2025 BIR Amendments for SMEs in the Philippines
Key 2025 updates from the Bureau of Internal Revenue (BIR) that affect micro, small, and medium enterprises (MSMEs), including registration rules, tax rates, deductible expenses, and payroll compliance.
The 2025 BIR amendments for SMEs focus on easing registration, updating tax rates, and clarifying tax compliance to help MSMEs grow while staying compliant. Key changes include simplified registration, waived registration fees, adjusted income tax rates under the TRAIN and CREATE laws, and clarified deductible expenses for SMEs.
What you’ll learn in this 2025 BIR amendments guide
This overview of the 2025 BIR amendments for SMEs in the Philippines explains how the new rules affect registration, income tax rates, deductible expenses, and payroll compliance for micro, small, and medium enterprises.
For deeper tax topics, you can also check our TRAIN Law Compliance Guide (RA 10963), BIR Business Registration Guide, and Digital Tax Filing & Payment (eBIRForms) Guide.
To put these amendments into practice, SMEs can also use our free BIR Book of Accounts Tool for day-to-day record keeping, and our 13th Month Calculator to help compute compliant employee benefits.
1. BIR Registration and Compliance
- SMEs must register with the BIR to obtain a Tax Identification Number (TIN) and Certificate of Registration.
- The PHP 500 annual registration fee was waived starting January 2024, reducing costs for small businesses.
- After registration, SMEs must comply with annual renewals like the Mayor’s Permit and local permits.
- Businesses with gross sales of at least PHP 3 million must register as VAT taxpayers and comply with eFPS digital filing requirements.
2. Income Tax and Tax Rates
- The 2025 TRAIN Law sets graduated income tax brackets for individuals and self-employed, with exemption up to PHP 250,000.
- SMEs can opt for an 8% flat tax on gross sales exceeding PHP 250,000 annually for simpler compliance.
- Corporate income tax is reduced to 20% for qualifying MSMEs with net taxable income up to PHP 5 million and total assets up to PHP 100 million (excluding land).
3. Tax Deductions and Expense Rules
- BIR clarifies that SMEs may deduct "ordinary and necessary" business expenses to reduce taxable income, making it easier for smaller businesses to manage finances tax-efficiently.
- Auditing requirements for medium enterprises vary by asset size, with proposals to raise the threshold to reduce administrative burden.
4. Payroll and Contributions for SMEs
- Updated government contributions for SSS, PhilHealth, and Pag-IBIG apply, with employers and employees sharing contributions.
- SMEs must follow strict payroll tax withholding and filing requirements using updated forms such as BIR Form 1601-C and Form 2316.
What These Amendments Mean for Your Business
These amendments aim to make tax compliance more accessible and less costly for Philippine MSMEs, encouraging formalization and growth while helping businesses avoid unnecessary penalties.