BIR basics for freelancers and small sellers: when to register, the 8% option, and invoices

Taxes are the part of a sideline most people avoid until a client asks for an invoice or a platform starts withholding. The rules are more manageable than they sound, and for most small earners the tax itself is small or zero. This guide covers the general rules as of 2025 for freelancers, online sellers and small businesses. Rates and forms change, and your situation may differ, so confirm the specifics with your Revenue District Office (RDO) or an accountant before you file.

Do I need to register?

If you earn regularly from a business or profession, whether a sari-sari store, online selling, freelance design or tutoring, you're expected to register as a self-employed taxpayer even if your income is small. Income up to ₱250,000 a year pays no income tax, but registration, invoices and filing still apply. One-off sales of personal items aren't a business. If you're employed and have a sideline, you're a mixed-income earner and register the sideline on top of your job.

A business with assets of up to ₱3 million (excluding land) can also register as a Barangay Micro Business Enterprise (BMBE) with the DTI for an income tax exemption, though it still files returns. Ask your LGU and RDO whether it applies to you.

How to register (in short)

1. Get a Tax Identification Number (TIN) if you don't have one; never apply for a second TIN.
2. File BIR Form 1901 at the RDO covering your home or business address, with a valid ID and, for a store, your DTI business name and barangay or mayor's permit. Many RDOs accept this online through the BIR's registration portal.
3. Receive your Certificate of Registration (Form 2303), which lists the taxes you must file. Display it at your store or keep it with your records.
4. Register your books of accounts and get invoices: either BIR-printed ones or an Authority to Print from an accredited printer. The yearly ₱500 registration fee was removed in 2024.

The 8% option vs graduated rates

Self-employed taxpayers with gross sales or receipts of ₱3 million or less (not VAT-registered) can choose between two ways to be taxed. Under the graduated rates, you pay income tax on your net income using the same brackets as employees (0% up to ₱250,000, then 15% to 35%) plus a 3% percentage tax on gross sales, and you can deduct expenses. Under the 8% option, you pay a flat 8% on gross sales above ₱250,000, with no percentage tax and no expense deductions.

• 8% is simpler and usually cheaper for freelancers and services with few expenses.
• Graduated rates can be cheaper for a store or food business whose costs eat most of the sales.
• You choose when you register or in your first quarterly return of the year, and the choice is locked for that year.
• Mixed-income earners can use 8% on the sideline, but the ₱250,000 exemption is already used by their salary.

Quick check: a freelancer earning ₱600,000 a year with ₱100,000 of expenses pays about ₱28,000 under 8% (8% of ₱350,000). Under graduated rates, the same person would pay income tax on ₱500,000 of net income plus ₱18,000 of percentage tax, which is more. Run both numbers for your own situation before choosing.

Invoices and the books

Since 2024, the invoice is the one official document for both goods and services; the old 'official receipt' for services is no longer required. Issue an invoice for every sale, and ask for one from every supplier, because deductions under graduated rates need proof. Keep your books of accounts updated: a simple columnar book or the BIR's templates is enough for most small businesses. Keep invoices and books for at least 10 years.

What and when to file

• Quarterly income tax (Form 1701Q): due May 15, August 15 and November 15.
• Annual income tax (Form 1701 or 1701A): due April 15 of the following year.
• Quarterly percentage tax (Form 2551Q), only under graduated rates: within 25 days after each quarter.
• Online marketplaces and delivery apps may withhold a small percentage of what they pay sellers above a yearly sales threshold; the withheld amount is a credit against your income tax, so keep the certificates (Form 2307) they issue.

File even when you owe nothing: a return with zero tax is still required, and unfiled returns bring penalties later. Filing is done through the BIR's online forms and payment through e-wallets, banks or authorized partners.

Set aside the tax share of every sale when it comes in: 8% of sales under the 8% option, or more if you expect graduated rates. A tax bill in April is painless when the money was saved all year.

How to do it in Iponista

1. Create a 'Taxes' goal or wallet and transfer the tax share of each week's sales into it from the business wallet.
2. Add the quarterly and annual deadlines in Plan → Bills & payday so Iponista reminds you two weeks ahead.
3. Keep your business income and expenses in the business wallet; at filing time, export the period to CSV from History for your return or your accountant.

Remember this

Regular earners register, choose 8% or graduated rates once a year, issue invoices, and file on time even at zero. Set aside the tax share of each sale, and confirm the specifics with your RDO.

Do this today

Estimate your sideline's yearly sales and expenses, then compute the tax under both 8% and graduated rates. Note which is lower, and check the BIR website for this year's forms and deadlines.