How to Compute Income Taxes in the Philippines (using old BIR Tax Rates)

Year after year, April 15 is a date millions of Filipinos dread. It is because this date is the annual deadline to file income tax returns.

If you’re able to make your own Income Tax Return (ITR) because you fully understand taxation laws, then good for you. But for the majority of us who still rely on accountants or our companies to prepare our ITRs, here’s a simple and concise explanation of the income tax law in the Philippines.

(UPDATE): The income tax rates below have been replaced by the new tax rates under the approved TRAIN Tax Reform of 2018.

Who are required to file Income Tax Returns (ITR)?

According to the Bureau of Internal Revenue (BIR), the following people are required to submit Income Tax Returns:

  • Filipino citizens residing in the Philippines receiving income from sources within or outside the Philippines
  • Filipino citizens not residing in the Philippines receiving income from sources within the Philippines
  • Resident or non-resident aliens receiving income from sources within the Philippines
  • Domestic corporations receiving income from sources within and outside the Philippines
  • Foreign corporations receiving income from sources within the Philippines
  • Taxable partnerships
  • Estates and trusts engaged in trade or business

As you can see, almost everyone who makes money is required to file and pay income tax.

What is Taxable Income?

Taxable income is the amount of gross income received by the taxpayer minus any deductions and/or personal and additional exemptions, as authorized by the Tax Code or other special laws.

Gross income means all income derived from whatever source. It includes, but is not limited to, Compensation for services, in whatever form paid; Gross income derived from the conduct of trade or business or the exercise of profession; Gains derived from dealings in propert; Interest; Rents; Royalties; Dividends; Annuities; Prizes and winnings; Pensions; and Partner’s distributive share from the net income of the general professional partnerships.

Exclusions from Gross Income include Life insurance; Amount received by insured as return of premiu; Gifts, bequests and devise; Compensation for injuries or sickness; Income exempt under treaty; Retirement benefits, pensions, gratuities, etc; Miscellaneous item; income derived by foreign government; income derived by the government or its political subdivision; prizes and awards in sport competition; prizes and awards which met the conditions set in the Tax Code; 13th month pay and other benefits; GSIS, SSS, Medicare and other contributions; gain from the sale of bonds, debentures or other certificate of indebtedness; and gain from redemption of shares in mutual fund.

What are allowable deductions from gross income?

Except for taxpayers earning compensation income arising from personal services rendered under an employer-employee relationships, a taxpayer may opt to avail either of the following allowable deductions from gross income:

  • Optional Standard Deduction – an amount not exceeding 40% of the net sales for individuals and gross income for corporations; or
  • Itemized Deductions – which include the following:  Expenses; Interest; Taxes; Losses; Bad Debts; Depreciation; Depletion of Oil and Gas Wells and Mines; Charitable Contributions and Other Contributions; Research and Development; and Pension Trusts

A maximum of P2,400 premium payments on health and/or hospitalization insurance may also be claimed as deduction, provided the annual family gross income is not be more than P250,000 and for married individuals, the spouse claiming this deduction is the one claiming additional exemptions for the qualified dependents.

What are allowable personal and additional exemptions?

Individuals who are earning compensation income, engaged in business or deriving income from the practice of profession are entitled to the following Personal Exemptions:

  • For single individual or married individual judicially decreed as legally separated with no qualified dependents – P50,000
  • For head of family – P50,000
  • For each married individual – P50,000 (to be claimed only by the spouse deriving gross income)

Taxpayers may also claim an Additional Exemption of P25,000 for each qualified dependents, up to four (4) dependents.

How is income tax payable computed?

The formula to compute the income tax payable is:

  • Gross Income
  • Less: Allowable Deductions (Itemized or Optional)
  • Net Income
  • Less: Personal & Additional Exemptions
  • Net Taxable Income
  • Applicable Tax Rate (see Tax Rate Table below)
  • Income Tax Due
  • Less: Tax Withheld
  • Income Tax Payable

What are the Income Tax Rates in the Philippines?

For individuals earning purely compensation income and those engaged in business and practice of profession, the applicable income tax table is as follows:


For domestic corporations, the corporate tax rate is 30% of the Net taxable income from all sources starting January 1, 2009.

For proprietary educational institutions and non-stock, non-profit hospitals, the tax rate is 10% of the Net taxable income, provided that the gross income from unrelated trade, business or other activity does not exceed 50% of the total gross income.

For GOCCs, agencies & instrumentalities, the tax rate is 32% of the Net taxable income from all sources.

For all taxable partnerships, the tax rate is also 32% of the Net taxable income from all sources.

International Carriers are taxed 2.5% on their Gross Philippine Billings.

For Regional Operating Headquarters (ROHQ), the tax rate is 10% of Taxable Income.

UPDATE: The income tax rates below have been replaced by the new tax rates under the approved TRAIN Tax Reform of 2018. See the revised tax rates here: New BIR Income Tax Rates and Income Tax Tables under TRAIN

133 thoughts on “How to Compute Income Taxes in the Philippines (using old BIR Tax Rates)”

  1. Hello po. Ask ko lang po kung may babayaran paakong tax kung self employed po ako at ang monthly salary ko lang ay 3,300.00 ? Naghuhulog po ksi ako ngayon sa Pag ibig fund ko at balak kumuha ng housing loan after mabuo ko ang 24 ms sa pag ibig fund. Required po ksi ng latest itr kung maghohousing loan sa pag ibig. Paano po ang gagawin ko? Wala pa po akong experience to file an itr. Ang binabayaran ko lang po ay Professional Tax or Occupational Tax dahil Licensed Massage Therapist po ako. Sana po may mkatulong po sa tanong ko. Thank you po.

  2. Sir tanong ko lang , sa tulad ko pong distributor ng isang MLM company, It’s my only source of income. Do I need to file an annual income tax return (ITR)? Or it’s my company’s responsibility to file it for me? May nakuha naman akong BIR form 2307 copy sa kanila para sa 2016 and 2017 pero paano ko malalaman na nai-file nila ang tax ko? Please I need your response. Salamat po!

  3. mam paki compute nmn po ng tax refund ko ks parang niloloko kmi ng head office nmin, ang salary to date ko is 214,765.50 (april-dec 2017)
    tax to date is 33,635.95 magkano po baang bblik sakin “6,500.00 lang nakuha komula sa kanila”

  4. magtatanong lng po… ako po ay minimum wage mula January to june 2017, tapos tinaa-san po ang sahod ko ng july 2017 kaya po nagka tax na ako… after December 2017 nagcompute ang acctng. naming kulang pa daw ang tax nakuha nila sa akin, kaya may utang pa daw ako… kasi January to December 2017 na kinita ko ang kinuhanan nila ng tax, tama po ba ung? sana may makasagot sa tanong ko… salamat…

    1. tama po…taxable income during the taxable year po ang laging basis sa pagcompute ng income tax…ang taxable year po ay from January – December 2017..

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