INCOME TAX TABLE

Effective January 1, 2018 until December 31, 2022

Effective January 1, 2023 and onwards

1. INCOME TAX FOR EMPLOYED

 There’s an EMPLOYEE-EMPLOYER RELATIONSHIP

 SSS,GSIS,PH,PAG-IBIG
 13TH MONTH PAY
WHAT TO DO?
Provide your TIN #
You are qualified for substituted filing.
EXCEPT: IF YOU HAVE MORE THAN 1 EMPLOYER
NOTE: ALLOWABLE DEDUCTION DE MINIMIS BENEFITS 90,000

2. INCOME TAX RATES FOR SELF-EMPLOYED INDIVIDUALS EARNING INCOME FROM:

SELF EMPLOYMENT or PRACTICE OF PROFESSION
If he gross sales or receipts and non-operating income does not exceed P3, 000,000 shall have the option to avail of:
1. 8% tax on sales or receipts and other non-operating income in excess of P250,000 in lieu of the graduated
income tax rates and the 3% percentage tax; or
2. The graduated rates.

3. INCOME TAX RATES FOR INDIVIDUALS EARNING INCOME BOTH FROM COMPENSATION AND FROM SELF-
EMPLOYMENT
(BUSINESS OR PRACTICE OF PROFESSION)
For mixed income earners, tax rates are the following:
1. The compensation income shall be subject to graduated tax; and
2. The income from business or practice of profession shall be subject to the following:
a) If the gross sales/receipts and other non-operating income do not exceed the VAT threshold, has the
option to be taxed at:
1. 8% tax on sales or receipts and other non-operating income in excess of P250,000 in lieu of the
graduated income tax rates and the 3% percentage tax; or
2. The graduated rates.
b) If the sales/receipts and other non-operating income exceeds the VAT threshold, it shall be subject to
the graduated income tax rates.

ILLUSTRATION: SELF-EMPLOYED(BUSINESS OR PRACTICE)

1. WITHHOLDING TAXES
5% OR 10%
EARNING IS LESS THAN 3M
2. PERCENTAGE TAX (3%) or OPTIONAL 8% (exempt 250,000)

3. INCOME TAX RETURN NO MORE INCOME TAX RETURN

EXERCISE: Ling owns a small sari-sari store and a beauty parlor. In 2018, her gross sales in the store amounted to
P680,000, in addition to her receipts from the parlor of P500,000, while her total cost of sales/receipts from the parlor
of P500,000, while her total cost of sales/services and operating expenses amounted to P300,000 and P200,000,
respectively.

OPTION 1 OPTION 2

PERCENTAGE TAX Optional 8% Taxable Income

Gross Sales – Sari-sari Store P680,000 Gross Sales – Sari-sari Store P680,000
Gross receipts – Beauty Parlor 500,000 Gross receipts – Beauty Parlor 500,000
Total Gross Sales/Receipts 1,180,000 Total Gross Sales/Receipts 1,180,000
3% Less: Exemption 250,000
Percentage Tax Due 35,400 Taxable Income 930,000
Rate of tax 8%
Income tax due 74,400

INCOME TAX RETURN (graduated tax table) NO MORE INCOME TAX RETURN

Gross Sales – Sari-sari Store P680,000

Gross receipts – Beauty Parlor 500,000
Total Gross Sales/Receipts 1,180,000
Less: Cost of Sales/Services 300,000
Gross Income 880,000
Less: Operating Expenses 200,000
TAXABLE INCOME 680,000

Tax on 400,000 30,000

280,000 x 25% 70,000
Income tax due 100,000
Income Tax Return
Gross Income
Less: Allowable Deductions
Taxable Income

Allowable Deductions:
Optional Standard Deduction 40%; or
Standard Itemized Deductions

Note: No deductions shall be allowed to individual taxpayers earning compensation income under an
employee-employer relationship (EMPLOYED) and those who opted to be taxed at 8% on their income from
business/practice of profession.

EXAMPLE: SELF-EMPLOYMENT (BUSINESS & PROFESSIONAL)

Cabal, a Certified Tax Technician and BIR accredited tax practitioner, operates a “Wash-Your-Car” business
while he offers tax services to clients. In 2018, his gross sales amounted to P825,000, in addition to his gross
receipts from bookkeeping services of P250,000. His recorded cost of goods sold and operating expenses were
P360,000 and P37,000, respectively.

OSD 40% ITEMIZED DEDUCTIONS

Wash Your Car business 825,000 Wash Your Car business 825,000
Bookkeeping services 250,000 Less: COGS 360,000
Gross Receipts 1,075,000 Net income 465,000
Less: OSD(1,075,000X40%) 430,000
TAXABLE INCOME 645000 Bookkeeping services 250,000
Less: Operating Expenses 37,000
Net income 213,000
Tax on P400,000 P30,000
P245,000 x 25% 61,250 TAXABLE INCOME 678,000
Income tax due 91,250

Note: Tax on P400,000 P30,000

1. The taxpayer elected OSD in the computation P278,000 x 25% 69,500
of his taxable income, thus, the graduated Income tax due 99,500
income tax shall be applied.
2. The election of OSD is irrevocable for the
taxable year for which the return is made.
3. Taxpayer is not required to submit his financial
statements with his tax returns.

Optional 8%
Wash Your Car business 825,000
Bookkeeping services 250,000
Gross Receipts 1,075,000
Less: Exemption 250,000
Taxable Income 825,000
8%
Income tax due 66,000
Bay Cuarto is engaged in a small business. He signified his intention to be taxed at 8% income tax rate on Gross Receipts
in his 1st Quarter Income Tax Return. The following are the data on sales, cost of services and operating expenses:
1st Q 2nd Q 3rd Q 4th Q
Gross Receipts P400,000 500,000 P1000,000 P3100,000
Less: Cost of Services 150,000 250,000 600,000 1600,000
Gross Income 250,000 250,000 400,000 1500,000
Less: Operating 80,000 120,000 180,000 800,000
Expenses
Taxable Income 170,000 130,000 1700,000 700,000

A. The tax due for the 1st Quarter?

Gross Receipts 400,000
Less: Exemption 250,000
Taxable income 150,000
Rate of tax 8%
Income tax Due 12,000

B. 2nd Quarter

Receipts 2nd Quarter 500,000

Add: 1st Quarter 400,000
Total 900,000
Less: Exemption 250,000
Taxable income 600,000
Rate of tax 8%
Income tax Due 52,000
Less: taxes paid 1st Q 12,000
Tax payable 40,000

C. 3RD Quarter

Receipts for 3rd Quarter 1,000,000

Add: receipts 1st, 2nd 900,000
Total 1900,000
Less: Exemption 250,000
Taxable income 1,650,000
Rate of tax 8%
Income tax Due 132,000
Less: Taxes Paid 1ST 2nd 52,000
Tax payable 80,000

D. Final Quarter
Receipts 5000,000
Less: cost of services 2600,000
Gross Income 2400,000
Less: Operating expenses 1,180,000
Taxable income 1,220,000

Tax on 800,000 130,000

420,000 x 30% 126,000
Tax due at graduated rates 256,000
Less: 8% tax paid (1st -3rd Q) 132,000
 Income Tax Payable 124,000

Note: the gross receipts had already exceeded the VAT threshold. Hence, it is now subject to the graduated tax rates.