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.
Does TRAIN exempt me from paying any tax?
According to bir gov ph, if you are earning less than P250,000 annually, you are exempt from paying percentage tax, income tax, and/or, the 8% gross receipt tax. According to the TRAIN Act, this means you are not required to file any tax return. The actual implementation of this, however, would still be dependent on the IRR to be released. (And we’ll update this article once that’s released.)
From VAT to Non-VAT – TRAIN’s New VAT Threshold
The previous threshold for a taxpayer to be required to be a VAT taxpayer was around P1,919,000. TRAIN raises the VAT threshold to P3,000,000. If you were a taxpayer earning below the P1.9 Million threshold, then things don’t change much for you – you’re still a non-VAT taxpayer.
All about that 8% Tax – TRAIN’s “Gift”
As a non-VAT taxpayer you now have 2 choices when it comes to filing your taxes:
- Good ol’ Percentage Tax + Income Tax
- The brand new 8% Tax
Percentage Tax
Not a lot of changes for percentage tax. Depending on the alphanumeric tax code that applies to your income that percentage is still what is applied to your gross receipts.
For most individuals, this would be 3% (PT 010) of your gross income.
Income Tax
The Income Tax table, on the other hand, has changed a LOT. Your tax dues are now computed thus:
[table id=1 /]
Note: This table is effective from Jan 1, 2018 to Dec 31, 2022 only. It changes (becomes lower!) after that.
8% Gross Receipts Tax
This is a new option for non-VAT taxpayers. Instead of filing the percentage tax and the income tax, they can opt to file 8% Gross Receipts Tax. The computation is very simple:
(GROSS Income – P250,000) * 0.08 = Tax Due
So which one should I choose?
You should choose the option that helps you save more, of course. How do you determine that? We gotchu, fam – we made a calculator for you! Depending on how much expenses you’ve spent, that will determine whether the 8% Gross Receipts Tax is a good option for you OR if you should stick with Percentage + Income Tax. You can find it HERE.
That’s It?
We are still waiting for the DOF to release the Implementing Rules & Regulations (IRR) for the changes in the TRAIN law. There will be more details on frequency, the process, and the actual forms so that we can comply with the latest changes brought about by this Tax Reform.
Once the IRR is released then we start to see the details of the process and the steps that will help the BIR in keeping track of everything. With Taxumo, you are assured that the forms you are filing are the latest forms and that they comply with the latest regulations of the BIR. So if you don’t want to worry about all of this (and you shouldn’t), sign up to Taxumo now!
For more articles relating to the TRAIN LAW, click HERE.
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Hi, I have this questions in mind.
1.) If you’re a Non-Vat Taxpayer and opted for the 8% Tax TRAIN Gifts, you do not have to file 2551M monthly and 1701Q quarterly and pay 3% percentage and the quarterly income tax respectively?
2.) Do you only have to file on Annual basis should your income is over P250,000 during the preceding year, while lower than P250,000 exempts you from filing any Income Tax Returns?
3.) Like wise, when you opted for the new tax rate, are you going to be compelled to file 2551M, 1701Q and Annual Income Tax return and pay based on the new tax rate but will also exempted to file if your income falls below P250,000?
4.) What happened to the payment you made for the percentage tax and quarterly tax if at the end of the year you’ll just find out that you are exempted in filing income taxes?
Further, may I request for notification immediately when the IRR, and the new procedure is released.
Hi Manny, to answer your questions:
1. Yes, that is the idea. You do need to be earning solely from your business. People with mixed income are not eligible for the 8% Gross Receipts Tax.
2. That depends on what tax option you opt for. If you choose income tax, for example, you still have to file even if it is a zero filing.
3. I think this is similar to #1? So the answer is: most likely you will still have to file a zero filing. We’ll learn more about that once the IRR is released.
4. If you mean that you are paid less than 250K in aggregate throughout the year, then most likely you will not be paying anything in the earlier quarters. Note that the 250K is not just for taxable income but for the gross income collected.
5. We will definitely post once the IRR is released. We will also inform our subscribers as soon as it’s released and as soon as it’s implemented in Taxumo.
Hope that answers your questions!
Hi EJ, thanks for your reply. However, I understand that Pres. Duterte vetoed some provisions under the new TRAIN which includes the supposed omission of the 3% percentage tax. Does it mean, we Non-Vat tax payers need to file 2551M and pay the 3% percentage tax for the gross income we earned last month (January 2018)? Since the IRR is not yet released to date, (or is it already?) will we be charged a penalty if we wait for the IRR before we file 2551M and pay 3% percentage tax should the IRR is released after the deadline set on February 20, 2018?
Hi Manny, this is probably too late. 😛 But yes, there are still some filings you’ll have to do that are more clearly explained in our later articles. FWIW, [Taxumo] does all of the computations automatically AND also shows you which forms you’re supposed to take action on so you don’t miss any filings.
Hello Sir Ej,
Kumusta po?Tanong lang po about sa tax exemption.My chance po ba makakuha ng copy even without paying tax?Need ko lng po sa visa dito sa New Zealand na katunayan un employed ako at wala akong binayarang tax.Ano po kayang form ang pede kung gamitin or kuhanin sa BIR?Meron po kayang forn na ganun dito sa TAXUMO?
Thanks po sa reply.
hi Sir ej,
follow up on Mr. Manny’s question last January. Now that its April if I availed the 8% percentage tax, what do i need to file ; just the income tax due next month (for 1st qtr)? or i file separate percentage tax for the quarter due this month and income tax for 1st quarter due next month? thank you, hoping for your helpful response.
