Whether you're employed or working as a freelancer, understanding how income tax works in the Philippines is essential for staying compliant with the Bureau of Internal Revenue (BIR). This guide breaks down what income tax is, who needs to file, how much you need to pay, and how to file properly.
What is Income Tax?
Income tax is a government-imposed levy on the income earned by individuals and businesses. In the Philippines, the BIR is the agency responsible for collecting this tax. The funds go toward public services like infrastructure, education, and healthcare.
Who Needs to Pay Income Tax?
You are required to pay income tax if you fall under any of the following categories:
Employed Individuals – Private and government employees earning above the minimum wage.
Self-Employed/Freelancers – Including online freelancers, consultants, and small business owners.
Mixed Income Earners – Those earning from both employment and freelance or business activities.
Corporations and Partnerships – Separate rules apply for corporate taxes.
Note: Minimum wage earners are exempt from income tax.
Tax Rates for Individuals (TRAIN Law 2023 Onwards)
Under the TRAIN Law, the following graduated tax rates apply for individuals:
| Taxable Income (Annual) | Tax Rate |
|---|---|
| ₱250,000 and below | 0% |
| ₱250,001 – ₱400,000 | 15% of excess over ₱250,000 |
| ₱400,001 – ₱800,000 | ₱22,500 + 20% of excess over ₱400,000 |
| ₱800,001 – ₱2,000,000 | ₱102,500 + 25% of excess over ₱800,000 |
| ₱2,000,001 – ₱8,000,000 | ₱402,500 + 30% of excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35% of excess over ₱8,000,000 |
Note: These apply to individuals, not corporations.
Filing Income Tax: Key Forms and Deadlines
Common BIR Forms:
BIR Form 1700 – For employees earning purely compensation income.
BIR Form 1701 – For self-employed individuals, freelancers, and professionals.
BIR Form 1701A – For those under the 8% flat income tax rate.
Deadlines:
Quarterly Income Tax: April 15, August 15, November 15
Annual Income Tax Return (ITR): April 15 of the following year
Freelancer/Self-Employed Tax Options
If you're self-employed or a freelancer, you have two options:
Graduated Income Tax Rates + Percentage Tax
8% Flat Tax on gross sales/receipts (if gross income is ₱3 million or below)
The 8% option can be simpler but may not be beneficial for everyone. It depends on your allowable deductions and business expenses.
How to File and Pay Income Tax
Register with BIR – Secure a TIN and register your source of income.
Keep Records – Track income and allowable expenses (especially for freelancers).
Use eFPS or eBIRForms – File online through eBIRForms.
Pay via Authorized Channels – Use banks, GCash, Maya, or online payment platforms.
Penalties for Non-Compliance
Failure to file or pay taxes on time can result in:
Surcharge: 25% of the tax due
Interest: 20% per annum
Compromise Penalty: Based on amount due
Tips to Stay Compliant
Keep all receipts and invoices
Use accounting tools or hire a tax professional
Always file on or before deadlines
Stay updated on BIR advisories and tax changes
Final Thoughts
Income tax might feel overwhelming at first, but with the right information, you can stay compliant and avoid penalties. Whether you’re working in an office or freelancing from home, knowing how income tax works in the Philippines helps you take control of your finances.
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