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Freelancer tax: 8% vs graduated
Enter what you expect to earn this year. See your annual tax under the 8% option and under graduated rates, and which one is lower.
Lowest tax this year
₱0.00
Above ₱3,000,000 you must register for VAT. VAT is not included here, so talk to an accountant.
| 8% option | |
| Graduated + itemized | |
| Graduated + 40% OSD |
How this is computed
- 8% option: 8% of gross receipts above ₱250,000 (no ₱250,000 deduction if you also earn a salary). It replaces both the graduated income tax and the 3% percentage tax. Only if gross receipts are ₱3,000,000 or less.
- Graduated + OSD: income tax on 60% of gross receipts using the 2023-onwards graduated table, plus 3% percentage tax on gross receipts (only if gross receipts are ₱3,000,000 or less).
- Graduated + itemized: income tax on gross receipts minus your expenses, plus 3% percentage tax (only if gross receipts are ₱3,000,000 or less).
- With a salary: graduated figures show the extra tax your business income adds on top of your salary (tax on salary plus business, minus tax on salary alone). Your salary's own tax is the same under every option, so it is left out.
- Above ₱3,000,000: no 8% option and no percentage tax, because VAT registration applies. VAT is not computed here.
Questions
Who can choose the 8% income tax?
Self-employed individuals and professionals who are not VAT-registered and whose gross sales or receipts for the year do not exceed ₱3,000,000.
Why does a mixed-income earner not get the ₱250,000 deduction?
If you also earn a salary, the ₱250,000 tax-free amount is already applied to your compensation. The 8% is then computed on all of your business income.
When do I choose the 8% option?
Usually when you register (BIR Form 1901) or on your first quarterly return of the year. Check with BIR or an accountant before you file.