Know Your Taxes: The 8% Income Tax Rate

https://juan.tax/blog/know-taxes-8-income-tax-rate/

Considered as one of TRAIN Law’s most intriguing provisions ever since its effectivity was
the 8% income tax rate option.

Not only did it became one of TRAIN’s most talked about rules as mentioned by most
individuals, but even businesses were also interested about any developments regarding
this new tax rate…

So, let’s cut to the chase: What’s with this 8% income tax rate option that makes it so
special amongst taxpayers? and what are the guidelines set by the Bureau of Internal
Revenue (BIR) regarding this filing option?

About the 8% Income Tax Rate

This filing option is available for self employed individuals whose gross sales/receipts and
other non-operating income for the year does not exceed the three million peso (3,000,000
PHP) Value Added Tax (VAT) threshold, and are not subject to Percentage tax. In this case,
they have the option to avail any of the following:

a) Use graduated income tax rates (follow the regular rates for individuals)
b) Avail for an 8% tax on gross sales/receipts in excess of 250,000 PHP

One the best perks in availing this option is that once you availed the 8% tax rate, you don’t
need to settle for a separate Percentage and Income Tax Return. Another thing is that with
the 8% option, all you need is to do is add your gross sales/receipts minus the non-taxable
250,000 PHP, then multiply the difference with the 8% tax rate and that’s it! — Simply put,
this tax option would make things easier for you.

Formula:

Total Gross Sales/Receipts – P250,000 X 8%

Criteria for Availing this Option

According to Revenue Memorandum Order No. 23-2018, aside from gross sales/receipts
and non-taxable income not exceeding the VAT threshold (3 million PHP), here are other
criteria that you should follow:

 The individual taxpayer should either be a self-employed (single proprietor,

professional, or mixed income earner).
 The taxpayer shall be registered and subject to percentage tax (or non-VAT filer).
 Taxpayer should have expressed his/her intention of availing the 8% Income Tax
Rate.
While those who are not qualified are the following:

 Corporation owning a business

 Compensation income earners
 VAT registered taxpayers (depending on the amount of gross sales/receipts)
 Taxpayers exempted from VAT, but exceeded the 3 million peso VAT threshold
 Taxpayers subject to other forms of Income Taxes
 Partners of GPP (General Professional Partnership).

How to File

Here are some guidelines for those who wanted to apply for an 8% Income Tax rate option:

a. For New Taxpayers

 You need to file 1901 (Application for Registration for Self-Employed and Mixed
Income Individuals, Estates/Trusts.) and/or 1701Q (Quarterly Income Tax
Return).
 For the initial quarter of the taxable year, you can use forms 2551Q (Quarterly
Percentage Tax Return) and/or 1701Q form.

b. For Existing Taxpayers

 File BIR Form 1905 (Application for Registration Information Update).

 First Quarterly Percentage Tax Return and/or Quarterly Income Tax Return
The 8% tax for self-employed individuals
Lea Roque
17 Apr 2018
https://www.grantthornton.com.ph/insights/articles-and-updates1/lets-talk-tax/the-8-
tax-for-self-employed-individuals/#:~:text=The%208%25%20tax%20is
%20applicable,other%20types%20of%20percentage%20tax.

Now that the tax filing deadline has passed, many taxpayers can breathe a sigh of relief.
Taxpayers have gone through one of the most grueling deadlines for the year and have
lived to tell about it. Yesterday’s deadline was a bit nostalgic, as it was the last return filed
under the old tax system. From now on, we can totally immerse ourselves in the new rules
under the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Taxes will now be
referred to as “before TRAIN” (BT) and “after TRAIN” (AT).

With April 16 gone, the next income tax filing deadline for individuals will be the first-
quarter Income Tax Return (ITR) due on May 15, 2018. Before that date, self-employed
individuals need to make a crucial decision. Do they avail of the 8% special tax rate, or
follow the regular income tax rate for individuals?

