Free invoice generator and tax tools for the Philippines

A small business in the Philippines deals mainly with the Bureau of Internal Revenue (BIR) through its Revenue District Office. The national taxes are income tax (graduated rates for individuals, or an 8% option on gross receipts), value-added tax (VAT) at 12%, a 3% percentage tax for those not VAT-registered, and withholding taxes on salaries and on payments to suppliers. Employers also deduct and remit contributions to three agencies: the Social Security System (SSS), PhilHealth and Pag-IBIG.

The BIR sorts taxpayers by gross sales: micro below ₱3 million, small from ₱3 million to under ₱20 million, medium from ₱20 million to under ₱1 billion and large from ₱1 billion. The class decides which concessions apply, including a 10% civil penalty instead of 25% for micro and small taxpayers, and who must issue electronic invoices. A business also needs local registrations: the Mayor's Permit or professional tax receipt from the local government, and for sole proprietors the DTI business name certificate.

The latest reform is Republic Act 11976, the Ease of Paying Taxes Act, signed on 5 January 2024. It made the invoice the primary sales document for goods and services alike and changed the penalties, interest and registration rules. In 2026 the BIR followed with Revenue Regulations 6-2026 (25 August) on withholding tax shown on invoices and Revenue Memorandum Circular 98-2026 (22 September) on electronic invoicing.

Self-employed individuals and professionals whose gross sales and other income stay within the VAT threshold can choose the 8% income tax option under Section 24(A)(2)(b) of the Tax Code, added by the TRAIN law (Republic Act 10963). The 8% applies to gross sales or receipts and other non-operating income above ₱250,000 and replaces both the graduated income tax and the percentage tax. A mixed-income earner who elects it pays 8% on business income only; salary is still taxed at the graduated rates. Anyone who does not elect it, and is not VAT-registered, pays the percentage tax of 3% of gross quarterly sales or receipts under Section 116. The temporary 1% rate applied only from 1 July 2020 to 30 June 2023, so 3% is the rate in force.