8% Income Tax Rate Philippines: Complete BIR 8% Tax Rate Guide
How to avail the 8% income tax rate via ORUS or BIR Form 1905, plus guide to tax forms 2551Q, 1701Q, and 1701A for small businesses, freelancers, and online sellers.
What you'll learn in this 8% income tax rate Philippines guide
This 8% income tax rate Philippines guide explains how small business owners, freelancers, and online sellers can simplify their taxes by choosing the 8% option instead of graduated income tax and percentage tax.
For related tax guides, also see our BIR ORUS Registration Guide 2026, Simple Guide: 3% vs 8% Tax, Form 1701Q Filing Guide, and BIR Business Registration Guide.
What is the 8% Income Tax Rate?
The 8% income tax rate Philippines is a simplified tax option under the Bureau of Internal Revenue.
👉 Instead of paying:
- Graduated income tax (0%–35%), and
- 3% percentage tax
You pay a flat 8% tax on your gross sales or receipts.
✅ In short: 8% tax replaces BOTH income tax + percentage tax (2551Q)
Who Can Avail the 8% Tax Rate?
You can choose the 8% tax rate if you are:
- ✔ Sole proprietor (small business owner)
- ✔ Freelancer or professional (e.g., designer, consultant)
- ✔ Online seller (Shopee, TikTok Shop, Facebook, etc.)
📌 Important Requirement:
Your total annual sales must be below ₱3,000,000 (VAT threshold)
🚫 You CANNOT use 8% if:
- You are VAT-registered
- Your sales exceed ₱3M
- You are a corporation (this is only for individuals)
How to Avail 8% Tax Philippines (Step-by-Step)
You must officially register your choice. If you don't, the default is graduated tax.
Option 1: Apply via ORUS (Online)
Use the BIR ORUS:
Steps:
- Log in to your ORUS account
- Go to Update Tax Type
- Select 8% Income Tax Rate Option
- Submit your request
📌 Best for: freelancers, online sellers, remote workers
Option 2: Apply via BIR Form 1905
File BIR Form 1905 at your RDO:
Steps:
- Download and fill out Form 1905
- Tick Change in Tax Type
- Indicate 8% Income Tax Option
- Submit to your RDO
📌 Best for: those who prefer manual filing
When Should You Apply?
- ✔ At the start of the taxable year (January)
- ✔ OR upon new business registration
⚠️ Late application = you may not qualify for that year
Tax Forms Under the 8% Rate
Here's what changes when you choose 8%:
1. Percentage Tax (2551Q)
❌ No need to file
Because 8% already replaces it
2. Quarterly Income Tax (1701Q)
✔ Still required
✔ Compute using 8% of gross income
3. Annual Income Tax (1701A)
✔ Still required
✔ Final tax computation based on 8%
Sample Computation (Simple)
Let's say:
Gross Sales: ₱500,000
👉 Tax Due:
₱500,000 × 8% = ₱40,000
📌 That's it—no deductions, no expense tracking needed.
Pros and Cons of 8% Tax
👍 Pros
- Simple computation
- No 3% percentage tax (2551Q)
- Less paperwork
- Easy for beginners
👎 Cons
- ❌ No deductions (rent, salary, utilities NOT allowed)
- ❌ Can be higher tax if your expenses are large
📌 Rule of thumb:
- Low expenses → 8% is good
- High expenses → graduated tax may be better
Common Mistakes to Avoid
- ❌ Forgetting to register the 8% option
- ❌ Filing 2551Q even if under 8%
- ❌ Mixing 8% and graduated tax
- ❌ Missing deadlines
👉 Tip: Always double-check your tax type in BIR records.
FAQs
Do I still need to file 2551Q if I chose 8%?
No. The 8% tax already replaces the percentage tax, so you don't need to file 2551Q.
Can I switch back to graduated tax?
Yes, but only next taxable year. You cannot switch mid-year.
Is 8% better than percentage tax?
It depends:
- ✔ Better if you want simplicity
- ✔ Better if expenses are low
- ❌ Not ideal if you have high operating costs
Final Tip
The 8% income tax rate Philippines is one of the easiest ways to stay compliant with the Bureau of Internal Revenue—especially for freelancers and small businesses.