Since the start of the year, when the TRAIN law became effective, many self-employed
individuals and small business owners have been keenly following the developing rules for
the 8% tax applicable to them. Every time I attend a family gathering, someone would
always ask me about the 8% tax and ask how he can avail of it. There have been issuances
from the Bureau of Internal Revenue (BIR) that have helped shed light on some of the
questions of taxpayers. Since this is a new tax rate, the BIR has to develop rules specifically
for implementing this special tax rate. Taxpayers are grappling with the various issuances,
trying to understand and comply with them.

The 8% tax is applicable only to self-employed individuals (sole proprietors and

professionals) whose gross receipts or gross sales and other non-operating income for the
year do not exceed the three million pesos (P3,000,000) value-added tax (VAT) threshold
and are not subject to other types of percentage tax. If the small business is owned by a
corporation, the 8% tax will not apply. The 8% tax is applicable to various types of business
activities that can be undertaken by a sole proprietor, such as the practice of a profession,
consultancy services, or convenience store business.

The taxpayer availing of the 8% tax gets to enjoy simplified taxation. He does not need to
pay separate income tax and percentage tax, as the 8% tax rate answers for both taxes. He
also does not need to account for various expenses when computing taxes. If the self-
employed individual is earning purely business income, he simply needs to add up his
gross sales or receipts, deduct the non-taxable P250,000, and multiply the difference with
the 8% to arrive at his tax payable to the BIR. It’s that simple.

A word of caution, however; the 8% rate should not be an automatic choice for all self-
employed individuals. The 8% tax rate is imposed on the gross sales or receipts; no
deductions for business expenses are allowed. Hence, the self-employed individual should
do his math and check what option would benefit him most. He should compare his tax
liability under the 8% tax and the regular income tax of 0% to 35%. However, should he
elect to pay under the regular rate of 0% to 35%, he shall continue to pay the 3%
percentage tax in addition to the income tax.

The 8% tax is generally preferred for professionals or those engaged in the sale of services
where business expenses are normally minimal. For those in businesses that have huge
costs of sales and operating expenses, the 8% tax on gross may yield a higher tax payable.
However, even with the higher tax, the taxpayer can also factor in his decision making that
fact the administrative requirements under the 8% are also simplified.

Partners of a general professional partnership are also not allowed to avail of the 8% tax, as
their distributive share from the general professional partnership is already net of cost and
expenses.

To avail of the 8% tax, the taxpayer must first cancel his VAT registration or his percentage
tax registration. Once that is done, he must elect to apply the 8% income tax rate in his
first-quarter income tax return, which is due on May 15. For those who are excited to file
their first- quarter income tax return for 2018, a little patience is required; the appropriate
form has not yet been released by the BIR. We expect the BIR Form to be issued before the
deadline. Hence, taxpayers need to check the BIR website for the announcement of the
availability of the form.

Section 12 of Revenue Regulations No. 8-2018 requires percentage taxpayers to submit

their taxpayer registration update form (BIR Form 1905) to the BIR to end-date the
percentage tax. If taxpayers fail to end-date their percentage tax registration, they must
continue to file the percentage tax return reflecting zero-amount of tax with a notation that
they are availing of the 8% income tax rate for the taxable year. I have received some
messages that there are some BIR offices that refuse to end-date the percentage tax return
for taxpayers availing of the 8% tax, despite the regulatory requirements. This situation is
probably part of the birthing pains we are still experiencing with the new tax system.

If the taxpayer is VAT-registered and wishes to avail of the 8% tax, he must cancel his VAT
registration no later than April 30, 2018. The taxpayer must submit his registration update
form to the BIR and surrender his unused VAT invoices and receipts.

In view of the lower income tax rate, the withholding tax collected by clients and customers
from their payments of professional, promotional, talent fees, and similar payments for
services rendered by self-employed professionals availing of the 8% has also been
decreased to 5%. The individual must submit to his client a sworn declaration that his
gross sales or receipts for the year do not exceed P3 million, together with a copy of his
Certificate of BIR registration showing that he is not VAT-registered. The sworn declaration
must be submitted no later than Jan. 15 of each year or at least prior to the initial payment
of the fees or commissions subject to 5% withholding tax. Failure to comply will result in
the payment of a higher rate of 10% withholding tax.
The 8% tax rate for small business owners is a welcome development in the simplification
of our tax system. It is especially helpful to individuals who may be very talented and
knowledgeable in their chosen field but may have difficulty in coping with the complicated
requirements of taxation. With tax simplification, self-employed individuals can
concentrate on making their businesses grow and on improving their skills until, one day,
they are small businesses no more.
Tax Filing Guide for Self-Employed or Freelancers
https://www.imoney.ph/articles/professional-self-employed-tax/

