Percentage tax is the tax many freelancers forget about. It is separate from income tax, it is filed on its own form, and it is based on your gross income — not your profit.
Whether you owe it depends almost entirely on one decision: 8% or graduated rates.
What percentage tax is
Percentage tax is a business tax for sellers who are not registered for VAT. Under Section 116 of the Tax Code, the rate is 3% of gross sales or receipts.
The rate was temporarily cut to 1% during the pandemic. It went back to 3% on July 1, 2023 (RMC 69-2023) and is still 3% today.
Who pays it and who does not
The 8% option is designed as an all-in rate. It covers both your income tax and your percentage tax. That is a big reason it often comes out cheaper for freelancers with few expenses.
| Your situation | Pay 3% percentage tax? |
|---|---|
| Non-VAT freelancer on graduated rates (OSD or itemized) | Yes, every quarter |
| Freelancer who chose the 8% option | No — the 8% replaces it |
| Mixed-income earner, 8% on business income | No |
| Mixed-income earner, graduated on business income | Yes, on business gross |
| VAT-registered taxpayer | No — you pay VAT instead |
Form 2551Q deadlines
Percentage tax is filed quarterly on Form 2551Q. The old monthly form (2551M) is no longer used.
The return is due on the 25th day after the end of each quarter. If that day falls on a weekend or holiday, the deadline moves to the next working day.
2551Q due dates
| Quarter | Covers | Due |
|---|---|---|
| Q1 | January to March | April 25 |
| Q2 | April to June | July 25 |
| Q3 | July to September | October 25 (October 26 in 2026, since the 25th is a Sunday) |
| Q4 | October to December | January 25 of the next year |
Different dates from your 1701Q
The 1701Q income tax return is due May 15, August 15 and November 15. The 2551Q follows its own 25th-day schedule. Put both sets of dates in your calendar.
Billed or collected? The EOPT change
Under the Ease of Paying Taxes Act and RR 3-2024, percentage tax on services is now generally based on the amounts you bill (accrual basis), not only on what you have actually collected.
In practice, this means an invoice you issue in September generally belongs to the July-to-September quarter, even if the client pays in October.
This is a change from the older collection-based approach, and how it applies to specific situations can vary. If most of your clients pay late, check the treatment with your RDO or a tax professional.
Example: a Q3 2026 return
You are on graduated rates with OSD. From July to September 2026, you invoiced clients a total of ₱150,000.
- Gross billings for the quarter: ₱150,000
- Percentage tax: ₱150,000 × 3% = ₱4,500
- Deadline: October 26, 2026 (October 25 falls on a Sunday)
- No deductions apply — the 3% is on the gross amount
Even with zero income tax
If your income is low enough that your graduated income tax is zero, you still owe the 3% percentage tax on your gross. That ₱4,500 is due regardless of your income tax result.
How to file and pay
- Fill out Form 2551Q through eBIRForms or another BIR-approved channel
- Enter your gross sales or receipts for the quarter and compute 3%
- Pay through any authorized bank or e-payment channel — under EOPT you can file and pay anywhere
- File even if you had no sales that quarter
- Keep a copy of the return and your payment confirmation
Common questions
I chose 8%. Do I still file 2551Q?
Your 8% election can be made on the first-quarter 2551Q, which is why some freelancers file one at the start of the year. After you are on 8%, you do not pay percentage tax. Your registration may still list 2551Q as a form type, though, so check your Certificate of Registration and ask your RDO to update it if needed.
What if my income goes over ₱3,000,000?
If your gross passes ₱3,000,000 during the year, you are moved to graduated rates for that year. Over the VAT threshold, you would also need to look at VAT registration rather than percentage tax. Get professional advice if you are near this level.
Can I deduct expenses from the 3%?
No. Percentage tax is on your gross sales or receipts. Expenses only matter for income tax, and only if you use itemized deductions.
If you file late
A late 2551Q gets the same penalties as other returns: a surcharge, interest and usually a compromise penalty. Micro taxpayers (gross under ₱3,000,000) get reduced rates — a 10% surcharge and 6% interest instead of 25% and 12%.
Bottom line
If you are on graduated rates, you owe 3% of your gross every quarter on Form 2551Q, due on the 25th after the quarter ends. If you chose 8%, you skip it entirely.
Not sure which option is cheaper once percentage tax is included? Run your numbers in the 8% vs graduated comparison.