On ₱1,200,000 in gross receipts with ₱300,000 in expenses, the 8% Flat Tax option nets you about ₱824,000 a year, roughly ₱46,500 more than the graduated rates option. Enter your own gross receipts and expenses below to see which actually wins for you.
Rates verified How we check rates
8% flat tax
8%
on gross above ₱250,000
VAT threshold
₱3,000,000
8% closes above this
OSD deduction
40%
of gross, no receipts needed
Percentage tax
3%
on gross, non-VAT-registered
For purely self-employed individuals and professionals only (not mixed income earners, and not salaried employees, who file differently). See our Philippines Salary Calculator for employee take-home pay.
8% flat tax nets you more
At ₱1,200,000/year in gross receipts with ₱300,000 in expenses, the 8% Flat Tax option leaves you with ₱824,000/year (₱68,667/month), which is ₱46,500 more than the graduated rates option would leave you.
8% Flat Tax
₱824,000
net per year · ₱68,667/month
Effective tax rate: 6.3%
Graduated Rates
₱777,500
net per year · ₱64,792/month
Effective tax rate: 10.2%
Full breakdown at ₱1,200,000/year
| Line item | 8% Flat Tax | Graduated Rates |
|---|---|---|
| Gross receipts | ₱1,200,000 | ₱1,200,000 |
| Deduction used for tax base | ₱250,000 exempt amount | ₱480,000 (OSD (40%)) |
| Income tax | ₱76,000 | ₱86,500 |
| Percentage tax / VAT | ₱0 (included in 8%) | ₱36,000 |
| Business expenses (cash outflow) | ₱300,000 | ₱300,000 |
| Net income (annual) | ₱824,000 | ₱777,500 |
Uses 2026 BIR TRAIN Law rules: the 8% flat tax on gross sales/receipts above ₱250,000 (available only up to the ₱3,000,000 VAT threshold), or the graduated PIT table plus 3% percentage tax (12% VAT once VAT-registered or above the threshold), with the larger of the 40% OSD or your entered itemized expenses used as the deduction. It assumes purely self-employed income, calendar-year filing, and does not model SSS/PhilHealth/Pag-IBIG voluntary contributions, prior-quarter payments already made, or mixed-income scenarios. Consult the BIR or a tax professional before filing.
A self-employed individual or professional in the Philippines has two ways to settle income tax under the TRAIN Law. The 8% flat tax applies a single 8% rate to gross sales or receipts above ₱250,000, and it replaces both the graduated income tax and the 3% percentage tax in one step. It's available only while your gross stays at or under the ₱3,000,000 VAT threshold, and it ignores your actual expenses entirely.
The graduated route runs your net taxable income (gross receipts minus deductions) through the same six-bracket TRAIN Law table used for employees, from 0% up to ₱250,000 to 35% above ₱8,000,000. Deductions come from either the 40% Optional Standard Deduction, no receipts required, or your itemized, substantiated business expenses, whichever is larger. On top of the income tax, a non-VAT-registered filer pays a 3% percentage tax on gross; once you cross the VAT threshold, that becomes a 12% VAT instead.
Which one wins depends on your actual expense ratio. Low-overhead freelancers (consultants, developers billing mostly for their time) tend to do better on the 8% option, since it skips percentage tax entirely. Self-employed individuals with genuinely high costs, subcontractors, equipment, inventory, office rent, often come out ahead itemizing under the graduated table, because the tax savings from real deductions can outweigh the simplicity of 8%. This is exactly why it's worth running your own numbers rather than following a rule of thumb.
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Take your annual gross sales or receipts, subtract ₱250,000, and multiply what's left by 8%. That's it. There's no separate percentage tax on top, since the 8% option specifically replaces both the graduated income tax and the 3% percentage tax in one number.
Purely self-employed individuals and professionals whose gross sales/receipts and other non-operating income don't exceed the ₱3,000,000 VAT threshold for the year. Mixed income earners (salary plus freelance income) can still elect it, but they apply the 8% to their entire freelance gross since the ₱250,000 exemption is already used up by their employment income.
The 8% option closes automatically. You're pushed onto the graduated income tax table plus 12% VAT (instead of the 3% percentage tax), and you become required to register as a VAT taxpayer with the BIR.
It depends entirely on your expense ratio. The Optional Standard Deduction gives you 40% of gross receipts as a deduction with zero paperwork, no receipts needed. If your real, substantiated business expenses run higher than 40% of your gross, itemizing wins instead. This calculator automatically uses whichever deduction is larger for the graduated-rate comparison.
Not necessarily; it depends on your expenses too. The 8% option ignores your actual expenses entirely, so if you have high genuine business costs (equipment, subcontractors, office rent), the graduated table with itemized deductions can come out ahead even at a modest gross. That's exactly why this is a break-even decision, not a fixed rule, and why entering your real expense figure matters.
Yes, but the election is made once per taxable year and generally locked in once you file your first quarterly return under that method (via BIR Form 1701Q, checking the applicable box). You can't switch mid-year, so it's worth running the comparison before your first quarter's filing deadline.
No. Those are voluntary contributions for self-employed individuals rather than mandatory payroll deductions, and they're independent of which income tax option you choose. This tool focuses purely on the BIR income tax and business tax comparison.
Related reading
Go deeper on the mechanics behind these numbers, or see how a salaried employee's tax compares.
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