According to the Philippine Statistics Authority (PSA), the second-largest class of workers
in the country are the self-employed. They made up about 27.8% of the total employment
rate in the country in 2017. The self-employment population also have a growing rate of
freelancers, due to the rise of remote jobs online. As the self-employed population
continues to grow, their contribution to the economy now bears as much gravity as those
who are employed.

For freelancers and self-employed individuals, taxes are sometimes easy to forget. Unlike
employed individuals whose taxes are automatically deducted from their paycheck along
with benefits like health insurance and SSS contributions, take home pay tends to be a bit
higher for the self-employed. Thus, it’s tempting to just pocket all of that money every
payday and move on. But unless you want the Bureau of Internal Revenue (BIR) to come
knocking at your door, it’s wise to set aside a chunk of those funds to pay your taxes.

Who are considered as self-employed?

Taxpayers in the Philippines are classified into two types: corporate or individuals. Those
who who fall on the individual taxpayer category, are those who are either employed (or a
compensation income earner, which includes minimum wage earners) or self-employed.

Self-employed workers are those who work on their own account or with one or a few
partners or in cooperative. In these jobs, the remuneration is directly dependent upon the
profits derived from the goods and services produced by the person running the livelihood.

Self-employed individuals may register as either single proprietor or entrepreneur (other

than marginal income earners or those earning less than ₱ 100,000 annual gross revenues),
or as professionals.

Single proprietor vs professionals

Professionals who are classified as self-employed are individuals who are practicing their
profession, with or without license under a regulatory board or body. They receive
payment only for the service that they do, but they don’t receive benefits and compensation
because they aren’t employees. Examples of self-employed professionals are private
practice physicians, lawyers, and even accountants who are basically on a pay-per-service
basis.

For your information

Freelancers are considered as professionals despite not being governed by a regulatory

board or body. As is the case of bloggers, web developers, graphic designers, writers and
other people who provide specialized services.
 Meanwhile sole proprietors are individuals who run their own business. It can be the
simplest form of business, as long as it’s registered through the Bureau of Trade
Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry
(DTI).

For your information

BIR’s definition of self-employed

 Persons engaged in business and who derive their personal income from such
business
 Professionals such as (1) “persons who derive their income practicing their
profession” like lawyers, and those registered with the Professional Regulation
Commission (PRC) such as doctors, dentists, certified public accountants, and
others; and (2) those “who pursue an art and make their living therefrom,”
including writers, athletes, and others. Freelancers and home-based service
providers also fall under professionals.

How to register as self-employed at BIR

Just like everyone else, the self-employed are required to register with BIR for tax filing.
The process can be a bit more tedious compared to tax registration for employment due to
some extra documents.

Requirements

 NSO Birth Certificate

 Mayor’s Permit, if applicable
 DTI Certificate of Business Name, if applicable
 PRC ID, if applicable
 Payment of Professional Tax Receipt (PTR), if applicable
 Affidavit indicating the rates, manner of billings, and the factors considered in
determining service fees (as specified in BIR Revenue Regulation 4-2014)

Forms to fill -out

 BIR Form 1905 – for people who already have a TIN number but want to a change
business. The form is also needed in the case of TIN loss
 BIR Form 1901 – the first and second page is the registration form. Basically, this is
the form for all self-employed individuals.
  BIR Payment Form 0605 – present this form upon payment in any authorized bank
by the Revenue District Office (RDO).

Step-by-step registration

Step 1

Obtain a Tax Identification Number (TIN) via the BIR website or the BIR portal if you don’t
have one yet. You can skip this step if you already have one.

Step 2

Fill up the Application for Registration (BIR Form 1901) and the payment form (BIR Form
0605), gather the applicable required documents.

Step 3

Submit to the form and the supplementary documents to Revenue District Office (RDO)
that has jurisdiction over your place of business.

