Income tax (rates / brackets)

Philippines Income Tax Rates and Brackets

The Philippines imposes a progressive income tax system on resident and non-resident citizens, as well as foreign nationals earning Philippine-source income. Individual income tax rates range from 5% to 37% depending on annual taxable income, with brackets adjusted periodically to reflect inflation and policy changes. The tax applies to compensation income, business income, passive income, and capital gains, though certain types of income receive preferential treatment or exemption under specific provisions.

The Bureau of Internal Revenue (BIR), under the Department of Finance, administers income tax collection and enforcement in the Philippines. The primary statutory framework is the National Internal Revenue Code (NIRC) of 1997, as amended, which establishes the rate structure and filing requirements for all taxpayers.

Effective January 1, 2023, the Philippines implemented significant changes to individual income tax brackets under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act. These amendments reduced the top marginal rate from 42% to 37% and adjusted intermediate brackets to provide relief across income levels. The changes apply to taxable years beginning in 2023 and onwards.

Employers and payroll teams must withhold income tax from employee compensation based on the applicable brackets and file monthly remittances with the BIR. Employees earning above the statutory threshold must file annual income tax returns by April 15 following the close of the taxable year. Accurate classification of income type—whether compensation, business, or passive—is essential, as different rules and rates may apply. Payroll systems must be updated to reflect the current 2023 brackets to ensure proper withholding and compliance.