What does the 8% tax replace?

For those who qualify and choose it, the 8% flat rate takes the place of both the graduated income tax rates and the separate percentage tax, which makes filing simpler.

Is the 8% option always cheaper?

No. It is simpler and can be lighter for low-expense earners, but if your expenses are high, the graduated rates that allow deductions may save more. It depends on your numbers.

The 8% Income Tax Option for Freelancers and the Self-Employed

Freelancing2 min readUpdated May 30, 2026

When you register as self-employed, you usually get to choose how your income tax is computed. One popular choice is the flat 8% option. Here is what it is and who it suits.

What the 8% option is

The 8% option lets qualifying self-employed individuals and professionals pay a single flat rate on their gross sales or receipts, in place of both the graduated income tax rates and the separate percentage tax. It is meant to make taxes simpler for smaller earners.

Who can choose it

In general, the 8% option is open to self-employed individuals and professionals whose gross sales or receipts stay within the VAT threshold and who are not subject to other percentage taxes. You normally signify your choice when you register or at the start of the year.

Those who do not qualify, or who do not choose it, fall under the graduated income tax rates with a separate business tax.

Is it the cheaper choice?

Not always. The flat option is simpler and can be lighter if you have low expenses, but if your costs are high, the graduated rates that let you deduct expenses may work out better. The right answer depends on your income and expenses.

Ask AskOnward to walk through how each option works for your numbers, or check with a tax professional before you commit.

Have a specific question?

Ask AskOnward and get an answer grounded in the official BIR rules, with the current forms, fees, and steps for your situation.

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Frequently asked questions

What does the 8% tax replace?: For those who qualify and choose it, the 8% flat rate takes the place of both the graduated income tax rates and the separate percentage tax, which makes filing simpler.
Who can use the 8% option?: Generally, self-employed individuals and professionals whose gross sales or receipts stay within the VAT threshold and who are not subject to other percentage taxes. You usually choose it at registration or at the start of the year.
Is the 8% option always cheaper?: No. It is simpler and can be lighter for low-expense earners, but if your expenses are high, the graduated rates that allow deductions may save more. It depends on your numbers.

Related guides

This guide is for general information and is not affiliated with the government. For official forms and the latest rules, see the Bureau of Internal Revenue at bir.gov.ph.