No exact details yet, unfortunately. 🙁 But when there is, we’ll be sure to update [Taxumo] with the latest forms and deadlines. SO it may be good for you sign up so you can stop worrying about these things yourself! 🙂
Hi sir how can i amend jan to mar 2018 if i filed it as 2551m?, this should be in 2551q
Also, how to amend for sept to dec 2017 in 2551m, i filed it under tin id 123-456-789-001 instead of 123-456-789-000.
For the first one, there’s a field in the 2551Q form that will allow you to put in (and deduct) the amount you previously paid.
For your 2551Ms filed under the incorrect TIN, you will have to go directly to the RDO and work that out directly with them. 🙁
Hi. I am a professional/self employed. I earned less than 250k last 2017. I used to file my monthly percentage and quarterly income tax upto present. With the new TRAIN law, do I still need to file my taxes? What happens to my BIR registration? do I need to update anything to BIR?
Thank you.
Hi Cherry, there is no IRR yet regarding that but we would recommend still filing your tax return even if it is zero. The reason was touched on in this article we published before.
the 10% and 15% withholding tax rate is not changed right?
Hi Angelica. It has changed. According to BIR’s RMC No. 01-2018, the EWT rates for the following are now at 8%:
Good day, Sir EJ!
I want to ask if the BIR already released an IRR as of this date?
Thanks in advance!
The BIR releases memos, circulars, and advisories in trickles. They have released some for some changes as per TRAIN but not yet for all. Certainly none yet for how to opt for the 8% Gross Receipts Tax, for example.
Hello Sir EJ.., I am computer shop owner and non-vat taxpayer., this April is due for the form 2551Q and listed in my COR that this would file for the 25th day of the following month after the close of each quarter that means due date for filing should be April 25? How to compute for these 3 months?
Sales for
January – 18,827.50
February – 22,278
March – 19,054
January + March = P60,159.50
P60,159.50 x 3% or 8% or 9%…?
How about 1601EQ..? My monthly rental 7,174.09
January 2018 – P7,174.09 x 5% = P358.70
February 2018 – P7,174.09 x 5% = P358.70 using the form 0605
How about this 1601EQ…?
Thanks for the help…..
Hi Cecilio, these computations are done automatically in [Taxumo]. One thing to note is that for taxable year 2018, the deadline for 1701Q Q1 is on May – they moved it. 🙂
Hi. I’m a newly hired freelancer this mid-January and I am really confused about on how to file a TIN number and our ITR. I’ve read dozens of articles before about applying as a self-employed professional but I don’t know if it still works now that the TRAIN law was passed. Hope you can guide me in the new process of filing of ITR/Tax Exemptions. Will be following your posts.
Hi Guilda, registration doesn’t change. 🙂 You can read more about this here: http://txmo.co/freelancertax
I’m a mixed income earner (compensation + home-based job). I availed of the substituted percentage tax return filing when I first registered with the BIR which exempts me from getting ORs per BIR RR 14-2003, if I only have one payor for my home-based business which I do. Now that TRAIN is in effect, my payor is withholding 8% of my gross receipts (combined income + percentage) as opposed to the previous system. I just wanted to clarify if this would force me to purchase receipts to show as evidence as opposed to the monthly issued BIR Form 2306 as a substituted OR per BIR RR 14-2003.
Thank you for your assistance.
Hi Joshua, your case may best be answered by talking to your RDO directly. Especially since the exemption is something that is approved by the RDO.
Just a follow-up question to the above discussion.
I’m a self-employed person whose annual income does not exceed P 250,000 annually and I’m thinking of opting for the 8% tax option because this will exempt me fully from paying tax as opposed to choosing the percentage/ income tax option. Is my assumption correct? How do I go about availing the 8% tax option? Do I have to go to the BIR office to update? And what BIR form should I use to file the 8% tax option even if it is zero filing since my annual gross income is less than 250K. Thank you.
Hi Albert, the IRR re: the 8% Gross Receipt Tax has yet to be released. So how to opt for it, what you need to file, etc is still unknown as of today, unfortunately.
Hello sir EJ,
I would just like to confirm.
In above post, you mentioned that there are 2 options:
1. Good ol’ Percentage Tax + Income Tax
2. The brand new 8% Tax
However there is this BIR Advisory (https://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/tax%20advisory-procedures.pdf) stating:
“The said non-vat taxpayers shall have the option to avail of:
1. The graduated rates under section 24(A)(2)(a) of the tax code, as amended.
or
2. An eight percent (8%) tax on gross sales or receipts and other non-operating income in excess of two hundred fifty thousand pesos (P250,000.00) in lieu of the graduated income tax rates under section 24(A) and the percentage tax under section 116 all under the tax code, as amended.”
———————
My understanding of the BIR Advisory is that the 2 options would be:
1. Income Tax
or
2. 8% Tax + Percentage Tax.
Is my understanding correct?
Does [1] mean you no longer have to pay for Percentage Tax?
And if you choose [1], this is were Itemized Deduction or OSD can be applied (since Gross Income will be used for [2])?
Thanks in advance!
God bless.
Hi Crista, you either go for (1) percentage tax + income tax OR (2) 8% Gross Receipts Tax. You’ll notice in the advisory you linked it says “in lieu of the graduated income tax rates under Section 24(A) and the percentage tax under section 116.”
If you choose to go with percentage tax + income tax, OSD is still an option.
Hope that helps!
Ohhhh… Thanks sir EJ! God bless! 🙂
Happy to help, Crista! 🙂
Hi!
