Act), and various Revenue Regulations (RR), Revenue Memorandum Orders (RMO), and Revenue Memorandum Circulars (RMC) issued by the Bureau of Internal Revenue (BIR).

The BIR is the primary tax enforcement agency under the Department of Finance. Local government units (LGUs) also impose local business taxes, real property taxes, and community tax under the Local Government Code (RA 7160).

II. Taxpayer Identification Number (TIN) and Registration

Every individual or entity engaged in trade/business or earning income in the Philippines must register with the BIR and obtain a Taxpayer Identification Number (TIN).

Individuals
- Employees: Employer registers on their behalf via BIR Form 1902.
- Self-employed, professionals, single proprietors: Register using BIR Form 1901.
- Mixed-income earners: Register both as employee (1902) and self-employed (1901/1903).
- Pure compensation earners who have only one employer: Not required to file ITR starting taxable year 2023 (substituted filing), but TIN is still required.
Corporations/Partnerships
- Register using BIR Form 1903.
- Required to secure Certificate of Registration (BIR Form 2303).
- Must register branches separately if operating in different RDOs.
Mandatory Registration Updates
- Any change in registered name, address, status, or tax types within 30 days using BIR Form 1905.
- Failure to update is punishable under Section 275 of the NIRC.

Under the Ease of Paying Taxes (EOPT) Act effective January 22, 2024, registration procedures have been simplified: one registration form for all tax types, removal of annual registration fee (P500), and elimination of separate registration for VAT/non-VAT.

III. Tax Compliance Obligations of Individuals

A. Income Tax

Resident Citizens – taxed on worldwide income.
Non-Resident Citizens (e.g., OFWs, seafarers for 183+ days) – taxed only on Philippine-source income.
Resident Aliens – taxed on worldwide income during Philippine residency.
Non-Resident Aliens –
- Engaged in trade/business (183+ days): 25% on net income or graduated rates.
- Not engaged in trade/business: 25% final tax on gross Philippine-source income.

Tax Rates (TRAIN Law as amended)
Graduated rates for individuals (effective 2023 onward):

Taxable Income	Tax Due
Not over P250,000	0%
Over P250,000 but not over P400,000	15% of excess over P250,000
Over P400,000 but not over P800,000	P22,500 + 20% of excess over P400,000
Over P800,000 but not over P2,000,000	P102,500 + 25% of excess over P800,000
Over P2,000,000 but not over P8,000,000	P402,500 + 30% of excess over P2,000,000
Over P8,000,000	P2,202,500 + 35% of excess over P8,000,000

B. Filing and Payment Deadlines

Annual Income Tax Return (BIR Form 1700 or 1701) – April 15 of the following year.
Quarterly Income Tax Returns (1701Q) – for self-employed/mixed-income:
- 1st quarter: May 15
- 2nd quarter: August 15
- 3rd quarter: November 15

C. Other Taxes Applicable to Individuals

Capital Gains Tax: 6% on real property; 15% on shares not traded on stock exchange.
Donor’s Tax: 6% flat rate on donations to strangers (effective 2018).
Estate Tax: 6% flat rate on net estate (effective 2018).
Documentary Stamp Tax (DST) on various documents.

IV. Tax Compliance Obligations of Businesses

A. Corporate Income Tax (CIT)

Domestic corporations and resident foreign corporations:
- Regular CIT: 25% (20% for domestic corporations with net taxable income ≤ P5M and total assets ≤ P100M).
- Minimum Corporate Income Tax (MCIT): 2% of gross income beginning 4th taxable year (suspended under CREATE MORE until June 30, 2026).
- Improperly Accumulated Earnings Tax (IAET): 10% on improperly accumulated profits (not applicable to publicly listed companies, banks, etc.).
Non-resident foreign corporations: 25% on gross Philippine-source income or 12% Gross Income Tax on certain passive income.

B. Value-Added Tax (VAT)

12% VAT on sale of goods, properties, and services if annual gross sales/receipts exceed P3,000,000.
VAT-exempt thresholds:
- Senior citizens/PWDs: sales up to P250,000 per item.
- Export sales, certain agricultural products, cooperatives, etc.
Non-VAT taxpayers: 3% percentage tax on gross quarterly sales/receipts.

