Quick answer: The Philippines taxes income on a graduated scale under the TRAIN law. The first ₱250,000 of annual taxable income is tax-free; above that, rates run from 15% to 35%. Your mandatory contributions and 13th month pay (up to ₱90,000) are excluded before tax is computed. Compute your income tax →
Who pays income tax in the Philippines
If you earn money in the Philippines, you are generally liable for income tax — but with a generous floor:
- Employees are taxed on their salary, with tax withheld each payday by the employer.
- Self-employed individuals and professionals (freelancers, doctors, consultants, online sellers) are taxed on their business or professional income.
- Minimum-wage earners are fully exempt, including the overtime, holiday and night-shift pay tied to their minimum wage.
Anyone whose annual taxable income is ₱250,000 or less pays nothing.
The 2026 income tax brackets (TRAIN)
These graduated rates have applied since 2023 and are unchanged for 2026:
| Annual taxable income | Tax |
|---|---|
| ₱0 – ₱250,000 | 0% (exempt) |
| ₱250,000 – ₱400,000 | 15% of the excess over ₱250,000 |
| ₱400,000 – ₱800,000 | ₱22,500 + 20% of the excess over ₱400,000 |
| ₱800,000 – ₱2,000,000 | ₱102,500 + 25% of the excess over ₱800,000 |
| ₱2,000,000 – ₱8,000,000 | ₱402,500 + 30% of the excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,202,500 + 35% of the excess over ₱8,000,000 |
Source: Bureau of Internal Revenue (BIR), TRAIN Law (RA 10963), graduated rates effective 2023 onward.
What counts as taxable income
For employees, taxable income is not your full salary. Several items come off first:
- SSS, PhilHealth and Pag-IBIG — your mandatory contributions are tax-exempt.
- 13th month pay and other benefits — exempt up to a combined ₱90,000 a year.
- De minimis benefits — small perks (rice allowance, uniforms, etc.) within official limits are exempt.
So: taxable income = gross compensation − contributions − exempt benefits.
Worked example: ₱30,000 a month
An employee on ₱30,000/month (₱360,000/year) with about ₱18,000 in yearly contributions:
Taxable income = ₱360,000 − ₱18,000 = ₱342,000
Bracket: over ₱250,000 → 15% of the excess
Income tax = 15% × (₱342,000 − ₱250,000) = ₱13,800/yearThat is roughly ₱1,150 a month — an effective rate of about 3.8% of gross pay. The Income Tax Calculator does this for any salary instantly.
The 8% option for freelancers
Self-employed individuals and professionals earning ₱3,000,000 or less a year can skip the graduated rates and instead pay a flat 8% on gross income above ₱250,000, in lieu of the percentage tax. For many freelancers this is both simpler and cheaper — the calculator compares both and shows the lower one.
Filing and deadlines
Employees whose tax is fully withheld and who have one employer are usually covered by substituted filing — the employer files for them. The self-employed file quarterly and an annual return (BIR Form 1701/1701A) by 15 April. See our income tax return guide for the full process.
Related guides
Source: Bureau of Internal Revenue (BIR), TRAIN Law (RA 10963). This guide is an estimate and explainer only — confirm your specific situation with the BIR or a tax professional.