Isn’t the deadline for the January 2018 filing on the 20th? Should we wait for the IRR for the 8% Gross Receipt Tax and not file the January 2018 tax yet? Or just file it while waiting to ensure that we will not be penalized for late filing?
Also, what if we already filed and paid the 3% percentage tax for January?
Thanks!
Hi Jelly – Yes the deadlines haven’t moved. We’re still waiting for the IRR from the BIR but until these are released, we are still bound to follow the old IRR (which pertains to the pre-TRAIN tax laws). We’re expecting an IRR/Advisories from BIR within the week for this so, fingers crossed, we should be able to have more clarity on this soon. In Taxumo, if you want to be sure, you can still file your 2551M as per normal.
Hi EJ,
For those that will proceed with filing the 2551M for January, do you think we will still have an option to change it to the 8% Gross Receipt Tax once the IRR is released? Or will we be bound to the Percentage Tax + Income Tax for the entire year?
– Jilly
I honestly can not say without the BIR’s IRR, unfortunately. 🙁
We’ll just wait a few more days then. I’ll be monitoring your blog for sure. Thanks, EJ! 😊
– Jilly
“According to bir gov ph, if you are earning less than P250,000 annually, you are exempt from paying percentage tax, income tax, and/or, the 8% gross receipt tax. ”
May I know where can I find this on the said site or its documents? I’m specifically concerned about apparently not needing to pay the percentage tax as well. Thanks!
Hi Testa, You can read about this in the actual TRAIN Act here: https://www.bir.gov.ph/images/bir_files/internal_communications_1/TRAIN%20matters/RA-10963-RRD.pdf
That would be the amendment on Section 116 (Section 38), right?
Best check the TRAIN Act and related advisories from the BIR for that: https://www.bir.gov.ph/images/bir_files/internal_communications_1/TRAIN%20matters/RA-10963-RRD.pdf 🙂
Hi Sir,
May I know when to file the EWT and Withholding tax on compensation? Are we still require to file monthly or is it quarterly?
Hi Gelo – The BIR recently released an advisory regarding WHT: https://www.bir.gov.ph/images/bir_files/internal_communications_1/Advisory/tax%20advisory1.pdf
Hello! I have determined that the 8% Gross Receipts Tax is better for me than the old system (percentage tax + income tax). I have also read that I must indicate in my Q1 income tax return that I intend to use 8% Gross Receipts Tax. But since there’s no IRR on that yet, do you think I should still make a 2551M filing for my earnings in January? The deadline is already in a few days…
Hi K – really it’s up to you. With Taxumo though, we take care of these uncertainties so you don’t have to worry about them. We’ll tell you what to file when to file them. 🙂
For individuals with annual fixed income of more than 250,000, how do we compute taxable income? Is it Gross Income ( basic salary x 14 i.e. including 13th and 14th month pays) minus 340,000( 250,000 exempt from tax and 90,000 deduction from bonuses) equals taxable income?
Is this question for employees or for self-employed individuals?
Hi, this is super helpful! But the 8%, is that for annual or quarterly tax? I asked my mom’s friend who works in BIR and she said that’s quarterly 8% gross.
It’s 8% Annually. However, do note that filing & remittance (aka payment) is most likely on a quarterly basis.
The quarterly filings is “cumulative”… let me attempt to explain (and to simplify things, I’m removing the 250K deduction):
Let’s say you earned 300,000 from Jan to March. When you file Q1, you have a taxable income of 300,000 so you’ll pay 24,000 (8%).
Now let’s say you earned 250,000 from April to July. When you file your Q2, you now have a taxable income of 550,000. Your due is 44,000. You deduct how much you paid before which is 24,000. So your new payable is 20,000.
This goes on until you file your annual. You always deduct how much you’ve paid before.
Note that it’s not true that it’s more expensive if it’s quarterly: 8% broken down applied to your income in different quarters is the same as 8% applied to your income across all quarters. MATH! 🙂
Thank you, Ej!!
Hi EJ, Isn’t it, you only pay 8% of P50,000 out of the P300,000 gross income for the first quarter as illustrated in the above scenario by virtue of the P250,000 threshold as tax-exemption?
You’re right! Thanks for that. Edited my comment. 🙂
Just a followup question on this. Let’s say I just earned P50,000 for Q1 and P50,000 in the succeeding quarters, does that make me exempted from paying? Thanks.
I’m assuming you’re talking about a scenario where in you opt for 8%, yes? If that the case [this article] may be of more help. 🙂
Hi sir. Just wanna seek your opinion. I’m a job order personnel of dpwh with monthly salary of 21k pesos. I am being taxed at 13% per month. Is the tax rate imposed on me correct? If not correct, can i ask for a refund? Also, dpwh does not give me any documents evidentiary to actual remitting of my tax due to the BIR. What i should i do? Thank you.
Hi Romula, are you a contractual employee of DPWH? If I understood correctly, you should be getting a 2307 when they pay you. That is the document to show the BIR that taxes were withheld from your salary.
Now if you can ask for a refund… asking any tax specialist normally elicits a chuckle when you ask them about refunds. 😛 The fastest/easiest option would be to get a tax debit memo from the BIR instead for any overpayment – which most likely will be the case if your taxes withheld are 13%. You then use this debit memo to deduct from your future tax dues.
Hi Ej, that’s what I have been doing for the fast 10 years when I decided to ceased being employed and turned self-employed. However, my tax credits have accumulated to more than P50,000 now…last year I decided to file my ITR and opted for a refund. I am turning 60 by November this year and I wanted to get a full refund of my overpayment to BIR. How can I please BIR to refund my P50k+ over payment?
