How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts


Income Tax for 2018 in the Philippines has been an interesting space lately because of the TRAIN Law (aka R.A. 10963). For self-employed individuals, it has been of particular interest because they now have an option to avail of a simpler 8% Income Tax Rate Option.

The BIR released Revenue Regulation 8-2018 which details how the income tax changes as per TRAIN will be applied. It answers a LOT of questions but it still leaves a few unanswered.

Who can avail of the 8% Income Tax Rate on Gross Sales/Receipts?

Any self-employed individual whose gross sales/receipts for the year does not exceed P3,000,000 (aka the VAT Threshold) can avail of the 8% Income Tax Rate on Gross Sales/Receipts.

Do I really save money if I go with 8% Income Tax Rate Option?

That exact question sounds so familiar… right, we wrote an article about exactly that: TRAIN’s new 8% Tax – Does it really save you money?

That article even comes with a calculator so click on over!

I’m currently registered as VAT tho – can I downgrade to non-VAT and opt in to 8% Income Tax Rate?

If your gross sales/receipts and other non-operating income in the preceding year (last year) did not exceed P3,000,000, then you have the option to change your registration to non-VAT until March 31, 2018. You have to do so via a Form 1905 submitted to your RDO.

In this article, you can read more about switching from VAT to non-VAT.

Whew – I’m non-VAT! What happens to my percentage taxes if I opt for 8% Income Tax Rate?

You should submit a Form 1905 to end-date or, essentially, remove “percentage tax” from your registration. If you don’t, you will need to continue submitting quarterly percentage tax returns BUT with one big difference: the tax dues will always be ZERO and you should include a notation that says you are availing of the 8% income tax rate option. The process to do is similar to filing a Form 1905 to change your RDO.

And what happens to my Quarterly Income Tax returns?

You still need to file your initial quarterly income tax return with a note that says you are availing of the 8% income tax option. The initial quarterly income tax return is either the Q1 tax return OR the first quarterly income tax return you’re supposed to file right after you register. This opting in needs to be done on a yearly basis.

What if I file my Quarterly Income Tax return late or I miss notifying them that I want to opt in?

Then you will have to file your Income Tax Returns using the Graduated Income Tax Table AND also file quarterly percentage tax returns. Yup, back to normal PLUS… not certain yet, but you may have to also update your registration via Form 1905 and bring back percentage tax to your registration. Whooptidoo.

Wait wait… so how do I opt in again?

Ok so if you’re eligible, you can opt in by doing the following:

  1. End date percentage tax on your registration via Form 1905.
  2. If you did not end-date percentage tax, you need to keep submitting a zero tax value quarterly percentage tax return (2551Q) with a note that says you’re opting in for 8% Gross Sales/Receipts Tax.
  3. Submit the initial quarterly income tax return (1701Q) for the year with a note that says you are opting in for 8% Gross Sales/Receipts Tax.

So how do I compute for my new tax dues with the 8% Income Tax Rate?

So the first thing you have to answer is: does your income come solely from your business or practice of profession? OR are you a mixed income earner earning from both compensation and your business/profession?

If you’re the first (income solely from business), then use this formula:

Total Income Tax Due = 0.08 * (Gross Sales - 250,000)

If you’re the latter (mixed income), then use this formula:

Total Income Tax Due = (0.08 * Gross Sales) + Tax Due on Compensation

The main difference, as you can see, is that the P250,000 deduction is not applied for Mixed Income earners. Now, before you start rallying out on the streets, the reason is pretty straightforward: the P250,000 has already been deducted when you computed your tax due on compensation so it’s not being applied anymore to the tax from your business. Makes sense, right?

What if I suddenly exceed the VAT threshold?

First of all, congratulations! That’s a good problem to have, rainmaker!

These are the things you’re supposed to do once you exceed the threshold:

  1. Submit a Form 1905 to change your tax type to VAT. You have to do this within the month AFTER you exceeded the VAT threshold. So let’s say your gross sales reached P3.1 million in June. That means by July, you should update your tax type to VAT!
  2. You have to pay percentage tax from the start of the taxable year until the time you became liable for VAT. Continuing the example above, you’ll file percentage tax covering January to June. You have to pay the whole tax due by July 20 – when the next quarterly tax return is due. If you do so by then, no penalties are applied.
  3. Starting July, you are now liable to pay VAT. So that means that on the subsequent months, you’re filing VAT returns: 2550M (Aug, Sep, Nov, Dec) and 2550Q (Oct, Jan following year).
  4. For your income tax, you are now back on the Graduated Income Tax Table. Any income taxes paid while you were on the 8% Income Tax Rate option are deducted from your tax due.

Great! Got it! So how do I file for my 8% Income Tax?

Remember, what I said about there being some unanswered questions? That’s one of them. There are no details yet regarding the specific form to submit once you opt in. There are also no details yet on how frequent the submission of this form is supposed to be (although some sources say the BIR is leaning towards quarterly given the impact on the government’s cashflow if they only receive the cash once a year).

So we’re waiting again?

Yup! The TRAIN introduced a TON of changes so the BIR will need time to iron out the processes to ensure a smooth transition.

Every time some new IRR’s are released, we’ll be sure to share them with you!

We make taxes easy!


