How much is the new withholding tax rate on incomes of self-employed and professionals and how to compute the income tax that they are supposed to pay?
We explain the answers in this easy-to-read guide below.
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 P3 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:
- Eight percent (8%) of gross sales or receipts and other income, in excess of P250,000 instead of the graduated income tax rates and percentage tax (no option to register for VAT); OR
- 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)
| Taxable Income per Year | Income Tax Rate (Year 2018-2022) |
|---|---|
| P250,000 and below | 0% |
| Above P250,000 to P400,000 | 20% of the excess over P250,000 |
| Above P400,000 to P800,000 | P30,000 + 25% of the excess over P400,000 |
| Above P800,000 to P2,000,000 | P130,000 + 30% of the excess over P800,000 |
| Above P2,000,000 to P8,000,000 | P490,000 + 32% of the excess over P2,000,000 |
| Above P8,000,000 | P2,410,000 + 35% of the excess over P8,000,000 |
| Source: | BIR and PinoyMoneyTalk.com |
BIR Income Tax Table (from year 2023 onwards)
| Taxable Income per Year | Income Tax Rate (Year 2023 onwards) |
|---|---|
| P250,000 and below | 0% |
| Above P250,000 to P400,000 | 15% of the excess over P250,000 |
| Above P400,000 to P800,000 | P22,500 + 20% of the excess over P400,000 |
| Above P800,000 to P2,000,000 | P102,500 + 25% of the excess over P800,000 |
| Above P2,000,000 to P8,000,000 | P402,500 + 30% of the excess over P2,000,000 |
| Above P8,000,000 | P2,202,500 + 35% of the excess over P5,000,000 |
| Source: | BIR and PinoyMoneyTalk.com |
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 P720,000 income every year) or 15% (for those earning more than P720,000 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 lndividuals or Professionals shall be subject to Eight Percent (8%):
1. Professional fees, talent fees, commissions, etc. for services rendered by individuals;
2. lncome distribution to beneficiaries of Estates and Trusts;
3. lncome Payment to certain brokers and agents;
4. lncome 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 P3 Million
However, the tax rule is simpler and more straightforward for self-employed and professionals receiving annual gross sales or receipts exceeding the P3 Million VAT threshold. If their gross income or sales receipts total more than P3 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.
(UPDATE Feb. 2018): The BIR released Revenue Regulation RR 8-2018 which details the implementation of income taxes under the TRAIN law. Click here to see a sample computation, as explained by BIR, of how income taxes are calculated for Professionals and Self-Employed individuals: BIR Sample Computation: Income Tax for Self-Employed and Professionals under TRAIN
(UPDATE May 2018): The BIR has released a new Revenue Memorandum Order covering the availment of 8% tax rate for self-employed and professionals. Read about it here: 8% BIR Tax Rule for Self-Employed and Professionals (RMO 23-2018)
* * * For more UPDATED resources on the approved TRAIN Tax Reform, click below:
What is the rule for mixed income earner? For example, combined compensation income and professional fees exceed Php3m. Will the 8% tax still apply if the professional fee portion does not exceed Php3m?
Hi Anna, we have a new article that talks about taxation for Mixed Income Earners. See it here: https://www.pinoymoneytalk.com/mixed-income-bir-train-tax-rate/
Hope that helps! 🙂
Can you give us a sample computation for the Self-employed tax? Or if you could correct this example:
Monthly earnings: 26,192php; For annual equivalent, this will be 26,192*12 = 314,304php
The 314,304php is above the 250,000php, or 64,304 in excess.
If there are two options of tax rates to choose from, how do they apply to the sample?
1) Eight percent (8%) of gross sales or receipts and other income, in excess of P250,000 instead of the graduated income tax rates and percentage tax (no option to register for VAT)
64,304*0.08 = 5,144.32php tax to pay for the year? or 428.69/month?
OR
2) Graduated income tax rates of 0% to 35% on net taxable income, plus 3% percentage tax (Above P250,000 to P400,000 = 20% of the excess over P250,000)
64,304*0.2 = 12,860.80 + 1,929.12 = 14,789.92 (or simply 64304*0.23?) or 1232.49/moth?
The latter is higher than the former by 9,645.6php/year or 803.80/month.
Hi Guys
Can you correct my understanding here. so self employed tax payer will have an option to pay whether we choose option 1 (8%) or the option 2 which is Graduated Income Tax?
So if I earn Php 75,000 a month.
and I choose option 1
Annual Income: Php 900,000.00 (75,000 * 12)
Excess of 250,000: Php 650,000.00 (900,000 – 250,000)
8% of Excess: Php 52,000.00 (650,000 * 0.08)
so Php 52,000.00 will be my tax and that’s it? no more additional pay or something?
Thanks
Sorry i posted it on your comment
Second computation is wrong. Net taxable income is 400,000 – 160,0000 (40% optional std deduction -OSD) = 240,000. Less exemption of 250000 is below zero. Individual will nor pay any income taxes. But, a 3% percentage tax comes along the graduated scheme. 3% of 400,000 is 12000. The 8% scheme is always if u are an OSD user.
Hi Guys
Can you correct my understanding here. so self employed tax payer will have an option to pay whether we choose option 1 (8%) or the option 2 which is Graduated Income Tax?
So if I earn Php 75,000 a month.
and I choose option 1
Annual Income: Php 900,000.00 (75,000 * 12)
Excess of 250,000: Php 650,000.00 (900,000 – 250,000)
8% of Excess: Php 52,000.00 (650,000 * 0.08)
so Php 52,000.00 will be my tax and that’s it? no more additional pay or something?