Not exactly sure how to please the BIR, but this article may help.
Hi! I think the rate is 10% professional fee and 3% business tax. However, may I ask if this 10% professional fee is still applicable or can opt for 8%? thanks
I mean for government contractors
i believe it’s 10% prof fees and 3% business tax. however my question is are government consultants eligible for the 8% or the professional rate remains the same?
Hi
I am also waiting for BIR’s update regarding the 8% gross receipts tax if required to file/pay on a monthly basis or if will do during the quarterly return.
It’s frustrating that the 20th is approaching and no clear advise yet from them. Any news?
Hi Mae Rose, Percentage Tax is now to be paid Quarterly as per the latest advise of BIR. The 8% GRT will also be quarterly it seems as there’s a direction to “note/indicate” in the 1st quarter filing that you’ll opt for 8%. Taxumo is working closely with the BIR for this so that our users don’t have to worry about such things. We’ll tell them what’s needed when their needed and they’re secure in the knowledge that Taxumo takes care of their taxes for them. 😉
Hi EJ, this could have answered my first question above. Can you please clarify this.
1. Does it mean, there’s no more filing of the 2551M on a monthly basis, but only ITR quarterly, consequently paying the 3% percentage taxes for total gross income earned from January to March upon filing the quarterly ITR?; or
2. Do we still need to file the 2551M monthly only (no payment required) and pay the 3% percentage taxes for total gross income earned from January to March upon filing the quarterly ITR?
3. How do we go about it if we are an e-filer? BIR seems not yet ready for the TRAIN in cases on the e-filers, since as to this writing the forms are still the same in their e-BIR system.
Can you please, provide us with the link to BIR’s latest advice: ….”xxx…..Percentage Tax is now to be paid Quarterly as per the latest advise of BIR. The 8% GRT will also be quarterly it seems as there’s a direction to “note/indicate” in the 1st quarter filing that you’ll opt for 8%…xxx”.
The 20th deadline for filing and payment of the 2551M is fast approaching.
Hi Manny,
1. Yes
2. No more.
3. Unfortunately, I can’t answer with regards to how to on eBIRForms. With [Taxumo] we’re able to forego eBIRForms altogether and submit the forms on your behalf to the BIR. Not to mention we can also remit payment to them (so no more lining up at the bank)
FYI on the Advisory related to Quarterly Percentage Taxes – you can find it [here].
Hi EJ!
Thanks a lot for the information! Been really waiting for an update about this.
I can handle the tax matters, just need good information re: tax updates.
God bless and more powers to Taxumo.
Hi
I have mistakenly filed and paid my January and February 2551M. What should I do if it should be now paid quarterly? Can I apply the previous payment as tax credit for 2551Q first quarter? Can you kindly enlighten me? It’s really confusing.
Hi Jollie, welcome to the wonderful world of taxes. 😉 That confusion is actually one of the things we’re addressing with Taxumo – so try it out now!
WRT your question: the BIR hasn’t released any advise on how to treat previous payments. We have a process for our Taxumo users that allow us to credit that payment to them. But I can’t speak for non-Taxumo users, unfortunately.
Good day Sir,
I am a life and non life insurance agent and a mutual fund representative. I would just like to inquire if I still would need to pay anything else since the companies which I am connected are already taking 8% out of my commission every payday and I make around 1 million a year. From previous years I am deducted 10% from my Php720,000 gross income and 15% for the excess. I also file the percentage tax of 3% every month (2551M), the quarterly taxes (1701Q) and the annual tax (1701).
Hi Jonathan, You can check your COR and see if there are any other tax types aside from Income Tax and Percentage Tax. If none, you should be all good. 🙂 Having said that, you may want to try out [Taxumo] – you can file ALL the forms you mentioned AND we’re updated with the latest TRAIN updates. For example, if you use us, you’ll know that you don’t need to file a 2551M anymore. If you did file through us, we’ll even give you a refund. 🙂
Hi EJ!
Just a follow up question.
Let’s say I’ll be electing the 8% tax option on gross sales/receipts. What should my COR contain? Should it just be Income Tax, or still Income Tax and Other Percentage Tax?
I, too, am a life insurance agent. Thanks!
Seems dependent on RDO at this point. Some remove the “percentage tax” line, some keep the “percentage tax” but change it to quarterly, while some have an added line there showing that you’re opting in to 8%. From what we’ve seen, the implementation varies across the RDOs.
Do I still have to file 2551Q and pay when it is indicated in my COR under tax types “percentage tax quarterly?” I chose the 8% income tax only. I thought there shouldn’t be percentage tax anymore but PT is still in my COR.
If that’s the case, we still recommend you file just to make sure you don’t have any open cases. You can do so easily via [Taxumo], by the way. 😉
Hi. Is the filing of VAT still monthly?
Yes, that hasn’t changed. 🙂
Your responses are very helpful. Thanks
I am a self-employed consultant. I have a question with regard to filing of annual income tax on april 15, 2018 for income earned for 2017. Since the TRAIN law takes effect in 2018, this means that we still use the old BIR 1701 form and the old income tax table when we file on april 15 even if an IRR is issued? Is this correct?
Hi Imelda – yes! For Annual ITR filing due on April 2018, you still use the pre-train forms and rates.
Hi! If I choose the 8% gross receipts tax, do I still need to file the 2551M? I have issued receipts for January but i’m not sure if:
A) I will still put the total amount of receipts in 2551M which means I would still pay the 3% percentage tax
B) I would still file 2551M but just put zero amount in the form even if I issued receipts for January
C) I need not file 2551M at all.