De-cluttering Your Workspace: Why de-clutter your work space now (and how to get started)

Whether you are a business owner, freelancer or a  professional, we all spend a significant amount of time at work and sometimes even more than we spend at home.

With all the stress and challenges that comes with our work life, wouldn’t you want a work space where you can be comfortable and feel emotionally and mentally healthy? A space that boosts clarity, creativity, and productivity? A place that encourages collaboration and trusting relationship with your colleagues and clients?

Learn how to de-clutter your workspace here…

Small Business Tips: Using SEO To Spark Your Business in 2018

I’m going to discuss one of the small business tips some entrepreneurs are not taking advantage of nowadays.

Over 3.5 billion searches happen per day, according to  Is your website near the top of the search results when someone searches for the services or products you offer?  According to, in 2017, 51% of Americans (and that’s just Americans) prefer to shop online and that rate grows every year.

Find out more about SEOs here…

Tax Reform: How to Change from VAT to Non-VAT

Tax Reform TRAIN Changing from VAT to Non-VAT

The Tax Reform for Acceleration and Inclusion, more popularly known as TRAIN, has amended the tax code to increase the VAT Threshold from P1.919 Million to P3.0 Million. If you are a registered VAT taxpayer earning less than P3.0 Million, you may now opt to be non-vat instead. This is great for services and high margin businesses as this will most likely result in tax savings.

Find out how to change your tax type to Non-VAT here…

TRAIN Law Primer or So what do I file now?

A Primer on the TRAIN Tax Reform Law

The Income Tax Reform Law (Tax Reform for Acceleration and Inclusion of TRAIN) (RA No. 10963 + veto message) changes a lot of things for the DIY taxpayer. Aside from the forms themselves, the tax reform law also changes the frequency, the processes, and the formula & tax tables that we’ve all gotten used to. As a freelancer, professional, or self-employed individual, this can be a confusing change. This article aims to make the tax TRAIN easier to understand.

Read more about the biggest changes from TRAIN…

Taxumo Makes Tax Filing a Quick & Easy Online Experience

Tax Filing Made Even Easier

Taxumo turns Tax Filing from what was previously a painful scary chore into a pleasant & quick online experience! Aligned with that promise, we are releasing our new UI. Built from the ground up with intuitiveness and ease in mind, filing your taxes are even easier than ever before.

What didn’t change?

Before we go into what changed, let’s talk about what didn’t change. Taxumo is still easy to use: you just enter income and expenses and press some buttons. In 1 click, forms are automatically filled out. Payment can be done through the website as well. So tax filing is still as easy as possible!

Read on to find out what DID change…

How to Transfer Your RDO Using BIR Form 1905


Congratulations! You’ve finally decided to resign from your job and go full time into your profession. Whether you’re going to become a freelancer, a licensed professional, or a small business owner, you’re now your own boss! Now to make sure that things are on the up and up, the first thing you’ll have to do is transfer your RDO – from the RDO of your employer to YOUR RDO. Fortunately, the process is easy and quite painless by using the BIR Form 1905.

Learn how to transfer your RDO here…

TRAIN’s New 8% Tax – Does it really save you money?

TRAIN Tax Reform Law Signed by President Duterte

The Tax Reform for Acceleration and Inclusion (more popularly known as TRAIN, less popularly known as RA No. 10963) has been signed.  This has opened up more options for Individuals, SME’s, Professionals, and Freelancers when it comes to paying taxes.

TRAIN’s New Tax Option

In particular, TRAIN gives us a new 8% Gross Receipt Tax that you can choose to file instead of filing the Percentage & Income Taxes. This is an intriguing choice as it definitely makes computing easier. Just multiply your total income (above 250K) by 8%! Then I asked myself, yes it’s easy but is it cheaper? Will I get out ahead if I just opt to pay 8%?

Read on to see if the new 8% Tax will save you money…

4 Guaranteed Ways to Scale Your Successful Facebook Ad Campaigns

Facebook ads

So you’ve been running Facebook ads for quite some time now, either for your business or your client’s. Hopefully, it’s been going great for you.

If you haven’t started yet, read  “What You Basically Need to Know About Facebook Ads.”

Once you find winning campaigns which get you your objective at a low cost, it’s time to level up those campaigns by scaling them.

Scaling generally refers to making something bigger than it currently is. In this context, scaling your Facebook ads refer to improving your results through different strategies which are aimed at gaining more leads, customers, and sales.

Facebook Ads: How to Scale Your Campaigns

Ready to start scaling out some of your campaigns? Here are 4 ways to do so, starting with the most obvious one:

Continue reading “4 Guaranteed Ways to Scale Your Successful Facebook Ad Campaigns”

5 Ways To Make Sure Your Facebook Ads Reach The Right Audience

Facebook Ads

If you’ve been using Facebook ads to drive customers and sales for your business, then I don’t have to tell you how great the targeting of the platform is.

Most of the time, advertisers are able to directly pinpoint their Facebook ads to their intended audience.

However, there are times when businesses have very specific offers targeted to a specific audience which cannot be easily targeted.

If you’re in this boat and you’ve been struggling to reach your exact audience, this is the post for you.

Below, we’ll discuss FIVE ways to make sure that your Facebook ads are able to reach the right audience: Continue reading “5 Ways To Make Sure Your Facebook Ads Reach The Right Audience”