Step 4

For your information

Check with your RDO what banks are accredited to accept this payment.

Pay the ₱500 annual registration fee. You can simply go to any authorized bank located
within your district and provide them the payment form with your payment.

Step 5

Pay the ₱15 Certification Fee and the P15 Documentary Stamp Tax. A form will be given,
which the taxpayer will be attaching to the registration certificate later on.

Step 6

Attend the required taxpayer’s briefing at the RDO before the release of the BIR Certificate
of Registration (COR or BIR Form No. 2303) and the “Ask for a Receipt” Notice (ARN). The
COR will reflect the returns that must be filed and the taxes to be paid.

Step 7

Apply for Invoices/Receipts using the Authority to Print form (BIR Form 1906).

Step 8
Register books of accounts (Journal/Ledger/Subsidiary Professional Income Book and
Subsidiary Purchases/Expenses Book) and have them stamped by the same RDO.

Bookkeeping and invoicing requirements

Self-employed individuals, especially professionals are required to maintain books of

accounts using any acceptable method of accounting (accrual or cash basis) consistently.
All of their accounts are required to be preserved within the prescriptive period (three
years from the close of taxable year) for post-audit examination.

There are guidelines that should be followed upon invoicing, such as the:

1. Receipts or sales invoices should each have corresponding serial numbers.

2. The name of the business, the TIN, and business address of the Professional should
also appear on the invoice.
3. Receipts or invoices should be issued to every payment received by the professional.
4. The original copy of receipts or invoice should be issued to the client upon the

For your information

Revenues exceeding ₱150,000 should have their be audited and examined by an

independent certified public accountant, and shall have their books accompanied by
relevant documents (such as certified balance sheets, profit and loss statements, and
others)

transaction. Meanwhile, a duplicate copy should be preserved in the place of

business for a period of three (3) years from the close of the taxable year.

Tax rates

On February 2018, the BIR released Revenue Regulation RR 8-2018 which details the
implementation of income taxes under the TRAIN law. Under the TRAIN law or Republic
Act (RA) No. 10963, self-employed individuals and professionals will be subjected to the
following tax regulations:

If annual gross sales or income is ₱3 Million or below

Self-employed and professionals with annual gross sales or income receipts not exceeding
the VAT threshold of P3 Million have the option to choose between these two tax rates:

1. Eight percent (8%) of gross sales or receipts and other income, in excess of
₱250,000 instead of the graduated income tax rates and percentage tax (no option
to register for VAT); OR
2. Graduated income tax rates of 0% to 35% on net taxable income, plus 3%
percentage tax (No change in computation of Net Taxable Business Income)
The graduated income tax rates are the same as the Personal Income Tax Rates and Tax
Tables here and summarized below.

BIR Income Tax Table (for the years 2018-2022)

Bracket Taxable income per year Income tax rate

1 ₱250,000 and below 0%
2 Above ₱250,000 to ₱400,000 20% of the excess over ₱250,000
3 Above ₱400,000 to ₱800,000 ₱30,000 + 25% of the excess over
₱400,000
4 Above ₱800,000 to ₱2,000,000 ₱130,000 + 30% of the excess over
P800,000
5 Above ₱2,000,000 to ₱8,000,000 ₱490,000 + 32% of the excess over
₱2,000,000

BIR Income Tax Table (from year 2023 onwards)

Bracket Taxable income per year Income tax rate

1 ₱250,000 and below 0%
2 Above ₱250,000 to ₱400,000 15% of the excess over ₱250,000
3 Above ₱400,000 to ₱800,000 ₱22,500 + 20% of the excess over
₱400,000
4 Above ₱800,000 to ₱2,000,000 ₱102,500 + 25% of the excess over
₱800,000
5 Above ₱2,000,000 to ₱8,000,000 ₱402,500 + 30% of the excess over
₱2,000,000

8% withholding tax for self-employed and professionals

The 8% withholding tax rate replaces the two-tier rate of 10% (for self-employed and
professionals earning less than ₱720,000 income every year) or 15% (for those earning
more than ₱720,000 per year).