Thanks
I attended the seminar of bir in Las Pinas. Yes you are correct and you do not pay percentage tax qrtrly. But you have to indicate the 8% option in the 1st qtr filing. There is no need also for financial statement. This is lower than the graduated rates plus the qrtly percentage tax.
I also want to know if there is a need to file percentage or vat monthly or quarterly.
I observed that in the 2 Tables shown above, the middle column’s heading in the first table is “Gross income per year”, while it is “Income per year” in the second table. Shouldn’t it be “Net Taxable Income” or “Taxable Income”?
Is the 8% withilding tax is applicable to medical practitioners who are permanent employed in the government earning less than 3M per annum?
No… as an employee, you will not be taxed for your first 250,000 but will be taxed 20% for anything above that.
If i am a resident physician paid hourly rate of 225/hour for 8 hours per day at 4 days a week….making about 29,000 to 30,000/month. (That would translate to around php 345,600 a year) How do i go about computing for new income tax? Do i have to pay the percentage 3% tax aside from the 8% withholding tax?
If i do not have to pay the percentage tax, what form do i submit at the first quarter of this year to indicate this option…
For quarterly payment will 250,000/ 4 be applied or you compute it just base on gross and apply the 250,000 exception on the last quarter. Pls. Clrarify
For self-employed, applicable dito yung nagbu-buy and sell ka lang ng cars kaso nga lang, hindi registered ang business kasi nga occasional lang naman.. U mean to say, u have to pay tax para dun sa kinita? Ganon yun?
My employer currently deducts 10% because the 8% option is still not available in the tax forms. They submit the 0605 every quarter. On my end, I file my tax at the end of Q1. How will I declare that 8% option? In the quarterly form? Also how do I manage the in excess of 250,000? Will I tell my employer not to deduct tax for the first 250,000 I earn for the year? Thanks!
I am a licence teacher practicing my profession in the private school. we are ask by our principal to photocopy our PRC ID and a payment of 150 pesos to be collected by the city treasurer of the city government as our professional tax. my question is if their way of collection is right?i thought that its the BIR who will collect our professional taxes.
All professionals should pay Professional Tax payable to City Government. In return they will give you Professional Tax Receipt or PTR. This is in reference to Section 139 of Local Government Code.
it’s like when you put up a business, you pay either for DTI or Municipal.
A different tax is collected by the BIR.
Paki check yung rr 11-2018 …. iba computatuon dun hindi 8%
Hello, I just want to ask. I’m a fresher. I dont have any work experience yet but I want to get TIN ID. Is it okay? Does it need an employer so that you can get TIN ID? Thank you and Godbless. Looking forward for your favorable response ?
Binasa ko po unh AnnexB-2 RR 11-2018
paano po iyon regsterd po ako as VAT payer..pero nakalagay doon sa RR11-2018..na “I am a non VAT payer”
para lang po ba yan sa mga non vat tax payer
How come that conyractual employees taht below minimum isuject to 3%tax if they dont get cor from bir..as per bir seminar last wk..pls informed us..so confusing
Explain why contractual employess that is MWE is subject to tax if they dont ge cor from bir that cost 500php and will be done annually.
Question: Ano po difference ng Graduated Income Tax Rate at ng Eight Percent (8%) income tax rate?
Real estate brokers are now subject to 5% withholding tax. Do salespeople selling memorial plots and pre need plans subject to 5% or 8% withholding tax? Thanks
Is the Non Resident Alien Engaged in Trade in Business can avail the 8% Income tax rate?
I am a soccer coach earning 10k per month only. The school give me a check amounting 9k only because of tax deduction. Can I get a refund of the tax deducted? Thank you for the reply.
ma’am sir, yung po bang 250,000 allowable deduction eh, pwedeng ideduct in 1st, 2nd, 3rd Quarter? form 1701Qv2018. yun lang 🙂 Thanks in Advance 🙂 God Bless!
Hi guys! Just want to ask. Nagwork ako as contractual for a company through agency for 1 year. I declare my salary every month to pay the 3% tax, now I was absorbed sa company and working as a regular employee. And yung status ko as contractual sa BIR di ko pa napapasarado. Does anyone know kung mapepenalty pa rin ba ako for not declaring my salary as “0”? Before kasi nangyari sakin yon. I paid 1thou as penalty kada month na hindi ako nakakapag-declare. I will appreciate if anyone can answer me. Thank you in advance!
How much is the tax on commission for brokers and agents?
Tanong ko lang po, Kapag Contract of Service employee po ba may TAX na 3% kahit na Less than 250,000 ang Annual Salary? Salamat po
Ask ko lng po if single prop den ung annual income is less than 250k, do i need to file my itr? Den im paying my quarterly percentage tax na 3 percent.
Just want to ask kung ang minimum wage earner po with allowance ay babawasan ba ng WHT tax? Below is the sample computation
1.Average Monthly Pay 17,609.13
2. Night Differential pay –
3. 5 days Incentive Pay 223.75
4. Overtime 11,130.83
5. Uniform Allowance 100.00
ALLOWANCE 10,000.00
A. AMOUNT TO GUARD 39,063.71
Less: Govt. Mandatory Deduction
7. SSS – Employee’s share 800.00
8. Philhealth – Employee’s share 242.13
9. Pag-ibig 100.00
B. TOTAL DEDUCTION (1,142.13)
C. TOTAL AMOUNT TO GUARD 37,921.58