Percentage Tax Calculator
Calculate 3% percentage tax for non-VAT registered businesses with gross annual sales ≤ ₱3M (per NIRC Section 116, current rate effective July 2023). Uses 2026 BIR rates.
Updated October 3, 2026
Calculate your tax
Percentage tax rate 2026: 3% of quarterly sales
If you are not VAT-registered and your sales are ₱3,000,000 a year or less, you pay 3% of each quarter's gross sales (NIRC Sec 116, as amended by RA 11976). The rate has been 3% since July 1, 2023. It was 1% from July 1, 2020 to June 30, 2023 under RA 11534 (CREATE).
| Gross sales for the quarter | 3% percentage tax |
|---|---|
| ₱150,000 | ₱4,500 |
| ₱250,000 | ₱7,500 |
| ₱500,000 | ₱15,000 |
| ₱750,000 | ₱22,500 |
Computed by the calculator above. Four quarters of ₱750,000 is ₱3,000,000, the most you can sell in a year and stay on percentage tax. No expenses are deducted: the tax is on gross sales.
Chose the 8% income tax? Then you do not pay this 3%. The 8% option replaces both the graduated income tax and the Sec 116 percentage tax (NIRC Sec 24(A)(2)(b)).
Other percentage tax rates
| Who pays | Rate | Law |
|---|---|---|
| Non-VAT persons with sales up to ₱3,000,000 a year | 3% | NIRC Sec 116 |
| Domestic common carriers of passengers by land, keepers of garages | 3% | NIRC Sec 117 |
| Radio and TV franchises with receipts up to ₱10,000,000 a year | 3% | NIRC Sec 119 |
| Gas and water utility franchises | 2% | NIRC Sec 119 |
| Overseas calls and messages originating in the Philippines | 10% | NIRC Sec 120 |
| Cockpits, cabarets, night and day clubs | 18% | NIRC Sec 125 |
| Shares sold through the local stock exchange, from July 1, 2025 (RA 12214) | 0.1% | NIRC Sec 127(A) |
Next, file BIR Form 2551Q and pay within 25 days after each quarter ends. Close to ₱3,000,000 in sales? Compare with the VAT calculator, or weigh the 8% option in 8% vs graduated income tax.
How it works
The calculator multiplies your gross sales for the period by the rate for your business, after any sales returns or discounts you enter. It shows the tax, the rate and the NIRC section it comes from, and warns you when your sales would pass the ₱3,000,000 VAT threshold.
- Enter gross sales: total sales or receipts for the month, quarter or year, before expenses.
- Subtract returns and discounts: sales returns, allowances and discounts reduce the base, never below zero.
- Apply the rate: 3% for most non-VAT sellers (NIRC Sec. 116), or the rate for your business type in the table above.
- Check the threshold: the calculator projects your yearly sales and flags them if they pass ₱3,000,000 (NIRC Sec. 109(CC), as amended by RA 11976).
Rules it applies
Percentage tax is a tax on the privilege of doing business, charged on gross sales, so no expenses are deducted. It applies to non-VAT-registered persons whose sales are VAT-exempt because they are under the ₱3,000,000 threshold (NIRC Sec. 116). You file BIR Form 2551Q and pay within 25 days after each quarter ends (NIRC Sec. 128(A)).
Getting an accurate result
Use the quarter's figures: choose Quarterly and enter that quarter's actual sales, the way 2551Q is filed.
Include all sales: retail, services, rentals and any other business receipts. Enter returns and discounts in their own field, backed by credit memos or invoices.
Confirm you are not VAT-registered: if you registered for VAT, voluntarily or because you passed ₱3,000,000, use the VAT calculator instead.
Ways to lower your tax legally
- Stay on 3% While Your Sales Are ₱3,000,000 or Less
- If you are not VAT-registered and your gross sales stay at or below ₱3,000,000 a year, you pay 3% of each quarter's gross sales on BIR Form 2551Q (NIRC Sec. 116, as amended by RA 11976). You do not issue VAT invoices or track input VAT. VAT-registered sellers charge 12% and file BIR Form 2550Q every quarter instead.
- Plan the VAT Switch Before You Cross ₱3,000,000
- The VAT threshold is ₱3,000,000 of gross sales a year (NIRC Sec. 109(CC), as amended by RA 11976). Once your sales pass it, you must register for VAT and charge 12%. Check your running total every quarter so the switch does not catch you mid-year.
- Set Aside 3% of Each Quarter's Sales for the 2551Q Deadline
- You file BIR Form 2551Q and pay 3% of that quarter's gross sales within 25 days after the quarter closes (NIRC Sec. 128(A)): by 25 April, 25 July, 25 October and 25 January. Example: Aling Nena bills ₱600,000 in the first quarter and owes ₱18,000 (₱600,000 × 3%) by 25 April. Moving 3% of each sale into a separate account keeps the cash ready.
- Report Every Peso of Gross Sales
- Underreporting costs more than it saves. Reporting ₱2,500,000 instead of ₱2,800,000 cuts ₱9,000 of tax, but an assessment adds the ₱9,000 back with a surcharge and interest. With sales under ₱3,000,000 you are a micro taxpayer, so the surcharge is 10% (₱900) and interest is 6% a year (RA 11976 Sec. 45; RR 6-2024). Others pay 25% and 12%.
- Chose the 8% Income Tax? Skip This Tax
- Self-employed people and professionals who elect 8% on gross sales above ₱250,000 pay it in place of both the graduated income tax and the Sec. 116 percentage tax (NIRC Sec. 24(A)(2)(b)). Compare the two in the 8% vs graduated guide before your first quarterly return of the year.
