Freelancer Tax: 8% or Graduated
BIR
Compare the 8% flat option against the graduated rates on net income. Expenses decide it, and the 8% ignores them completely.
This calculator does not carry current agency interest or dividend rates. You enter the rate, so a result is only as current as the figure you typed.
It is an estimate for planning, not an official quotation, and BIR's own computation is what governs. Confirm the figures before you commit to anything.
Every figure on this page is from Bureau of Internal Revenue's own published documents.
Last verified 1 source, listed below
Income Tax1. PHGuides is independent and not affiliated with BIR.
What this calculator does
A self-employed individual or professional under the VAT threshold chooses between two regimes. This runs both and names the cheaper one.
| 8% option | Graduated | |
|---|---|---|
| Charged on | Gross receipts above ₱250,000.00 | Net income after expenses |
| Rate | Flat 8% | 0% to 35% by band |
| Expenses | Ignored entirely | Deducted |
| Available | Gross up to ₱3,000,000.00 | Always |
| Replaces percentage tax | Yes | No |
Expenses decide it
| Gross | Expenses | 8% tax | Graduated tax | Cheaper |
|---|---|---|---|---|
| ₱1,000,000.00 | ₱100,000.00 | ₱60,000.00 | ₱160,000.00 | 8% |
| ₱1,000,000.00 | ₱400,000.00 | ₱60,000.00 | ₱80,000.00 | 8% |
| ₱1,000,000.00 | ₱700,000.00 | ₱60,000.00 | ₱10,000.00 | Graduated |
| ₱2,000,000.00 | ₱200,000.00 | ₱140,000.00 | ₱490,000.00 | 8% |
The pattern: a low-cost service business almost always does better on the 8%, and a business carrying real costs does better on the graduated rates. The crossover moves with your gross, which is why it is worth computing rather than guessing.
The threshold is a cliff
Above ₱3,000,000.00 of gross the 8% option disappears and you are on the graduated rates and VAT. Crossing it mid-year is a real event, not a rounding detail.
The same caveat applies
BIR’s page publishes the graduated schedule with no effectivity date, so both sides of this comparison inherit that. The 8% is fixed by Section 24(A)(2)(b) and the ₱250,000.00 allowance with it.
Registration, the percentage tax alternative and the quarterly filing calendar are in our freelancer tax guide. The bands alone are in the income tax calculator, and the forms in ITR filing.
Sources
- Bureau of Internal Revenue | Income Tax, retrieved