The 8% withholding rate is applied on the income, regardless of the amount, and is
reiterated in BIR’s Revenue Memorandum Circular No. 1-2018 issued on January 4, 2018
which states that:

“Change in the Creditable Withholding Tax Rate on lncome Payments to Self-employed

lndividuals or Professionals.”

The following lncome Payments to Self-employed individuals or Professionals shall be

subject to 8%:

1. professional fees, talent fees, commissions, etc. for services rendered by individuals;
 2. income distribution to beneficiaries of Estates and Trusts;
3. income Payment to certain brokers and agents;
4. income Payments to partners of general professional partnership;
5. Professional fees paid to medical practitioners; and
6. Commission of independent and/or exclusive sales representatives, and marketing
agents of companies.”

If annual gross sales or income is above ₱3 Million

However, the tax rule is simpler and more straightforward for self-employed and
professionals receiving annual gross sales or receipts exceeding the ₱3 Million VAT
threshold. If their gross income or sales receipts total more than ₱3 million, they do not
have a choice and they must follow the graduated income tax rates (as shown above) on the
net taxable income, plus VAT.

Filing your Income Tax Return (ITR)

Filing for a tax return for the year is a straightforward process. If the documents and
bookkeeping have consistently complied, filing should be as easy as these three steps:

1. Download and accomplish the ITR form from BIR’s website.

2. Proceed to Authorized Agent Bank of RDO where you are currently registered and
present your filled-out BIR form and required documents.
3. Receive duly stamped and validated form as proof of ITR filing.

Having to deal with taxes is no fun at all, however, it is a responsibility every law-abiding
citizen must comply with. As the BIR would put it:

“If you love your country, then pay your taxes. “

In light of the implementation of the Enhanced Community Quarantine (ECQ) to contain the
spread of the COVID-19, the Bureau of Internal Revenue (BIR) has announced that it will be
extending the deadline for the filing of Income Tax Return (ITR) until May 15, 2020.
Bookkeeping and Tax Requirement for Freelancer/Self-Employed/Home-based Businesses
https://mpm.ph/bookkeeping-and-tax-freelancer/

In the past years, there has been an increased in individuals who do freelancing, as a means
to generate income rather than being employed. These are individuals who prefer to be
either a self-employed (offering their knowledge, talents or skills) or sole-proprietor of a
business (selling goods or services). Although many succeed as freelancer, they oftentimes
end up losing their earnings because of their inability to account and manage their finances.
Additionally, they end up paying large amount of tax and penalties because they fail to
comply with tax and other government requirements, after they register as self-employed
or sole-proprietor.

This article will guide you on the basic bookkeeping and tax requirements that freelancer,
self-employed, or sole-proprietor must monitor and comply with to avoid future problems.
Though the title implied that this is for freelancers, it is also applicable for small business
owners, home-based businesses and all businesses registered as sole proprietor.

Register your home-based or freelance business

If you want to be taken seriously as freelancer, the first thing you need to do is to get
registered basically to the following government agencies:

 Department of Trade Industry (DTI). To secure a trade name or business name.

 Local Government Units (LGUs), such as Barangay and Mayor’s Office. If you are a
Professional registered in Philippine Regulatory Commission (PRC), you may skip
this.
 Bureau of Internal Revenue (BIR). To secure a new Tax Identification Number (TIN)
or update your registration.

For more details on registration, please see our article How to Register a Sole Proprietor
Business in the Philippines?

Maintain accounting books

After you register, the next step is to keep an accounting record. These are the following
accounting books applicable to freelancers:

 General Journal
 General Ledger
 Cash Receipt Journal
 Cash Disbursement Journal

Important Note: Make sure that your accounting books are registered with the BIR.
Issue BIR Registered Invoices and/or Receipts

After registering, and before you start operating or offering your services, register your
invoices and receipts with the BIR.

 For manual invoices and/or receipts

o Look for an accredited printer who will do the printing of your invoices and/or
receipts.

 For computerized invoices and/or receipts, Point-of-Sale(POS), Cash Register

Machine (CRM), etc
o Register your computerized system with the BIR.

Keep the receipts of your expenses

It’s typical for business, even freelancers, to incur expenses in order to operate. Expense is
deducted from gross sales in order to come up with the net income. As such, ensure that
you keep your expense receipts so you can determine the true financial performance (or
profit).

