Availing the 8% Income Tax Rate

It’s been two (2) years since the TRAIN Law was enacted but there are still taxpayers who get confused with the 8% Income Tax Rate. So, let’s address this over today’s coffee break.

You need to remember the following: 1) WHAT

Option to avail 8% income tax rate

2) WHO Only individuals with self-employment income (from business or practice of profession) with gross receipts and other operating income (GSR&NOI) not exceeding P3 million are qualified to avail the 8% income tax rate instead of the 0% - 35% graduated tax rate.*

3) WHEN You can opt to avail this option when you file your 1st quarter Income Tax Return (ITR) or Percentage Tax (PT) return of the year, or the Initial quarterly ITR or PT return you’re supposed to file right after you register with BIR. This should be done annually in order to avail of the tax rate.

4) WHY (Benefits of availing 8% income tax rate) • You are not required to pay 3% Percentage Tax* • You don’t need to substantiate and support your itemized expenses since the only deduction allowed is the P 250,000 exemption. • There’s no need to submit a financial statement since there are no itemized expenses.

5) HOW The tax base is the total of the taxable gross receipts and other operating income less P 250,000 exemption**

We hope this helps clarify any confusion you encountered since 2018.

Kaya follow our tax break para mahimbing ang tulog mo sa gabi.

#TaxBreak with #VPA

* The following are not allowed to avail the 8% income tax rate: a. VAT-registered taxpayers, regardless of the amount of GSR&NOI b. Taxpayers who (initially) elected 8% tax rate BUT the GSR&NOI (eventually) Exceeded the VAT threshold c. Partners of a GPP d. Taxpayer who is subject to Other Percentage Taxes under Title V of the Tax Code, except those subject under Section 116 ** “The P250,000.00 mentioned is not applicable to mixed income earners since it is already incorporated in the first tier of the graduated income tax rates applicable to compensation income [Sec 3(D) of RR No. 08-18].”