The 8 Percent Tax Option for Freelancers and the Self-Employed

If you earn from freelancing, a profession, or an online store, the BIR gives you a choice in how your income is taxed. Picking the right one can make a real difference to what you owe and to how much paperwork you keep.

The two ways to be taxed

The default is the graduated income tax, the same bracket table employees follow, paired with a separate 3 percent percentage tax on your gross sales or receipts. The alternative is a single 8 percent flat tax. When you choose the 8 percent, it stands in for both the graduated income tax and the 3 percent percentage tax, so you are settling both with one rate.

Who can choose it

The 8 percent option is open to self-employed individuals and professionals whose gross sales and receipts for the year do not exceed ₱3,000,000, the same figure that is the VAT registration threshold. If you are VAT-registered, or you cross ₱3 million during the year, you fall back to the graduated rates. You signal the choice on your first quarterly return, and it holds for that whole year.

The ₱250,000 that changes the math

For someone earning purely from self-employment, the 8 percent is applied only to gross receipts above ₱250,000. That first ₱250,000 is left out, which mirrors the tax-free first bracket employees get. So a pure freelancer with ₱800,000 in receipts pays 8 percent on ₱550,000, not on the full ₱800,000.

The ₱250,000 head start does not apply to a mixed income earner, someone with both a salary and a business. In that case the ₱250,000 is already used up inside the graduated table applied to their salary, so the 8 percent is charged on the full business receipts with no reduction.

Which one wins

There is no single answer, and that is why the choice exists. The 8 percent tends to favor freelancers with low expenses, since it is charged on receipts and ignores costs. The graduated route can win for someone with heavy, documented expenses, because it is charged on profit after those expenses. The safest move is to run your own numbers both ways before you commit for the year.

To compare the two on your figures, use the freelancer tax calculator, or the affiliate tax calculator if your income is commissions from Shopee, TikTok, or similar.