I also read in one of your comments that Percentage Tax is no longer filed monthly but quarterly? So there is no need to worry on filing 2551M for January which is due this Feb 20th?
Please enlighten me on this. thanks
Hi Will, hope this newer article helps:
[How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts]
Hi sir. I also have the same concern regarding tax payment. I’m a self employed, earning below 250,000. I already filled my percentage tax 3% for January 2018. If my understanding is right, I also want to avail the 8% tax annually coz I will be exempted from paying any tax at the end of the year, instead of paying my 3% monthly, since I’m only earning below 250,000 income yearly. Since there is no latest info regarding this matter, I’m worried if I don’t pay my percentage tax this February, I might pay penalties soon. What can you advice for me to do. Thank you.
Hi Litz, there are still some quarterly filings you’ll have to comply with even if you choose that option. Our later articles should be able to shed some light on that: [How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts].
Sir, how about for the expanded witholding tax? like the 5% of rental…
Gotchu fam. BIR released advisories related to EWT: [Jan 31] and [Feb 6].
Hi,
What are the requirements in changing from VAT to Non VAT? Thanks!
You may want to read [this article] on how to do that.
Hi I’m a Self-Employed too..Just want to clarify things, so we don’t need to file 2551M this 20th of February (for month of January) as well as March (for Feb) and so on, the monthly percentage tax return? We’re just going to file for the first quarter (jan-feb-march) using 2551Q form which is deadline is by April, is that right?
Yes that’s right. 🙂 With [Taxumo] you see which forms are actionable for you and when to file them so you don’t miss any deadline moving forward. We also update Taxumo with the latest updates from the BIR so you’re sure you’re submitting the right forms and using the right formulae!
Hello Sir EJ,
“…Percentage Tax is now to be paid Quarterly as per the latest advise of BIR. ”
—> May we also ask for your reference to above statement? I would also like to read about it. I was trying to search for related BIR advisories but found none.
Thanks in advance!
Best Regards,
Crista
[BIR Advisory] as requested. 🙂
Sir,
i paid my monthly percentage tax last feb 5 for the month of january then i read that non vat taxpayers need not file monthly (2551M) but quarterly using 2551Q. Does this mean
1) i need to file (again) but this time my earnings from Jan-Mar using 2551Q?
2) what happens to the payment i made for January?
3) Do i use 8% tax instead of 3%?
4) When is the deadline for each qtr?
5) lastly, do i still need to file 1701Q?
Appreciate your help on this matter.
Hi Andrea,
1. Yes you would need to file a 2551Q covering Jan to Mar.
2. For Taxumo users, we have a process that allows us to deduct that amount from their 2551Q due. I can’t say the same for non-Taxumo users, however.
3. It would depend on whether you want to or not. You may want to read this article to determine if it makes sense for you to choose 8% or continue with Percentage Tax + Graduated Income Tax.
4. Deadline depends on which form you’re filing. 🙂 With Taxumo you’ll always see which form you have to file so you don’t worry about missing anything out!
5. Yes you will still need to file 1701Q. Check out this article, however, as the 8% changes that a bit.
Hope that helps!
Sir about the, 8% gross income – 250,000 *0.08= tax due
what is the gross income here? do you mean gross income annually?
thank you for your response…
Hi Mitch, yes Gross income annually. Note that IF the BIR decides to make filing 8% quarterly, then it would mean gross income from start of taxable year up to date covered by the return. You may want to try out Taxumo – with Taxumo, you won’t need to worry about whether you’re using the right formula – we take care of that for you. 🙂
Hi Sir Arboleda, this is a query on the computation of Quarterly / Annual Income Tax for 2018.
1. Is the current tax table showing the 250k exemption applies only for the compensation earner?
OR IS IT
2. Applicable to all INDIVIDUALS who are earning 3million and below ( Percentage Taxpayers) filing Tax Return BIR Form 1701. OR there is a separate Tax Table?
3. Supposing the tax table is applicable to all individuals filing 1700 and 1701 , after deducting the exemption of 250k, is the remaining income still subject to the deduction of Cost of Sales/Services/Operating/Administrative Expenses?
Hi Belen, the table above is for Individuals .Here is the table for compensation earners. Deductions still apply (assuming you’re not OSD, not 8%) – the 250K deduction is basically a threshold in the graduated income tax table — earning below that maps to ZERO for tax dues. Hope that helps!
Is the IRR not coming just yet, Mr EJ Arboleda? Today is the 20th and the deadline for 2551M.
Hi Manny, the BIR has been releasing RRs/RMCs/ROs/advisories in short bursts covering different sections of the TRAIN Law. You might be interested to read this advisory from the BIR as it speaks about percentage tax.
We update Taxumo regularly and as soon as BIR sends out advisories and updates. If you’re a Taxumo user, you won’t need to worry about what rules to follow as you’ll have to worry about is what’s actionable on your dashboard — those are the forms you’ll file. You may want to give it a shot. 🙂
Hi Sir! What if I have already filed for my January percentage tax? What should I do for March when I now have to pay for my quarterly percentage tax?
For Taxumo users who filed their percentage tax through us, we have a process to credit them back for it. For non-Taxumo users, I can’t say honestly. You may need to get a tax certificate from the BIR so you can credit this amount.
Hello sir, If I opt for 8% tax, does this mean that I wont have to pay anything for the annual filing of income? Thanks
Hi Marieposa – Yes you will. 8% is income tax actually. 🙂 You can read more about 8% Tax in this recent article I wrote.
