Freelancer & Self-Employed Tax Calculator (8% vs Graduated)

A flat 8% tax on your gross sales or receipts (and other non-operating income) above ₱250,000.00, paid instead of both the graduated income tax rates and the 3% percentage tax (NIRC Sec. 24(A)(2)(b) as amended by TRAIN). There are no deductions: expenses do not lower the tax. It is open to self-employed individuals and professionals whose gross sales or receipts for the year do not exceed the ₱3,000,000.00 VAT threshold.

Compare the totals. With few expenses, 8% usually wins: on ₱1,000,000.00 of receipts it is ₱60,000.00, against ₱62,500.00 of income tax plus ₱30,000.00 of percentage tax (₱92,500.00) on the graduated rates with the 40% optional standard deduction. The graduated rates can win only when your real, deductible expenses are large — about half or more of your receipts at typical freelance incomes — because itemized deductions cut the taxable income while 8% ignores expenses. The calculator above compares all three for your numbers.

Yes under the 8% option if you are purely self-employed: the 8% applies only to the excess over ₱250,000.00, so ₱250,000.00 of receipts means ₱0 income tax. On the graduated rates the first ₱250,000.00 of taxable (net) income is taxed at 0%, but the 3% percentage tax is still due on gross receipts. Mixed income earners get no ₱250,000.00 deduction under 8%, because their salary already used the 0% bracket (BIR, RR No. 8-2018).

At the start of each year. New registrants choose it on their BIR Form 1901 registration or their first quarterly return; existing taxpayers file BIR Form 1905 at the beginning of the year to drop the quarterly percentage tax, and signify the 8% option in the first-quarter income tax return (1701Q) or percentage tax return (2551Q). If you do not signify it, BIR treats you as on graduated rates for the whole year, and the choice cannot be changed once made (RR No. 8-2018; RMO No. 23-2018). It has to be signified again every taxable year.

Your salary is always taxed at the graduated rates. Your business or freelance income can be taxed at 8% of gross (no ₱250,000.00 deduction) or added to your salary and taxed at the graduated rates, plus the 3% percentage tax. Example: ₱400,000.00 of taxable salary (₱22,500.00 of tax) and ₱600,000.00 of freelance receipts: 8% gives ₱70,500.00 in total; graduated rates with the 40% OSD give ₱94,500.00 plus ₱18,000.00 percentage tax.

Yes. A Filipino citizen living in the Philippines is taxed on income from all sources, inside and outside the country (NIRC Sec. 23(A)), so payments from foreign clients and platforms count as gross receipts, the same as local clients. A Philippine client may withhold tax on your fees; that withholding is credited against the income tax on your return.

Above the ₱3,000,000.00 VAT threshold the 8% option is no longer available: you are taxed at the graduated rates for the year, become liable to VAT from then on, and attach audited financial statements to the annual return (RMO No. 23-2018). The percentage tax does not apply to VAT-registered persons.

Instead of listing actual expenses, an individual on graduated rates may deduct a flat 40% of gross sales or receipts (NIRC Sec. 34(L)); no receipts for expenses are needed and financial statements need not be attached. The election is made in the first-quarter return and applies for the whole year.

Sa 8% option: ₱20,000.00 — 8% ng sobra sa ₱250,000.00, at wala nang percentage tax. Sa graduated rates na may 40% OSD: ₱7,500.00 na income tax at ₱15,000.00 na 3% percentage tax, kabuuang ₱22,500.00. Piliin ang 8% sa unang quarterly return ng taon.