Self-employed individuals and professionals who aren't VAT-registered choose between two options:
Option 1: 8% income tax
- 8% of gross sales or receipts above ₱250,000
- Replaces both the graduated income tax and the 3% percentage tax
- No deductions for expenses
- Only if your gross sales or receipts are ₱3 million or less
Option 2: graduated income tax + percentage tax
- Graduated income tax rates (0% to 35%) on taxable income
- Plus 3% percentage tax on gross sales or receipts
- You can deduct expenses (itemized or optional standard deduction)
Filing:
- Quarterly income tax returns (BIR Form 1701Q) — due 15 May, 15 August and 15 November
- Annual income tax return (BIR Form 1701 or 1701A) — due 15 April of the next year
- Keep books of accounts and issue BIR-registered invoices (under the Ease of Paying Taxes Act, invoices replaced official receipts)
What it means for you:
- Register with the BIR before you start earning
- The 8% option is simpler if your expenses are low
- Consider a bookkeeper if your income or filings get complicated