Filipino freelancers, virtual assistants and professionals choose between two ways to pay income tax: a flat 8% on gross receipts, or graduated rates on net income plus a 3% percentage tax. The right choice depends on your income and expenses, and you normally lock it in for the whole year. This calculator works out all three routes and shows the cheapest. Rates checked September 2026.
Figures checked against the National Internal Revenue Code as amended by the TRAIN Law (RA 10963) and BIR tax tables from 2023. Prices and rules change, so confirm with the official source before relying on them.
How it works
8% option: 8% of gross receipts above ₱250,000, replacing both the graduated income tax and the 3% percentage tax. It's open to self-employed individuals and professionals with gross receipts of ₱3 million or less who aren't VAT-registered. If you also have a salaried job, the ₱250,000 exclusion doesn't apply to your business income.
Graduated rates (from 2023): 0% up to ₱250,000; 15% of the excess to ₱400,000; ₱22,500 plus 20% to ₱800,000; ₱102,500 plus 25% to ₱2 million; ₱402,500 plus 30% to ₱8 million; and ₱2,202,500 plus 35% above. On this route, non-VAT taxpayers also pay 3% percentage tax on gross receipts.
With graduated rates you deduct either your actual expenses (itemized, with receipts and books) or the optional standard deduction (OSD) of 40% of gross, without receipts. Low-expense freelancers usually find the 8% option cheapest; high-expense businesses can do better with itemized deductions.
You choose the 8% option when you register, or in your first quarterly return of the year; otherwise graduated rates apply. Everyone with business income also has to register with the BIR and file quarterly and annual returns.
A worked example
A purely self-employed freelancer earns ₱1,200,000 with ₱150,000 of expenses. The 8% option costs 8% × ₱950,000 = ₱76,000. Graduated rates with OSD (taxable ₱720,000) cost ₱86,500 plus ₱36,000 percentage tax, ₱122,500 in total. With itemized expenses (taxable ₱1,050,000) it's ₱165,000 plus ₱36,000, ₱201,000. The 8% option saves ₱46,500.
Questions people ask
Who can use the 8% income tax option?
Self-employed individuals and professionals whose gross sales or receipts are ₱3 million or less and who aren't VAT-registered. It isn't available for purely compensation income from a job.
Does the 8% tax include percentage tax?
Yes. The 8% is in lieu of both the graduated income tax and the 3% percentage tax, which is why it's usually the cheaper option for freelancers with few expenses.
Is the first ₱250,000 tax-free on the 8% option?
For purely self-employed individuals, yes: 8% applies only to gross receipts above ₱250,000. Mixed-income earners pay 8% on all their business receipts, because the tax-free amount is already used against their salary.
How do I choose the 8% option?
Signify it when you register with the BIR, or in your first quarterly income tax return for the year. If you don't elect it in time, graduated rates and percentage tax apply for that year.
Do I pay tax on income from foreign clients?
Yes. Philippine residents are taxed on income from clients abroad, including platforms like Upwork. The same 8% or graduated options apply.