Compare the 8% optional flat tax against graduated income tax + the 3% percentage tax — with the correct ₱250,000 treatment for pure self-employed versus mixed-income earners — and see which election costs you less.
professional / sole proprietor only
The 8% option is only available if you are not VAT-registered.
Net taxable business income is used only for the graduated comparison; the 8% is always applied to gross.
Lower total tax
Saves ₱42,500.00 versus the alternative
In lieu of graduated income tax and the 3% percentage tax
TRAIN graduated income tax plus the 3% percentage tax (§116)
A self-employed individual, professional, or mixed-income earner whose annual gross sales/receipts (plus other non-operating income) do not exceed ₱3,000,000 and who is not VAT-registered may elect a flat 8% tax. The election is in lieu of both the graduated income tax and the 3% percentage tax (NIRC §24(A)(2)(b); BIR RR 8-2018) — so you file no separate percentage-tax returns for the covered periods.
The ₱250,000 rule is where most calculators go wrong:
The 8% taxes gross with no deductions, so it favours high-margin earners. If your deductible expenses are large, the graduated rates on your net taxable income plus the 3% percentage tax can be cheaper. And once your gross exceeds the ₱3,000,000 VAT threshold, the 8% option no longer applies.
Self-employed individuals, professionals, and mixed-income earners whose annual gross sales/receipts plus other non-operating income do not exceed ₱3,000,000 and who are not VAT-registered. The election is made on the first quarterly return (or the registration/new-business form) for the year and is in lieu of the graduated income tax and the 3% percentage tax (NIRC §24(A)(2)(b); BIR RR 8-2018).
No. The ₱250,000 reduction applies only to a purely self-employed individual or professional. For a mixed-income earner the 8% is applied to the full business gross, because the ₱250,000 is already absorbed by the 0% band of the graduated schedule that taxes the compensation income. The compensation is taxed separately under the graduated rates and the two are added.
Yes. Electing the 8% income tax is in lieu of both the graduated income tax and the 3% percentage tax under §116. You do not file or pay percentage-tax returns for periods covered by a valid 8% election — that is the main simplification it offers.
The 8% option ceases to apply. Once your gross sales/receipts exceed the ₱3,000,000 VAT threshold you must register for VAT, and your income is taxed under the graduated rates. Any 8% already paid is credited against the graduated income tax due for the year.
No. The 8% taxes gross with no deductions, so it wins when your margins are high (few deductible expenses). If your deductible expenses are large — so your net taxable income is much lower than gross — the graduated rates plus the 3% percentage tax can cost less. This calculator computes both so you can compare.
Informational only — not tax advice. This calculator is a general planning aid for the Philippine 8% optional income tax and assumes a valid, timely election. Eligibility, the carry-over of taxes paid, and quarterly filing mechanics depend on your facts. Verify with the Bureau of Internal Revenue (BIR) or a qualified Philippine tax professional. See our full disclaimer.
Source: BIR Revenue Regulations No. 8-2018; Revenue Memorandum Order No. 23-2018; NIRC §24(A)(2)(b). As of June 2026.