C. Percentage Tax

Applies to persons exempt from VAT (gross annual sales ≤ P3M):

3% on gross quarterly sales/receipts.
Other rates: banks (0–7%), life insurance (2%), cockpits (18%), etc.

D. Withholding Tax System

Creditable Withholding Tax (CWT) – expanded withholding on payments to suppliers/contractors.
Final Withholding Tax (FWT) – on passive income (interest, royalties, dividends).
Withholding Tax on Compensation – graduated rates or 15% flat for certain fringe benefits.

E. Excise Tax

On alcohol, tobacco, petroleum products, automobiles, minerals, sweetened beverages, cosmetic procedures, etc.

F. Filing and Payment Deadlines for Businesses

Return/Form	Frequency	Deadline
Monthly VAT Declaration 2550M	Monthly	10th day following month-end
Quarterly VAT Return 2550Q	Quarterly	25th day following quarter-end
Monthly Remittance 1601C/0619E/1601F	Monthly	10th/15th day following month-end
Quarterly Income Tax 1702Q	Quarterly	60 days following quarter-end
Annual Income Tax 1702	Annual	April 15 following taxable year
Annual Alpha List (DAT files)	Annual	With annual ITR

All VAT-registered taxpayers must use the Electronic Filing and Payment System (eFPS) for filing and payment. Non-eFPS filers may use manual or eBIRForms.

V. Invoicing and Record-Keeping Requirements

All taxpayers engaged in business must issue registered official receipts or sales invoices (principal and supplementary) via the BIR’s CAS (Computerized Accounting System) or non-CAS loose-leaf/point-of-sale systems.
Effective 2025 (RR 7-2024, RR 8-2024, RR 11-2024), all taxpayers selling to consumers (B2C) with annual sales > P1M must use the new Sales Data Transmission System (EIS – Electronic Invoicing System) starting in phases from July 2025.
Books of accounts must be registered with the BIR and preserved for 10 years from the last entry (EOPT Act).

VI. Penalties for Non-Compliance (Section 248–275, NIRC)

Violation	Penalty
Late filing of return	25% surcharge + 12% interest p.a. + compromise penalty
Late payment	12% interest p.a. + 25% surcharge if willful neglect
Failure to file return	50% surcharge if willful
False or fraudulent return	50% surcharge
Failure to issue receipts/invoices	P1,000–P50,000 per violation + possible closure 3–6 days
Failure to register	P5,000–P20,000 + possible business closure
Underdeclaration of tax >30%	50% surcharge

Criminal penalties: imprisonment from 2–10 years for tax evasion (P100,000–P50M fine depending on amount).

VII. Recent Major Reforms (2023–2025)

CREATE MORE Act (RA 12023, July 2025)
- Reduced CIT to 20% for domestic corporations (from 25%).
- Extended MCIT suspension until June 30, 2026.
- Enhanced VAT refund system and investment incentives.
Ease of Paying Taxes Act (RA 11976, effective Jan 22, 2024)
- Removed P500 annual registration fee.
- Classified taxpayers into micro, small, medium, large/other.
- Allowed filing and payment at any authorized agent bank/RDO within jurisdiction.
- Extended statute of limitations to 5 years for false/fraudulent returns.
Electronic Invoicing System (EIS)
- Mandatory real-time transmission of sales data to BIR for large taxpayers and those selling to consumers.

VIII. Best Practices for Full Compliance

Secure TIN and register all tax types immediately upon commencing business/income-earning activity.
Use eBIRForms or eFPS for all filings.
Implement robust accounting systems compliant with Philippine Financial Reporting Standards (PFRS).
Engage a Certified Public Accountant (CPA) for accreditation of CAS or loose-leaf books.
Conduct regular internal tax compliance reviews.
Monitor BIR issuances via www.bir.gov.ph and subscribe to eFPS alerts.

Tax compliance in the Philippines is now more digital, simplified in some areas, but significantly stricter in monitoring and real-time reporting. Non-compliance carries severe civil, administrative, and criminal consequences. Businesses and individuals are strongly advised to maintain proactive engagement with tax professionals and the BIR to ensure continuing adherence to all requirements.