Freelancer Tax: 8% Option or Percentage Tax
Bureau of Internal Revenue · filing
Quick answer
A self-employed Filipino under the ₱3,000,000 VAT threshold chooses between 8% income tax on gross receipts above ₱250,000, which replaces the percentage tax, or the graduated income tax rates plus a 3% quarterly percentage tax on BIR Form 2551Q.
Last verified
Where these figures come from
About these figures: the numbers below come from BIR's official published sources: Bureau of Internal Revenue | Income Tax, Income Tax Rates (https://www.bir.gov.ph/income-tax, retrieved 2026-08-31); Bureau of Internal Revenue | Percentage Tax (https://www.bir.gov.ph/percentage-tax, retrieved 2026-08-31); Bureau of Internal Revenue | List of BIR Forms (https://www.bir.gov.ph/bir-forms, retrieved 2026-08-31). Agencies change fees and rates without notice, so confirm with BIR before you rely on them. Last verified: 2026-08-31.
A Philippine freelancer under the ₱3,000,000 VAT threshold makes one choice that changes both what they pay and how often they file.
The choice
| Option A: the 8% | Option B: graduated plus percentage tax | |
|---|---|---|
| Income tax | 8% on gross sales or receipts in excess of ₱250,000 | Graduated rates on net taxable income |
| Percentage tax | Replaced; the 8% is in lieu of it | 3% of gross sales or receipts, for a non-VAT person under Section 109 (BB) |
| Annual return | 1701A | 1701A |
| Quarterly income tax return | 1701Q | 1701Q |
| Quarterly percentage tax return | Not filed | 2551Q, within 25 days after each quarter |
| Eligibility | Gross sales or receipts and other non-operating income not over ₱3,000,000 | Any level, and mandatory above ₱3,000,000 |
Worked comparison
Applying BIR’s own published formulas. These are arithmetic illustrations, not BIR computations, and they ignore deductions, which materially change option B.
| Gross receipts in a year | Option A: 8% on the excess over ₱250,000 | Option B: 3% percentage tax alone |
|---|---|---|
| ₱250,000 | ₱0 | ₱7,500 |
| ₱500,000 | ₱20,000 | ₱15,000 |
| ₱750,000 | ₱40,000 | ₱22,500 |
| ₱1,000,000 | ₱60,000 | ₱30,000 |
| ₱2,000,000 | ₱140,000 | ₱60,000 |
| ₱3,000,000 | ₱220,000 | ₱90,000 |
The right-hand column is only the percentage tax. Under option B you also pay income tax on net taxable income at the graduated rates, so the columns are not a like-for-like total. What the table does show is that the 8% is a single flat charge covering both, while option B splits the bill in two and lets deductions reduce one half.
The income tax table has the graduated schedule that completes option B.
The graduated rates, for option B
| Net taxable income, over | But not over | Rate |
|---|---|---|
| – | ₱250,000 | 0% |
| ₱250,000 | ₱400,000 | 20% of the excess over ₱250,000 |
| ₱400,000 | ₱800,000 | ₱30,000 plus 25% of the excess |
| ₱800,000 | ₱2,000,000 | ₱130,000 plus 30% of the excess |
| ₱2,000,000 | ₱8,000,000 | ₱490,000 plus 32% of the excess |
| ₱8,000,000 | – | ₱2,410,000 plus 35% of the excess |
BIR’s page carries no effectivity date for that schedule. The income tax table guide says so plainly too.
The percentage tax in detail
| Detail | |
|---|---|
| Return | BIR Form No. 2551Q, Quarterly Percentage Tax Return |
| Deadline | Within 25 days after the end of each taxable quarter |
| Who files | Non-VAT registered persons selling goods, properties or services with annual gross sales or receipts not over ₱3,000,000.00, exempt from VAT under Section 109 (BB) |
| Also files | Persons leasing residential units where the monthly rental per unit exceeds ₱15,000.00 but the yearly aggregate does not exceed ₱3,000,000.00 |
| Late no-payment return | Penalties imposed by the RDO, paid at the concerned Authorized Agent Bank |
The published rate table
| Coverage | Taxable base | Rate |
|---|---|---|
| Non-VAT registered persons under Section 109 (BB) | Gross sales or receipts | 3% |
| Domestic carriers and keepers of garages | Gross receipts | 3% |
| International air or shipping carriers doing business in the Philippines | Gross receipts on cargo transport from the Philippines abroad | 3% |
| Franchise grantees: gas and water utilities | Gross receipts | 2% |
| Franchise grantees: radio and television broadcasters whose preceding-year gross receipts do not exceed ₱10,000,000 and who did not opt to register for VAT | Gross receipts | 3% |
| Overseas dispatch, message or conversation originating from the Philippines | Amount paid | 10% |
| Banks and quasi-banks, lending income with maturity of 5 years or less | Interest, commissions, discounts | 5% |
| Banks and quasi-banks, lending income with maturity over 5 years | Same | 1% |
| Banks and quasi-banks, dividends and equity shares and net income of subsidiaries | - | 0% |
| Banks and quasi-banks, royalties, rentals, exchange profits and other gross income | - | 7% |
| Banks and quasi-banks, net trading gains on foreign currency, debt securities and derivatives | - | 7% |
| Other non-bank financial intermediaries | Interest, commissions, discounts and other gross income | 5% |
Your filing calendar either way
| Date | What is due |
|---|---|
| April 15 | Annual return: 1701A for purely business income, 1701 for mixed income |
| May 15 | 1701Q, 1st quarter |
| August 15 | 1701Q, 2nd quarter |
| November 15 | 1701Q, 3rd quarter |
| Within 25 days after each quarter | 2551Q, only under option B |
| January 31 | Your employer’s Form 2316, if you also hold a job |
The ITR filing guide covers all of those, including the four exemptions from filing Form 1700.
