Step by step
- Start with gross receipts: ₱500,000.
- Pure self-employed taxpayers deduct the first ₱250,000: ₱500,000 − ₱250,000 = ₱250,000.
- Multiply by 8%: ₱250,000 × 8% = ₱20,000.00.
- No percentage tax on top — the 8% covers it.
Compare: graduated rates
With OSD: taxable income = 60% × ₱500,000 = ₱300,000 → 15% × ₱50,000 = ₱7,500.00, plus 3% percentage tax of ₱15,000.00 = ₱22,500.00.
With itemized expenses of ₱100,000: taxable income ₱400,000 → ₱22,500.00, plus ₱15,000.00 percentage tax = ₱37,500.00.
So the 8% option saves you ₱2,500.00 versus OSD in this example.
Other gross amounts (pure self-employed, no itemized)
| Gross receipts | 8% option | Graduated + OSD + 3% |
|---|---|---|
| ₱300,000 | ₱4,000.00 | ₱9,000.00 |
| ₱400,000 | ₱12,000.00 | ₱12,000.00 |
| ₱500,000 | ₱20,000.00 | ₱22,500.00 |
| ₱600,000 | ₱28,000.00 | ₱34,500.00 |
| ₱800,000 | ₱44,000.00 | ₱62,500.00 |
| ₱1,000,000 | ₱60,000.00 | ₱92,500.00 |
Below ₱250,000 a year, the 8% option gives zero income tax. Note that if you earn less than ₱250,000 under graduated rates you still owe 3% percentage tax, which is why 8% is usually the better choice for small freelancers too.
How you pay it
The tax is paid quarterly on BIR Form 1701Q (cumulative), with the annual return on Form 1701A. If clients withhold 5% or 10% expanded withholding tax from your fees (Form 2307), you can credit that against your tax.
Quarterly payments in practice
With ₱500,000 of receipts earned evenly through the year, the first quarters may show little or no tax because the ₱250,000 deduction is applied cumulatively: the tax builds up as your year-to-date receipts pass ₱250,000. File each 1701Q even if the tax due is zero — late or missing returns carry penalties.
Keep simple records anyway
Under the 8% option, expenses don’t reduce your tax, but you still need to issue registered invoices and keep a simple record of sales. Good records also help if you want to compare options next year or apply for a loan or visa.
FAQ
How much is the 8% tax on ₱500,000?
₱20,000.00 for a purely self-employed taxpayer: 8% of ₱250,000 (the amount above the ₱250,000 deduction).
Is 8% cheaper than OSD at ₱500,000?
Yes. OSD plus 3% percentage tax totals ₱22,500.00, versus ₱20,000.00 under 8%.
Can I deduct my 2307 withholding?
Yes. Creditable withholding tax shown on the Forms 2307 from your clients is deducted from the income tax due on your quarterly and annual returns.
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.