File and/or pay the tax returns on time

Once you’re registered with the BIR, keep in mind that you are required to pay or file
monthly and quarterly tax returns, as follow:

Monthly

 BIR Form 1601E – if you are renting, paying professionals or commissions. This is
due for payment or filing on or before 10th of the preceding month.
 BIR Form 2551M – For Non-VAT individual. It is the computed sales tax equivalent
to 3% of monthly gross sales. This is due for payment or filing on or before 20th of
the preceding month.
 BIR Form 2550M – For VAT individual. It is computed sales tax equivalent to 12% of
monthly vatable sales less 12% of vatable purchases/expenses. This is due for
payment or filing on or before 20th of the preceding month.

Quarterly

 BIR Form 2550Q – For VAT individual. It is similar to BIR Form 2550M, but instead
of one month, it reports the three months in a particular quarter. It’s due for
payment or filing on or before 25th of the preceding month after the close of the
quarter.
 BIR Form 1701Q – This is the income tax for the quarter. It’s due for payment or
filing on or before the 60th day after the close of the quarter.
Renew your licenses annually

Once registered, you need to renew your licenses and permits to LGUs on or before January
20th of each year.

File and/or pay annual reports

Last but not the least, on or before April 15th of each year, you need to file or pay BIR Form
1701 – Annual Income tax return based on your net income for the preceding year.

It is said that prevention is better than cure. To avoid future headaches and problems, it’s
best if you monitor compliance to these bookkeeping and tax requirements. One good
reason for keeping a good accounting record is that, your future investors for your
expansion might require it someday. You will never know that your small/freelance/home-
based business is the real next big thing.
Taxes Applicable to Sole-Proprietors, Freelancers, Self-Employed and Professionals
https://mpm.ph/taxes-sole-proprietors-freelancers-self-employed-professionals/

Starting your own micro-small business and freelancing job can be exciting because of the
endless opportunities. However, it can also be scary because of all the risks. One of the
things you worry about is the taxes you must pay, and how to do it.

This article aims to be your guide with regards to taxes required to be filed and paid by sole
proprietors of micro and small businesses, as well as freelancers, self-employed and
professionals.

Please note that this article is applicable for the following: Individual Purely Sole
Proprietor of Business, Freelancer, Independent Contractor, Self-Employed and
Professional

Terms and Definition

If you are new to this kind of discussion, here are some basic terms and what it means.

Sole Proprietor

A sole proprietor is the solo owner of a business such as the owner of a business engaged in
providing service, such as salon, spa, restaurant, food delivery or food kiosks, travel agency,
manpower agency, rentals, etc., or engaged in sale of goods, such as retailers, wholesalers,
etc., both online (or thru the internet) or offline (with physical stores).

Freelancer / Independent Contractor / Self-employed

This is a type of individual who provide their service, time and skill but are not
professionals or licensed by the Philippine Regulatory Commission (PRC) such as artists,
reporters, models, IT / Programmers, sales agent, etc., both online (or thru the internet) or
offline (with physical office).

Professional

This somehow similar with the previous, the difference is they have the Philippine
Regulatory Commission (PRC) ID and are considered licensed professional such as doctors,
lawyers, engineers, architects, real estate broker, insurance broker, accountants, etc., both
online (or thru the internet) or offline (with physical office).

Taxes Applicable

Before you read on and start filing your taxes, it is important that you check your BIR Form
2303 – Certificate of Registration, to check if the tax types I will enumerate below are
shown in under the “tax type” of your BIR Form 2303. The taxes shown in your BIR Form
2303 “tax type” are the required taxes to be filled for your specific company. Below is a
sample BIR Form 2303- Tax Type:

Now that we know the terms and definition, and have discussed the importance of checking
your own BIR Form 2303 – Tax Types, let us now discuss the type of taxes applicable to
sole proprietors, freelancers, self-employed, independent contractor and professional.