Frequently asked questions
What is the current percentage tax rate in the Philippines?
The current percentage tax rate is 3% of gross quarterly sales or receipts under NIRC Section 116, as amended by RA 11976. The CREATE Act (RA 11534) temporarily lowered this to 1% from 1 July 2020 to 30 June 2023; on 1 July 2023 the rate automatically reverted to 3%. It applies to non-VAT registered businesses with gross annual sales not exceeding ₱3,000,000.
Who is eligible to pay percentage tax instead of VAT?
Non-VAT registered persons (individuals, partnerships, or corporations) with gross annual sales or receipts not exceeding ₱3,000,000 are eligible to pay percentage tax. Once you exceed ₱3M in sales or voluntarily register for VAT, you must shift to the VAT system.
Can I deduct business expenses from my gross sales before calculating percentage tax?
No. Percentage tax is computed on gross sales with no deductions allowed for cost of goods sold, operating expenses, depreciation, or other business costs. It is a privilege tax on gross receipts, not an income tax.
How often must I pay percentage tax?
Percentage tax is a quarterly tax. You file BIR Form 2551Q and pay the tax due within 25 days after the close of each taxable quarter, computed on that quarter's actual gross sales or receipts (NIRC Section 128(A), as amended by the TRAIN Law, RA 10963). The standard deadlines are 25 April, 25 July, 25 October, and 25 January. There is no annual lump-sum option and no 25%-installment scheme.
What happens if my sales exceed ₱3,000,000 during the year?
If your gross annual sales exceed ₱3,000,000, you must register for VAT (NIRC Sec. 109(CC), as amended by RA 11976) and start charging 12% VAT. You cannot keep paying the 3% percentage tax once you are in the VAT system. Use the VAT calculator to price your sales with VAT.
Is percentage tax the same as VAT?
No. Percentage tax is a 3% tax on gross sales with no input tax credits or deductions. VAT is 12% (0% on zero-rated sales such as exports) and lets you credit the VAT you paid on purchases. Both regimes now file quarterly within 25 days after the close of each taxable quarter, VAT via Form 2550Q and percentage tax via Form 2551Q. Monthly VAT filing (Form 2550M) stopped being mandatory on 1 January 2023 (RMC 5-2023).
Can I voluntarily register for VAT if my sales are below ₱3M?
Yes. You may voluntarily register for VAT even if your sales are below ₱3M, provided you meet other VAT registration requirements. Once you voluntarily register, the election is irrevocable for three (3) years from the quarter the election was made (NIRC Section 236), so you cannot revert to percentage tax during that period.
What records must I keep to support my percentage tax return?
Maintain detailed sales invoices, receipts, sales journals, and accounting records for the entire taxable year. These documents substantiate your reported gross sales and must be available for BIR audit. Keep your books of accounts and supporting records for five (5) years from the day after the filing deadline (or actual filing date, if later) under RR 7-2024 implementing the Ease of Paying Taxes Act (RA 11976), longer if a protest or refund claim is pending.
What penalties apply if I underreport my gross sales?
The BIR assesses the unpaid tax plus a surcharge and interest. Most percentage-tax payers have sales under ₱3,000,000, which makes them micro taxpayers under RA 11976, so the surcharge is 10% and interest is 6% a year (RA 11976 Sec. 45; RR 6-2024). Underreporting ₱300,000 of sales means ₱9,000 of tax, a ₱900 surcharge, and ₱540 of interest for each year it stays unpaid. Larger taxpayers pay a 25% surcharge and 12% interest.
Can I use this calculator if I am VAT-registered?
No. This calculator is for non-VAT registered businesses only. If you are VAT-registered, use the VAT Calculator instead. Percentage tax and VAT are mutually exclusive regimes.
How do I know if I have exceeded the ₱3M sales threshold?
Track your cumulative gross sales throughout the year. If your total gross sales for the calendar year (or your elected fiscal year) exceed ₱3,000,000, you have crossed the threshold and must register for VAT. Consult your accountant or BIR office if you are near the limit.
Are there any industries or business types exempt from percentage tax?
Certain activities may be exempt or subject to different rules (e.g., financial institutions, insurance companies, non-profit organizations). However, most small businesses and self-employed individuals with sales below ₱3M are subject to the 3% percentage tax. Verify your specific situation with the BIR.
Sources & References (4)
Primary sources and the laws, regulations, and official issuances this page relies on. Each citation links directly to the issuing authority’s document.
- Bureau of Internal Revenue. “3% percentage tax on gross quarterly sales/receipts (non-VAT taxpayers, gross sales not exceeding P3M).” bir.gov.ph. NIRC Sec. 116 (3% rate reverted from CREATE's 1% on July 1, 2023); Sec. 109(CC) P3M threshold. Accessed .
- LawPhil Project (Arellano Law Foundation). “CREATE Act that set the temporary 1% rate (expired June 30, 2023, reverting to 3%).” lawphil.net. RA 11534 (CREATE), amending NIRC Sec. 116. Accessed .
- LawPhil Project (Arellano Law Foundation). “Other percentage taxes catalog (Sec. 117 common carriers 3%; Sec. 119 franchise; Sec. 127 stock transaction tax).” lawphil.net. NIRC Secs. 117, 119, 120, 127; Sec. 127(A) STT reduced to 0.1% by RA 12214 (CMEPA) eff. July 1, 2025. Accessed .