BIR Form 1702Q: Quarterly Income Tax Return Guide for Corporations and Partnerships in the Philippines

All corporations, One Person Corporations (OPCs), and partnerships registered with the Securities and Exchange Commission (SEC) must also register with the Bureau of Internal Revenue (BIR) as Non-Individual (NI) Taxpayers.

After registration, it is also required to file and pay the applicable taxes as indicated in its BIR Form 2303 – Certificate of Registration (COR). For most taxable corporations and partnerships, this includes filing of quarterly and annual Income Tax Returns (ITR), along with other applicable tax returns such as withholding taxes and value-added tax (VAT) or percentage tax, depending on the nature of the business.

One of the required filings is the BIR Form 1702Q. BIR Form 1702Q is the Quarterly Income Tax Return for Non-Individual Taxpayer such as corporations, partnerships, and other taxable juridical entities. It is used to report cumulative taxable income and compute any income tax due for the first, second, and third quarters of the taxable year.

What is BIR Form 1702Q?

BIR Form 1702Q is the Quarterly Income Tax Return for corporations, partnerships, and other taxable juridical entities. It is used to report cumulative taxable income earned from the beginning of the taxable year up to the end of each quarter and to compute any income tax due.

Unlike an annual income tax return, 1702Q is filed quarterly after the close of the first, second, and third quarters of the taxable year.

Who needs to file BIR Form 1702Q?

Generally, the following taxpayers are required to file BIR Form 1702Q if they are subject to quarterly corporate income tax:

• Domestic corporations
• One Person Corporations (OPC)
• Resident foreign corporations
• Partnerships

Who does not use BIR Form 1702Q?

BIR Form 1702Q is not used by:

• Sole proprietors
• Self-employed individuals
• Professionals
• Mixed-income earners filing individual income tax returns

These taxpayers generally use BIR Form 1701Q instead.

When is the filing deadline?

BIR Form 1702Q is filed after the end of the first, second, and third quarters of every taxable year.

The return must generally be filed within 60 days following the close of each taxable quarter.

For businesses following the calendar year:

Important: BIR Form 1702Q is cumulative. Each succeeding quarter includes the results of the previous quarters.

Corporations using a fiscal year should count 60 days after the end of each taxable quarter instead of using the calendar-year dates above.

What information is required?

Preparing BIR Form 1702Q usually requires the following information:

Gross Income

Total taxable sales, service income, and other operating income earned from the beginning of the taxable year up to the end of the current quarter.

Allowable Deductions

There are two types of allowable deductions to choose from:

1. Optional Standard Deduction (OSD)
2. Itemized Deduction

Under Optional Standard Deduction (OSD), the non-individual taxpayer will only use 40% of net gross income as allowed deductions instead of actual itemized expenses.

Under Itemized Deduction, the amount of deductions is based on the necessary business expenses applicable to the corporation and partnership such as:

• Cost of sales
• Operating expenses
• Salaries and wages
• Rent
• Utilities
• Professional fees
• Depreciation
• Supplies
• Transportation
• Representation & Entertainment
• Other allowable deductions

Taxable Income

Taxable income is generally computed as:

Gross Income
Less: Allowable Deductions
= Taxable Income for the Current Quarter
Add: Taxable Income from Previous Quarter(s)
= Total Taxable Income To Date

Prior Quarter Income Tax Payments

Since the return is cumulative, taxes already paid in previous quarters must be deducted to avoid paying the same tax twice.

Tax Credits

Common tax credits include:

• Creditable Withholding Tax (supported by signed BIR Form 2307 from customers)
• Prior quarter payments
• Other allowable tax credits permitted by law

Carry-Over Options

Certain excess tax credits may be carried over to succeeding quarters or taxable years, subject to the applicable tax rules and elections made by the taxpayer during the quarter.

What is the Income Tax Rate for Non-Individual Taxpayers?

The income tax rate applicable to a Non-Individual (NI) taxpayer depends on its classification, nature of business, and whether it qualifies for special tax rates, tax incentives, or exemptions under existing laws.

This guide focuses on taxable corporations and partnerships that are subject to the regular corporate income tax and are not covered by special income tax rates or tax incentive regimes.

There are two corporate income tax systems to consider:

A. Regular Corporate Income Tax (RCIT)

The Regular Corporate Income Tax (RCIT) applies to most taxable corporations and partnerships unless they qualify for a special tax rate or exemption.

Under Republic Act No. 11534 (CREATE Act), the applicable income tax rates are:

Both the net taxable income and total asset requirements must be met to qualify for the 20% income tax rate.

B. Minimum Corporate Income Tax (MCIT)

Beginning on the fourth taxable year immediately following the year the corporation commenced business operations, a corporation may become subject to the Minimum Corporate Income Tax (MCIT).

