What is percentage tax?

It is a business tax on gross sales or receipts paid by non-VAT taxpayers. It is separate from income tax and is generally filed quarterly using BIR Form 2551Q.

Who has to pay percentage tax?

Generally non-VAT registered businesses and professionals within the VAT threshold, plus certain specific industries that are always subject to percentage taxes. The 8% income tax option removes the separate percentage tax for those who choose it.

What form is used for percentage tax?

BIR Form 2551Q, the quarterly percentage tax return.

Percentage Tax (BIR Form 2551Q) Explained

Taxes1 min readUpdated May 30, 2026

Percentage tax is a business tax that many smaller, non-VAT taxpayers pay on their sales or receipts. Here is what it is and who it applies to.

What percentage tax is

Percentage tax is a business tax based on your gross sales or receipts, charged to taxpayers who are not registered for VAT. It is separate from your income tax. If your income tax is the tax on your profit, percentage tax is a tax on your business activity itself.

Who pays it

In general, percentage tax applies to:

Non-VAT registered businesses and professionals whose sales stay within the VAT threshold
Certain specific industries that are subject to percentage taxes regardless of size

It is filed quarterly using BIR Form 2551Q.

How the 8% option changes things

Self-employed individuals who choose the 8% flat income tax option no longer pay the separate percentage tax, since the 8% rate is designed to cover both. So whether you owe percentage tax depends partly on the tax option you picked at registration.

Ask AskOnward whether percentage tax applies to you, and how the 8% option would change your filings.

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.

Ask AskOnward

Frequently asked questions

What is percentage tax?: It is a business tax on gross sales or receipts paid by non-VAT taxpayers. It is separate from income tax and is generally filed quarterly using BIR Form 2551Q.
Who has to pay percentage tax?: Generally non-VAT registered businesses and professionals within the VAT threshold, plus certain specific industries that are always subject to percentage taxes. The 8% income tax option removes the separate percentage tax for those who choose it.
What form is used for percentage tax?: BIR Form 2551Q, the quarterly percentage tax return.

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.