
Year-End Reporting and Tax Annualization with HRIS
Creating year-end reports and tax annualization with HRIS can help you streamline your processes without any worry. Read to know more!
Understanding Philippine tax reforms in 2025 is crucial in ensuring compliance, identifying opportunities, mitigating risks, and achieving sustainable progress. Thus, corporations, startups, and even individuals must stay informed to navigate the new tax landscape effectively and maximize their financial outcomes.
This blog will explore the practical implications of these reforms and how they could impact you. Follow us to stay informed and navigate the future landscape of taxation in the Philippines!
Tax, in general, has a broad impact on the economy as it affects everything, from business operations to individual spending. It also helps in fostering economic growth and development by allowing governments to have sustainable sources of funding. To keep tax-related laws effective and relevant, tax reforms are frequently presented.
In the case of the 2025 Philippine tax reforms, the changes are projected to have a major impact on government revenue and expenditure. Moreover, these improvements seek to establish a more efficient and equitable tax system that will benefit corporations, startups, Micro, Small, and Medium Enterprises (MSMEs), freelancers, and individuals in the long run. According to the government, these amendments will enable them to achieve sustainable growth in the long run.
The Philippine government has introduced several tax reforms in 2025, resulting in changes to the existing tax laws. These are the noteworthy ones that have significant effects on businesses and individuals alike:
The Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, initially proposed as the TRABAHO Bill, was signed into law in 2021 by then-President Rodrigo Duterte. This legislation aimed to revitalize the Philippine economy by providing significant tax relief to businesses, particularly during the onset of COVID-19. In 2024, the framework was further enhanced with the introduction of the CREATE MORE (Maximize Opportunities for Reinvigorating the Economy) Act. This enhanced bill builds on its predecessor to boost competitiveness, encourage investment, and foster sustainable economic growth.
A key provision of the CREATE MORE Act is the reduction in the standard corporate income tax rate from 30% to 25%. There is also a preferential rate of 20% for micro, small, and medium enterprises (MSMEs) with a taxable income of up to Php 5 million. This reduction can surely improve business competitiveness, attract foreign investments, and empower MSMEs to scale their operations. Additionally, the law streamlines the application process for tax incentives. In turn, fiscal support for businesses is readily available to businesses.
Beyond tax reductions, the CREATE MORE Act modernizes the Philippine tax system to create a more conducive business environment. It broadens eligibility for tax incentives, extending benefits to both local and foreign businesses. Hence, this positions the Philippines as an attractive investment destination.
The Value-Added Tax (VAT) on Digital Services Law, also known as Republic Act No. 12023, attempts to level the playing field for Philippine companies. This is done by imposing a 12% VAT on foreign digital service providers (DSPs). Furthermore, the legislation addresses the growing digital economy where foreign companies often operate in the country without contributing significantly to the local tax base.
The law’s definition of digital services includes online search engines, marketplaces, cloud services, online media and advertising, online platforms, and digital goods. Additionally, Bureau of Internal Revenue (BIR) now requires foreign digital service providers to register. After that, they have to pay VAT for the services they used in the Philippines.
The Philippine government has been trying to ease the burden on individuals, which resulted in the Tax Reform for Acceleration and Inclusion (TRAIN) Law. This legislation has already provided reduced personal income taxes for low- and middle-income earners. However, it also introduced higher excise taxes on certain goods, such as sweetened beverages and tobacco products. Because of this, consumer prices and business costs were greatly affected.
Hence, the current administration enacted the Republic Act No. 11976, also known as the Ease of Paying Taxes Act (EOPT), which introduces a more comprehensive and streamlined tax process. Key improvements include a more efficient administration system for taxpayers. Notably, the EOPT Act has standardized the timing for Value-Added Tax (VAT) recognition. It has also addressed the compliance issues for businesses by streamlining documentary requirements for both goods and services.
While the Philippine tax reforms in 2025 aim to improve the business environment and stimulate economic growth, they also have direct and indirect effects on businesses and employees.
Here are the direct effects of the tax reforms:
The recent minimum wage increase will directly affect millions of workers and businesses. According to the Department of Labor and Employment (DOLE), close to 5 million private sector employees will benefit from this adjustment, with daily wage increases ranging from PHP 21 to PHP 75. This increase is implemented in two tranches, which are effective January 12, 2025, and July 1, 2025. Additionally, this will raise the minimum wage in various regions, ultimately benefiting workers by improving their living standards. But with these wage increases, labor costs for businesses also rise. The anticipated hike in salaries will require organizations to recalibrate their payroll systems.
The TRAIN Law has changed how individual income taxes are calculated in the Philippines. While lower-income earners benefit from reduced tax rates, higher earners may see adjustments to their tax brackets. To guarantee compliance, businesses must adapt to these changes. For those earning above the minimum taxable income, calculating income tax has become more detailed. Income tax returns (ITRs) now factor in standard deductions and additional allowances, making the process more complex. Additionally, the Bureau of Internal Revenue (BIR) has introduced stricter rules for reporting foreign income. This means businesses and individuals with international earnings must ensure accurate reporting to avoid penalties.
Adjustments in minimum wage and income tax rates also influence employee and employer contributions to mandatory government programs. For businesses, these changes have bearing on tax liabilities, especially regarding withholding taxes on compensation and contributions to the Social Security System (SSS) and other government-mandated funds. To ensure compliance, it is crucial for companies to update and align their payroll systems with the latest wage standards and tax regulations. Staying proactive in these adjustments helps businesses avoid potential compliance issues and ensures smooth operations.
These are the indirect effects of the tax updates:
Corporate income tax rates decreased because of these reforms. Because of this, the government will be able to stimulate business investment in the Philippines. Moreover, this can foster job creation and potentially lead to higher wages for employees. While these benefits can positively impact workers, the extent of the impact will depend on the specific industry and the strategies adopted by individual companies.
The tax reforms presented better tax procedures and reduced compliance burdens for businesses. This will enable them to operate more efficiently. The increased efficiency can also potentially lower operating costs that will allow companies to allocate resources. Such can include efforts toward enhanced employee benefits, increased wages, or investments in training and development programs that support workforce growth and productivity.
An HRIS offers a seamless solution for managing payroll and tax compliance, especially amidst evolving tax regulations. By automating tax calculations, compliance reporting, and payroll processes, an HRIS ensures accurate deductions and timely submissions, minimizing errors and saving valuable time.
Besides, navigating multiple tax reforms, such as the Digital Services Tax or CREATE Act incentives, can be complex. Having a robust system like Hurey simplifies this process by generating accurate tax forms, tracking exemptions, and ensuring adherence to the latest policies.
For businesses adapting to new laws, an HRIS provides transparency, reliability, and the tools needed to stay compliant while focusing on growth and employee satisfaction.
The Philippine tax reforms in 2025 highlight the government’s commitment to modernizing the tax system and driving economic growth. These changes bring both challenges and opportunities for businesses and individuals, which makes it essential to stay informed and proactive.
Nevertheless, adapting to the constantly evolving tax regulations does not have to be overwhelming. Tools like Hurey simplify the process by automating compliance, streamlining workflows, and empowering businesses to navigate these changes confidently. With tailored solutions, Hurey helps ensure compliance, optimizes tax strategies, and reduce administrative burdens, allowing businesses to focus on your growth and success.
Partner with Hurey and experience smarter tax management solutions designed to keep your business ahead. Because when your tools work as hard as you do, success becomes inevitable.
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