Registering in the first place
| Detail | |
|---|---|
| Form | BIR Form 1901, Application for Registration for Self-Employed (Single Proprietor/Professional), Mixed Income Individuals, Non-Resident Alien Engaged in Trade/Business, Estates and Trusts |
| When | On or before the commencement of business |
| Published time | 3 days through ORUS, 1 day by walk-in |
| Fee | ₱30.00 documentary stamp tax, plus procured printing on the walk-in route |
| Invoices | A final clear sample of your own invoices, or a BIR Printed Invoice bought at the New Business Registrant Counter |
| DTI certificate | Required if operating under a business name |
The TIN registration guide and the 1901 against 1902 guide cover it, and the TIN ID guide the free card.
Micro and small classifications
| Classification | Gross sales |
|---|---|
| Micro | Less than ₱3,000,000 |
| Small | ₱3,000,000 to less than ₱20,000,000 |
Both file BIR Form 1701-MS, the Annual Income Tax Return for Individuals Classified as Micro and Small Taxpayers. BIR publishes no filing date for that form on the page read for this guide.
What this page does not cover
BIR does not publish, on the pages read for this guide, the effectivity year of the graduated schedule, the VAT registration rules above ₱3,000,000, the optional standard deduction mechanics, the penalty amounts for late filing, or how to switch between the 8% option and the graduated rates mid-year. None of those are stated here.
Related
The income tax table guide covers the graduated rates, the ITR filing guide the deadlines, and the TIN registration guide getting registered as self-employed.
Frequently asked questions
- What is the 8% option?
- For purely self-employed individuals and professionals whose gross sales or receipts and other non-operating income do not exceed the VAT threshold of ₱3,000,000, BIR publishes an option: 8% income tax on gross sales or gross receipts in excess of ₱250,000, in lieu of the graduated income tax rates and the percentage tax.
- What replaces the 8% if I do not take it?
- The graduated income tax rates on your net taxable income, plus the quarterly percentage tax. For a non-VAT registered person under Section 109 (BB) that percentage tax is 3% of gross sales or receipts.
- When is the percentage tax due?
- Within 25 days after the end of each taxable quarter, on BIR Form No. 2551Q, the Quarterly Percentage Tax Return.
- Who has to file 2551Q?
- Persons, meaning individuals and non-individuals including estates, trusts, partnerships and corporations, who are not VAT-registered, who sell goods, properties or services whose annual gross sales or receipts do not exceed ₱3,000,000.00 and are exempt from VAT under Section 109 (BB). Also persons leasing residential units where the monthly rental per unit exceeds ₱15,000.00 but the aggregate for the year does not exceed ₱3,000,000.00, and persons in specified industries.
- What happens if I file late with nothing to pay?
- BIR states that no-payment returns filed late will result in the imposition by the RDO of penalties, which are paid at the concerned Authorized Agent Bank.
- Which annual return do I file?
- BIR Form 1701A if you earn purely from business or profession, on or before April 15 for the preceding taxable year. If you also have a job, that is mixed income and the form is 1701. Quarterly, the form is 1701Q, due May 15, August 15 and November 15.
- Do I still register a business with BIR?
- Yes, using BIR Form 1901 for a self-employed single proprietor or professional. The charter publishes that route at 3 days through ORUS or 1 day by walk-in, with a ₱30.00 documentary stamp tax.
- Which return is used above ₱3,000,000?
- Above the VAT threshold the 8% option is not available and the graduated income tax rates apply. This guide does not describe the VAT registration rules, because they are outside the pages read for it.