Here are the taxes that may apply, in general:

1. Income Tax
2. Business or Sales Tax
3. Withholding Tax

1. Income Tax

This type of tax is applicable to net taxable income or gross sales/receipts. There are two
ways to compute income tax for sole proprietors, freelancers, self-employed, independent
contractor and professional:
1st – Using Graduated Income Tax Rates
The computation of net taxable income for this type is as follows:

2nd – Using 8% Income Tax Rate

The computation of net taxable income for this type is as follows:

Important Note:

1. This type of special rate (8% income tax) is only applicable and allowed to
individual with Yearly Gross Sales/ Receipts below P3,000,000.00
2. To avail of this special income tax rate of 8%, you need to your intention or update
your registration with the BIR.
3. Once approved, the business or sales tax of Percentage Tax will be removed.

BIR FORM:

 Quarterly: BIR Form 1701Q

 Yearly: BIR Form 1701A

REQUIRED ATTACHMENT, in general and if applicable:

 Copies of Tax Credit Certificates such as BIR Form 2307
 Esubmission of SAWT – Summary Alphalist of Withholding Taxes
DEADLINE FOR FILING AND PAYMENT: In general following calendar year:

Quarterly:
 May 15 for the first quarter of the current year
o August 15 for the second quarter of the current year
o November 15 for the third quarter of the current year
 Yearly: April 15 of the following year

2. Business or Sales Tax

This type of tax is applicable to sales or receipts. There are two types of sales or business
tax, in general, applicable to sole proprietors, freelancers, self-employed, independent
contractor and professional:

 Percentage Tax, also known as NONVAT.

 Value-Added Tax, also known as VAT.

Important Note:

This business or sales tax will apply to individuals who are not qualified to avail 8% Income
Tax and/or pays regular Graduated Income Tax.

a. NONVAT or Percentage Tax

It is a type of tax applicable to individual with yearly gross sales or receipts of less than
P3,000,000.00 and pays regular Graduated Income Tax from 0 to 35%.

Computation:

BIR FORM:

 Quarterly: BIR Form 2551Q

DEADLINE FOR FILING AND PAYMENT: In general following calendar year:

 Quarterly:

o April 25 of the current year – for the first quarter

o July 25 of the current year -for the second quarter
o October 25 of the current year for the third quarter
 o January 25 of the following year for the fourth quarter

b. VAT or Value-Added Tax

It is a type of tax applicable to individual with yearly gross sales or receipts of more than
P3,000,000 or chooses to be VAT registered regardless of amount of sales.

There are two taxes to be considered:

1. Output VAT – is computed as follows: Sales x 12%. It is a VAT imposed on sales.

2. Input VAT – is computed as follows: Purchases x 12%. It is a VAT imposed on
purchases or expenses.

Computation:

BIR FORM:

 Monthly: BIR Form 2550M

 Quarterly: BIR Form 2550Q

REQUIRED ATTACHMENT, in general and if applicable:

 Quarterly: Esubmssion of Summary List of Sales and Purchases (VAT RELIEF)

DEADLINE FOR FILING AND PAYMENT: In general following calendar year:

 Monthly: 20th day of the following month

 Quarterly:
o April 25 of the current year – for the first quarter ending March 31
o July 25 of the current year -for the second quarter ending June 30
o October 25 of the current year for the third quarter ending September 30
o January 25 of the following year for the fourth quarter ending December 31

3. Withholding Tax

It is a type of tax deducted on certain payments and remitted to BIR. The taxpayer acts as
withholding agent of the BIR by declaring income of our vendors/suppliers and collecting
advance tax in behalf of BIR.
TYPES OF WITHHOLDING TAX, if applicable:

 Withholding Tax on Compensation – it is a tax withhold or we deduct from

payments of salary to our employees, if applicable.
 Withholding Tax on Certain Payments to Vendors (Expanded) – it is a tax withhold
or we deduct from payments to our vendors or suppliers, if applicable, such as
rental, commission, professional fee, contractors, etc.