Hi,
Still no IRR re percentage tax? Thanks
Hi Cora, there has been a related advisory released by the BIR here. Were you looking for anything in particular?
Hello, i earn purely through compensation income but i am planning on renting out my house currently not in use. Rent will be 10k per month and the lessee will be renting it for their business. Questions are,(1) will the rental income be subjected to 3% percentage tax, (2) do i have to issue an OR (3) do i have to register it to BIR (3) the unit is still bare and has no electricity yet, can i use the expenses on installing electricity as a deduction on getting net taxable income?
Hi April, to answer your questions:
1. Yes, it will be subject to taxes. Now whether it’s 3% percentage tax or otherwise, it would depend on your registration. Likely it’s just that.
2. Yes you do have to issue an OR.
3. Yes do should register with the BIR.
4. Expenses related to your business can indeed be written as deductions.
Hope that helps!
Hello,
Just want to ask under the TRAIN Law, what is the proper tax rate to be applied by a withholding agent if the individuals contracted by them are:
Professionals with license
Professionals without license
Non-Professionals
Thanks
Toni
Hi Toni, the BIR released RMC 1-2018 early this year that talks about this. You may want to check versus that RMC. If not included in the RMC, it would be safe to assume that you should still use the previous/old wht rate.
Hi, ask ko lang po kung mag-aaply na yung new income tax table sa 2017 annual itr, na babayaran po on or before april 15 this year 2018?
Hi Joyce, for the Annual ITR this coming April 2018, you still use the OLD table. 🙂 Moving forward, you may want to use Taxumo – Taxumo is always updated with the correct formulas and knows which formula to apply when so you won’t have these doubts in the future.
Hello Mr. EJ.
I am very confused. I am an online tutor and I’m earning around P26,000 monthly. I just want to know if I choose the 8% GRT, that’s like (26,000 X 12months) = P312,000. Then, (312,000 -250,000) = 62,000. So, I will deduct 8% from 62,000 pesos which is P4,960. That’s the tax I have to pay in one year? no more percentage monthly tax and so on? Please help me. And what if I don’t choose 8%GRT.
Hi Natasha, your tax due would be the P4,960. 🙂 Percentage Tax would now be zero if you opt for that. However, do note that you will still have to FILE a Percentage Tax form even if it’s zero. I wrote more about that in this article. Now you may want to check if 8% makes sense for you. You may have enough expenses such that the 3% Percentage Tax + Income Tax option is still a better option. We made a calculator here that would help you check which option makes sense for you.
Your team is a great help to us. God bless!
Hi Sir EJ.
Is there any changes in filing the percentage tax?i heard it should be filed quarterly instead of monthly.i already pay my january percnetage tax last month and thinking of filing it early this week for february percentage.by the way i am non vat resigtered.
Thanks in advance.
Hi Gwen, yes, it’s now quarterly as per this BIR advisory.
If you’re a Taxumo user, you’ll always see which forms are actionable for you. So you’ll know what to file. We keep Taxumo updated with the latest advisories/RRs/RMOs/RCs from the BIR. 🙂
Hello Sir,
Would like to ask regarding this computation “(GROSS Income – P250,000) * 0.08 = Tax Due”
I am an EMPLOYEE and at the same time, I am also an ONLINE SELLER/RETAILER (NON VAT).
I already asked my EMPLOYER regarding this if may kailangan ba sila sakin or may kailangan ako sa kanila. Sabi nila sakin WALA naman daw, file ko lang ng sarili yung business ko.
If ever po ba yung computation above is applicable to my ONLINE SELLING only, what I mean is the GROSS INCOME is based on my INVOICE? Tama po ba? So yung tax ko sa pagiging empleyado bahala na si company dun, right?
Thank You in Advance po, malaking tulong po sakin ito. 🙂
Hi Jeff, thanks for this question! In computing 8% for your business, you will NOT have that 250K deduction. So 8% for your business is:
Gross Sales * 0.08 = Tax Due
I wrote more about that in this article.
nag pay po ako last feb.2551m..then tis coming march,sabi nang bank..we pay 2551q..3%parin ba ang gagamitin for filling.2551q
Hi Anna, the percentage depends on the ATC you’re using – but the percentages haven’t changed. 🙂 Note that you may want to file through Taxumo instead – we take care of all the computations for you so you won’t have any doubts regarding what formula/percentage to use!
Hi, we are already a non-vat business since beginning and monthly we are paying withholding tax for our rental using the 1601E form.with he new TRAIN law, should we be paying the monthly wht like what we usually do before the TRAIN law was implemented or should we be paying it quarterly?i just got confused with all the provisions that i don’t know which is the one applicable in our business.
Thank you
Hi Selle, yes this is one of the more confusing part of all these changes. What will need to happen now is that you need to remit/pay the amount your withheld on a monthly basis. The actual reporting however is done quarterly via Form 1601EQ (The BIR will likely release a new form for this). So the schedule is now:
Jan (due Feb) – 0605
Feb (due Mar) – 0605
Mar (due Apr) – 1601EQ
Apr (due May) – 0605
May (due Jun) – 0605
Jun (due Jul) – 1601EQ
Jul (due Aug) – 0605
Aud (due Sep) – 0605
Sep (due Oct) – 1601EQ
Oct (due Nov) – 0605
Noc (due Dec) – 0605
Dec (due Jan) – 1601EQ
I love what you did with the calculator! It allowed me to confirm my tax rate option.
