This is an estimate, not tax advice. It covers the common case: a non-VAT individual seller. Your situation may have details it doesn't handle. Confirm with the BIR or a tax professional before you file.
Your three options
1. 8% income tax
You pay 8% of your gross sales and other business income above ₱250,000. No expenses are deducted, and you don't pay the separate 3% percentage tax. It's simple and needs very little bookkeeping.
If you also earn a salary (a "mixed income earner"), the ₱250,000 is not deducted from your business income, since your salary already uses the tax-free portion. You can only choose 8% if your gross sales are ₱3,000,000 or less and you're not VAT-registered.
2. Graduated rates with the optional standard deduction (OSD)
You deduct a flat 40% of your gross sales as expenses, no receipts needed, and pay graduated income tax on the remaining 60%. You also pay 3% percentage tax on gross sales.
3. Graduated rates with itemized deductions
You deduct your actual costs: the goods you sold, platform fees, shipping you paid, packaging, rent and so on. Every deduction needs official receipts or invoices. You pay graduated tax on what's left, plus the 3% percentage tax.
Which one usually wins?
It comes down to how much of your sales are eaten by costs:
- Low costs, like reselling digital goods or services: the 8% option is usually cheapest.
- High costs, which is most physical-product resellers: itemized deductions often win, because product cost alone can be 50% to 70% of sales.
- OSD wins when your real costs are a bit below 40% of sales, or when you don't keep good receipts.
Online resellers are often surprised here. Because you can deduct the cost of goods, a reseller with thin margins can pay far less under itemized deductions than under 8%. The catch is that you need complete records.
The graduated tax table
| Yearly taxable income | Tax |
|---|---|
| ₱250,000 and below | ₱0 |
| Over ₱250,000 up to ₱400,000 | 15% of the excess over ₱250,000 |
| Over ₱400,000 up to ₱800,000 | ₱22,500 + 20% of the excess over ₱400,000 |
| Over ₱800,000 up to ₱2,000,000 | ₱102,500 + 25% of the excess over ₱800,000 |
| Over ₱2,000,000 up to ₱8,000,000 | ₱402,500 + 30% of the excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35% of the excess over ₱8,000,000 |
When to choose
You elect the 8% option on your first quarterly income tax return of the year (BIR Form 1701Q), or when you register your business. If you don't elect it, you're on graduated rates. Once chosen, you can't switch until the next year, so run this calculator with a realistic estimate for the full year before the first quarter's deadline.
Don't forget the platform withholding
Shopee, Lazada and TikTok Shop withhold about 0.5% of your sales once you pass ₱500,000 a year. That money counts as tax you've already paid. Tick the box in the calculator to subtract it from the tax you still owe. Keep the BIR Form 2307 certificates the platforms give you, since you need them to claim the credit.
Frequently asked questions
Is the 8% tax better for online sellers?
Only if your costs are low. Most physical-product resellers have high costs of goods, so graduated rates with itemized deductions often give a lower tax. Enter your numbers above to compare.
Do I still pay percentage tax under the 8% option?
No. The 8% income tax replaces both the graduated income tax and the 3% percentage tax.
What happens if my sales go above ₱3,000,000?
You'll need to register for VAT and you can no longer use the 8% option. VAT works differently and isn't covered by this calculator.
Can I deduct Shopee and Lazada fees?
Under itemized deductions, platform fees are business expenses you can deduct with proper documentation. Under the 8% option or OSD, you can't deduct them separately.