The MCIT is 2% of gross income. If the computed MCIT is higher than the Regular Corporate Income Tax (RCIT) for the taxable year, the MCIT becomes the income tax due instead of the RCIT.

Since BIR Form 1702Q computes quarterly income tax, corporations that are already subject to MCIT should determine whether the MCIT or the RCIT applies when preparing their quarterly income tax return.

Check if MCIT should be considered in your 1702Q

How to compute the income tax due?

The most common mistake is thinking that each quarter is computed independently.

It is not.

The computation is cumulative.

Example

ABC Manufacturing, Inc. reports the following cumulative figures:

First Quarter

Second Quarter

At the end of June, cumulative figures become:

Notice that the second-quarter computation does not start from zero. It includes the entire year’s results from January through June, then deducts taxes already paid during the first quarter.

The same cumulative approach applies to the third quarter.

What are the required attachments to BIR Form 1702Q?

The required attachments for BIR Form 1702Q – Quarterly Income Tax Return for Non-Individual Taxpayers depend on the taxpayer’s circumstances and whether tax credits are being claimed.

One common scenario is when claiming Creditable Withholding Tax (CWT) supported by BIR Form 2307. In this case, the following submissions are generally required:

Summary Alphalist of Withholding Taxes (SAWT)

If applicable, the taxpayer should electronically submit the Summary Alphalist of Withholding Taxes (SAWT) containing the details of the tax credits being claimed.

Be sure to keep the proof of successful SAWT submission as it forms part of the supporting documents for the income tax return.

Electronic Audited Financial Statements (eAFS)

Supporting documents are generally uploaded through the Electronic Audited Financial Statements (eAFS) System, when applicable. These may include:

• Signed copies of BIR Form 2307 supporting the claimed Creditable Withholding Tax
• Proof of successful SAWT submission
• Proof of filing and payment of BIR Form 1702Q
• Other supporting documents required under existing BIR regulations

For a guide on how to use eAFS, you may read this article, How to Use BIR eAFS?

Common Mistakes When Filing BIR Form 1702Q

Forgetting that the return is cumulative

The second and third quarter returns include all income and expenses from the beginning of the taxable year.

For example:

• Q1 covers January to March.
• Q2 covers January to June – not just April to June.
• Q3 covers January to September – not just July to September.

This is one of the most common causes of incorrect tax computations.

Forgetting prior quarter tax payments

Taxes already paid in earlier quarters should generally be claimed in the succeeding quarterly return.

Otherwise, the corporation may end up paying more income tax than necessary.

Missing available tax credits

Many corporations forget to claim available tax credits, particularly Creditable Withholding Tax (BIR Form 2307) deducted by customers.

Always reconcile withholding taxes before filing.

Claiming unsupported BIR Form 2307 credits

Only Creditable Withholding Taxes properly supported by valid and signed BIR Form 2307 should generally be claimed as tax credits.

Using unsupported tax credits may result in disallowance during a tax examination.

It is also important to claim the tax credit (BIR Form 2307) on the same quarter of sale.

Forgetting to submit the SAWT as attachment to BIR Form 1702Q when claiming Tax Credits

If the corporation is claiming Creditable Withholding Tax (CWT) supported by BIR Form 2307, it is required to submit a Summary Alphalist of Withholding Taxes (SAWT) thru esubmission@bir.gov.ph

The deadline of submission is similar to the deadline of the income tax return.

Mismatch between the return and accounting records

Income, expenses, and tax credits reported in BIR Form 1702Q should agree with:

• Books of accounts
• Financial statements
• Supporting schedules

Differences often trigger unnecessary questions during audits or tax compliance reviews.

Using the incorrect BIR Form or outdated eBIRForms Version

The BIR periodically updates both the eBIRForms package, EFPS and the BIR Form 1702Q itself to reflect changes in tax laws, tax rates, or filing requirements.

For example, there are different versions of the form such as BIR Form 1702Q v2008C and BIR Form 1702Q v2018C. Filing using the wrong form version may result in an incorrect tax computation or the return being rejected.

Before preparing your quarterly income tax return, verify that you are using both:

• The latest applicable version of the BIR Form 1702Q for your corporation.
• The latest version of the eBIRForms package, if you are filing through eBIRForms.
• The latest version of BIR Form 1702Q in your EFPS BIR Forms.

Simplify Quarterly Income Tax Preparation

Preparing BIR Form 1702Q becomes much easier when your accounting records are accurate and up to date throughout the year.

Instead of manually gathering receipts, reconciling accounts, and computing cumulative figures every quarter, maintaining complete accounting records allows you to prepare quarterly income tax returns more efficiently and with fewer errors.

MPM Accounting helps businesses organize income and expenses, maintain books of accounts, generate financial reports, and simplify the preparation and filing of quarterly tax returns – all while keeping supporting records readily available when needed.