I’ll be waiting for your update on how to file quarterly tax for the self-employed 😉
By the way, I came across this news that self-employed tax payers will have their first quarterly deadline on May 15. That means we have enough time to wait for the procedure from BIR then, right?
http://pia.gov.ph/news/articles/1004314
Thank you for the kind words, Shasha! You’re right, BIR released RR 08-2018 which states that the deadline for 1701Q Q1 is now May 15. Do note that there have been some updates regarding how to opt in for 8% – you can read more about how to do so here.
Hi Sir,
Good day!
Just want to clarify some things.
1. If you’re using the Offline BIR forms previously for filing your returns, is there a new eBirForms for the new rate of 8%?
2. If you have already paid your January and February 2018 percentage tax @3% rate, is it possible to switch to the 8% rate by March?
Thanks!
Hi Danissa, good day! For your questions:
1. Not exactly sure if/when the BIR will release those forms. What I can say is that we at Taxumo are working closely with the BIR to make sure you can file whatever you need to file through us.
2. You should be able to pa rin. You can read more about how to opt in here.
Hope that helps!
Hi EJ! We already filed 2551M for January and February. Do we still have an option to the 8% Gross Receipt Tax at the end of 2018? Also, do I continue to file monthly? Or just quarterly? Will the payments I made be credited? Thanks! 🙂
Hi Chickoy! Thanks for your questions!
Yes, you would still have the option to opt for 8%. To read about how to do so, read this).
Percentage taxes are now filed quarterly as per this advisory from the BIR.
Now as for the payments you made, since you’re opting in for 8%, it makes sense for you to be able to ask for these payments to be credited. It’s safer to ask for a tax certificate from the BIR. You will have to go to them directly though. 🙁 Try calling them up at 9817003 / 9817020 to ask them how it’s done. 🙂
Hope that helps!
Hi. Thanks for this time-relevant article. I just want to ask, though. I am a freelancer and the article says, if I understand it right, that I (earning less than 10k monthly from freelance work totaling to 120k yearly which is less than 250k threshold) don’t have to pay ANY tax? Is this right? I was employed by a company before and I was trying to get information about how to change my tax type and continue paying my taxes as a freelancer. Thanks.
Hi Kevin, yes, when you file your income tax, using the graduated income tax table, that income would fall in the 0-250K bracket which means ZERO tax due. Note that IF you are mixed income, however, and you opt for 8% income tax rate, you would still have to pay 8% of that 120K — you can read more about the 8% Income Tax Rate Option here.
Hello,
How do government consultants professional and job order be taxed? thanks
Hi Zee, you would be a self-employed professional in that case. Check out this article to understand taxation in the context of freelancing/consulting. 🙂
Hi Ej,
I attended a Seminar for Train today and am very very confused. Im a freelance Photographer.
Today is March 20th and one the persons i met who attended the seminar said that. BIR accredited Banks have received advisory to not accept 2551m payments.
Then the BIR staff from the Seminar said that if we do not exceed the 250k threshold, we are required to file 2551m.
I have inquired from other sources online and they’ve said that Self Employed Earners that do not exceed the 250k, i am 100% not taxable.
Can you advise?
Alright, sounds like some terms and thresholds are getting mixed up in that discussion. For now, this article may be able to answer some of your questions. We’ll look at creating a guide that should hopefully clear things up like that.
You may also want to try out Taxumo. We are always updated with the latest BIR guidelines and advisories. The default (Cashflow) view also shows you which forms are actionable for you so you don’t have to worry about which form to file. Try it out. 🙂
Hello!
I am a consultant. Previously, when filing my 1701q and 1701, i used optional deductibles to compute my net income. Does this still apply in the new train law?
Also, one of my workplaces deducts 8% from my salary. Will that affect my filing if i choose percentage + income tax
You can still use OSD, yes. 🙂
If your customer deducts 8%, then they should also provide you with a Form 2307. You use this Form 2307 to claim a deduction from your income tax due when you file your 1701Q.
Hope that helps!
Hi, ask ko lang po, do i need to get new receipts since VAT exempt na ko or can i still use my remaining receipts?
Thanks!
If you mean you changed from VAT to Percentage Tax, yes you do need to have new receipts printed. 🙂
Hello, I just registered with BIR today as professional (freelancer). Now, I am confused, in your blog, you said we dont need to pay percentage tax and income tax if it is below 250K whick is I am sure my income will not go higher than that. According to my registration (1901), I need to pay taxes: 0605, 2551Q, 1701 and 1701Q. I thought I will not be paying any percentage tax based on your blog. Can you lighten me up as this mostly freelancers would like to ask.
For example:
1st quarter I earned – php 60K,
I am going to pay for 2551Q (3%)= php 1,800
I am going to pay for 1701Q (8%) = php 4,800
This computation is based on my COR.
Hi Jorgie, so you have to exercise your risk management skills here. The reason is if you DO exceed that threshold within the year, then you’re technically LATE for the previous filings you SHOULD’VE submitted – hello, penalties. I would suggest you err on the side of caution and file/pay regardless.
Do I still have to update my bir cor even if I am not going to use the 8% train law? Thank you
May I direct you to this article please: [How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts]
Good evening. I am a new business owner. So this is my first time in filing percentage tax return, and because of the changes made by the TRAIN law I got even more confused on how to file and how much will I pay for my taxes. And another problem I am encountering as of now is that the Part II of the 2551Q online filing doesn’t work, I can’t type anything. Pls help me with this. Thank you.