COMPUTATION:

 WITHHOLDING TAX ON COMPENSATION

 WITHHOLDING TAX ON CERTAIN PAYMENTS (EXPANDED), example: RENTAL

BIR

FORM:

WITHHOLDING TAX – COMPENSATION

 Monthly: BIR Form 1601C

 Yearly: BIR Form 1604-C

WITHHOLDING TAX – EXPANDED

 Monthly: BIR Form 0619E

 Quarterly: BIR Form 1601EQ
 Yearly: BIR Form 1604-E

REQUIRED ATTACHMENT, in general and if applicable:

WITHHOLDING TAX – COMPENSATION

 Yearly:
o Esubmission of Alphalist of Employees
o Distribution of BIR Form 2316 to employees
o Substituted Filing of BIR Form 2316 to BIR, if applicable
WITHHOLDING TAX – EXPANDED

 Quarterly:

o Distribution of BIR Form 2307 to payees/vendors/suppliers

o Esubmission of QAP – Quarterly Alphalist of Payees

 Yearly:

o Esubmission of Alpahlist of Payees

DEADLINE FOR FILING AND PAYMENT: In general following calendar year:

 Monthly: Every 10th of the following month

 Quarterly:

o April 30 of the current year – for the first quarter ending March 31
o July 31 of the current year -for the second quarter ending June 30
o October 31 of the current year for the third quarter ending September 30
o January 31 of the following year for the fourth quarter ending December 31

 Annual:

o FOR COMPENSATION: BIR FORM 1604C – January 31 of the following year

o FOR EXPANDED: BIR FORM 1604E – March 1
Mark Your Calendar: Tax Deadlines Every Business Owner Should Remember
https://mybusinessacademy.ph/resources/tax-deadlines-for-business/#gref

Avoid thousands of pesos or more in penalties by making tax payments on time. Bookmark
this page so you don't forget those important BIR deadlines!

Minding your business’s tax obligations is as important as your day-to-day operations. In

fact, if you fail to pay your taxes on the specified deadline, the Bureau of Internal Revenue
(BIR) will require you to pay a surcharge plus interest and other penalties on top of the
actual tax amount due. Even if you have zero income to declare, failing to declare it on time
results in a penalty of P1,000.

For your business, that can mean losing tens of thousands of pesos, if not more.

According to EJ Arboleda, co-founder and chief executive officer of Taxumo, these penalties
are applied as soon as April 16, or the day immediately following the annual income tax
deadline of April 15.

Tax filing deadlines to take note of

April 15. That date is just around the corner.

If your business is registered as a sole proprietorship, or if you are self-employed, a

freelancer, or an independent professional, you’ll need to pay your income tax on this date.
The annual income tax payment you make on April 15 covers the period from January to
December of the previous year.

But April 15 isn’t the only date you need to remember. You are also required to file your
income tax quarterly, following these BIR deadlines with the corresponding coverage
period:

Income Tax Deadlines

*October to December is covered in the April 15 filing.

If your business is not VAT-registered (meaning, you have an annual gross income of less
than P3 million), then you are required to pay a percentage tax. BIR defines percentage tax
as a business tax imposed on persons, entities, or transactions specified under the Tax
Code. There is no option to pay for percentage annually, so the tax deadlines are spread out
quarterly, or every 25th of the following months:

Percentage Tax Deadlines

VAT Deadlines

If your business earns more than P3 million, then it needs to be VAT-registered. This means
that on top of the BIR form and the tax payment, you will also be required to provide an
audited annual financial statement. The list of VAT deadlines runs longer, as these are set
monthly:

Take note that requirements vary according to the type of tax you are paying. Check the
BIR website for the list of accompanying documents which may be required in addition to
the BIR forms specified above.
Beyond BIR deadlines

“In the Philippines, tax is a huge cost for businesses,” says Arboleda, who established
Taxumo as a tax filing platform for freelancers, small business owners, and self-employed
professionals.

This is why aside from remembering BIR deadlines, it’s also important for business owners
to have a basic understanding of how taxes work. Adds Arboleda, “Applying or opting for
certain tax options—that could save you a lot of money. Taxumo has an active educational
aspect. We offer free seminars and talks, and engage clients in our Facebook groups.”

While you may rely on your accountant to maintain your accounting books and make sure
that tax filing deadlines are met, Arboleda reminds that at the end of the day, you are
ultimately accountable for your tax obligations as a business owner. In other words, being a
responsible tax payer is key to smoothly operating a legitimate business.