Your three choices as a self-employed taxpayer
| Option | Income tax | Percentage tax |
|---|---|---|
| 8% option | 8% × (gross − ₱250,000); mixed earners: 8% × gross | None — included |
| Graduated + OSD | Table below on 60% of gross | 3% of gross |
| Graduated + itemized | Table below on gross − actual expenses | 3% of gross |
The 8% option is open to individuals whose gross sales/receipts and other non-operating income do not exceed ₱3,000,000 (the VAT threshold). Mixed income earners can choose 8% for their business income, but the ₱250,000 deduction is not allowed because it is already used by their salary.
Graduated income tax table (2023 onwards)
| Taxable income per year | Tax |
|---|---|
| ₱250,000 and below | 0% |
| ₱250,000 – ₱400,000 | 15% of excess over ₱250,000 |
| ₱400,000 – ₱800,000 | ₱22,500 + 20% of excess over ₱400,000 |
| ₱800,000 – ₱2,000,000 | ₱102,500 + 25% of excess over ₱800,000 |
| ₱2,000,000 – ₱8,000,000 | ₱402,500 + 30% of excess over ₱2,000,000 |
| Above ₱8,000,000 | ₱2,202,500 + 35% of excess over ₱8,000,000 |
Quick rule of thumb
If your real expenses are low (typical for freelancers, VAs, writers and consultants), the 8% option usually wins. If your expenses are a big share of sales (online sellers with stock, small shops), graduated rates with itemized deductions can be cheaper — but you need receipts and books for every expense.
FAQ
How much tax does a freelancer pay on ₱600,000 a year?
Under the 8% option: 8% × (₱600,000 − ₱250,000) = ₱28,000.00. With graduated rates and the 40% OSD it would be ₱34,500.00 (income tax plus 3% percentage tax), so 8% is cheaper.
Is the 8% income tax better than OSD?
Often yes for service income. At ₱1,000,000 gross: 8% gives ₱60,000.00, OSD gives ₱92,500.00, and itemized with ₱200,000 expenses gives ₱132,500.00.
Can an employee with a side business use the 8% rate?
Yes, as a mixed income earner — but on the full gross, without the ₱250,000 deduction. Salary of ₱400,000 plus ₱300,000 of business receipts: total tax ₱46,500.00 under 8% vs ₱67,500.00 with OSD.
Do I still pay 3% percentage tax if I choose 8%?
No. The 8% tax is in lieu of both the graduated income tax and the percentage tax under Section 116.
Sources (checked 5 November 2026): NIRC Sec. 24(A)(2) as amended by RA 10963 (TRAIN) — graduated income tax table effective 1 January 2023 and the 8% option on gross sales/receipts above ₱250,000 for taxpayers with gross receipts not over ₱3,000,000; Sec. 34(L) optional standard deduction of 40% of gross sales/receipts; Sec. 116 percentage tax of 3% (the 1% CREATE rate ended 30 June 2023); Revenue Regulations No. 8-2018 (election of the 8% option, mixed income earners); bir.gov.ph. No change to these rates had been announced for 2027.