The notations, if you’re opting in to 8%, are done automatically in Taxumo. Unfortunately, can’t help with other filing platforms. 🙂
I am earning around 25,000 per month, what is the differences when I use 3% or the 8% rate on tax due. I don’t understand this part sir. Thank you.
Hi Leona, may I direct you to this article: [How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts]
HI, EJ.
Are self-employed individuals the only ones that have the first PHP250,000.00 subtracted from the gross income to get the taxable income? Meaning employees who earn more than PHP20,833.33 gross/month are automatically in bracket 2 of the tax table? Or is it annual taxable income = (monthly gross x 12) – 250,000?
The income tax bracket for compensation shows that any earning below 250K has a tax due of zero (0.00). So it’s already considered for employees. So yes, NO 250K deduction for your compensation income.
Should I still file my 1701Q even if my gross receipts did not exceed 250,000? Thanks Sir EJ
YES! Zero tax due filing. 🙂
pag-nagavail ba ako ng GST 8% s 1701q no nid na ba ako magbayad pa ng 2551q?
Hi Rodel, no need na po to PAY 2551Q. However, you may still have to FILE, especially the first quarter 2551Q (due last Monday). Since you missed it, you may want to check with your RDO if you can still be eligible.
Sir,
Im a non vat reg.self employed, I have not filed monthly percentage tax coz I want to avail the 8% annual tax rate, is there a deadline to end-date of pecentage tax? Thank you
First of all, you SHOULD have filed your percentage tax pa rin (they changed to quarterly). That was noted in the RR – you can read more about it here: How to Avail of the 8% Income Tax Rate on Gross Sales/Receipts
You may want to check with your RDO if that makes you ineligible for the 8% Rate. 🙁
WRT end date of percentage tax, it differs by RDO. We’ve heard some saying it should be April 24, while some say April 30, and other say it’s before the 1701Q deadline for Q1. So may be best to check with your RDO how they’re implementing that provision in the RR. 🙂
Hi Taxumo
I have already filed and paid my monthly percentage taxes for the months of Jan, Feb, and Mar. I am confused because my accountant said I still have to pay again an income tax for the first quarter of this year? Thanks
Hi, i was not able to comply and file 2551Q, but i filed 2551M (Jan-Mar) and 1701Q.. meaning i am not qualified to avail the 8% income tax rate?
Did you use the NEW 1701Q form? Did you file a 2551Q form? Chances are that you are not eligible for 8% anymore. But best to check with your RDO to be sure. If you’ve missed indicating the 8% opt in in your 1701Q, however, it’s too late and you’re stuck with Graduated (Tabular) Income Tax at least for the year.
Hi Sir EJ,
I am currently employed and have a small business. I just want to ask if I will still file for 2551M? I already filed for my COR update from monthly to quarterly, however, upon filing for 1701Q new form I realized that I cannot avail of the 8% because my source of income is not solely from the business. So, my question is do I still file for 2551q or / and 1701q opting for the old itemized deduction?
Appreciate your help in advance 🙂
Thank you
Yes you would still need to file 2551Q and your 1701Q’s in that case. 🙂
Hi!
I am registered as self-employed in BIR. But I was not able to file form 1905 to update my registration, cancel the VAT, and avail of the 8% tax under TRAIN law. I read that the deadline was May 15.
Can I still avail it? How and when?
Please help. My RDO office is far from home and I don’t want to go there without knowing what to do. BIR offices are stressful places and the BIR offices that I call are always unavailable or just ringing.
Please help.
Thank you.
Hi Ara, you avail of the 8% in the first quarterly income tax filing you make. If you missed it, you’re out of luck, unfortunately. 🙁
Switching from VAT has a deadline which I believe has already passed. You can still switch to VAT but you must first show 3 years worth of previous VAT returns before you can switch. Changing from VAT to non-VAT (and vice versa) can only be done every 3 years.
Hello! I am already self-employed and was able to file form 1901 in BIR and avail of the 8% tax under TRAIN law. Am I going to be compelled to file 2551Q (Percentage Tax) and 1701Q (Income Tax) quarterly even if my income per year falls below P250,000?
Hello! I am already self-employed and was able to file form 1901 in BIR and avail of the 8% tax under TRAIN law. Am I going to be compelled to file 2551Q (Percentage Tax) and 1701Q (Income Tax) quarterly even if my income per year falls below P250,000?
Hi! Sir. is BIR FORM 0605 applicable also to contractual employees in the government owned corporation?. I just want “po” to clarify about this BIR FORM 0605. Thank you so much..
Hi Sir,
I am planning to file my ITR using OSD, will i still be deducting the 250k from my gross, to come up for the 40% tax due?
good am sir, pano po kapag OSD non vat. may less poba ng 250,000 don taxable income bago iapply yung applicable rate?
Can i pay my percentage tax using my income tax overpayment from previous year?
If your gross income does not exceed 60,000/ year, is there a need for you to file an income tax return?
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Hi EJ I’ve mistakenly filed 2551M instead of 2551Q since the latter went to use in 2018? What should I do? Can Taxumo help?
Joselito
Hi, I have a question. From my understanding, for instance, if I have made below PHP 250,000 for the year 2021 does that mean I am tax exempt? If so, why am I getting tax deductions on my monthly salary even though I am earning less than PHP 250,000 in a year?
Thank you.
For your question, it would be best to seek the guidance of a Certified Public Accountant.
You can book for a consultation session here:
https://www.taxumo.com/taxumo-consult/
If there is anything you need to ask about using Taxumo, feel free to reach out to us again.🙂
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Nice guide that business owners can follow through on proper tax filing.
Thank you, QCA! 🙂