Total tax across salary and business income.
Total income tax
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Tax on compensation
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Tax on business
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When one person has two income streams
Plenty of Filipinos earn from two places at once: a salary from an employer and money from a sideline, a profession, or a registered business. The Bureau of Internal Revenue calls this a mixed-income earner, and the tax treatment is not simply "add it all up." Your salary is always taxed on the graduated table. Your business or professional income gets a choice. You can fold its net profit into the same graduated table, or you can elect a flat 8 percent on gross. This calculator models both routes so you can see which leaves you with the smaller bill.
The tool is built for the freelancer who also holds a day job, the consultant moonlighting beside salaried work, and the employee with a shop or rental sideline. It expects four inputs: your annual taxable compensation, your annual business gross, your business expenses, and which method you want for the business side.
How the BIR stacks your two incomes
Under the graduated route the calculator combines your taxable compensation with your net business income, which is gross minus expenses, and runs the total through one graduated computation. That single stack matters, because your salary has already used up the lower bands, so your business profit is taxed at the higher rates sitting on top of it rather than starting fresh from zero. The exempt first PHP 250,000 is effectively consumed by your compensation, not handed to the business income a second time.
The 8 percent route works differently and carries a catch specific to mixed earners. For a pure self-employed person the 8 percent is applied only to gross above PHP 250,000. But when you also draw a salary, that PHP 250,000 reduction is gone on the business side: the 8 percent hits your full business gross, because the exempt band is already spoken for by your compensation. The calculator applies exactly that rule, which is why the 8 percent figure can look higher than people expect.
Salary plus PHP 600,000 of net business income
Work the default through the graduated method: taxable compensation of PHP 600,000, business gross of PHP 800,000, and expenses of PHP 200,000, leaving net business income of PHP 600,000. The figures below use the rates this calculator applies.
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The business slice is not a separate flat rate. It is the extra tax the business profit triggers because it stacks into higher bands above where your salary already left off. The chart splits the total tax into the part your salary would owe on its own and the part the business income adds on top.
Picking graduated versus the flat rate
Switch the same defaults to the 8 percent method and the business tax becomes 8 percent of the full PHP 800,000 gross, PHP 64,000, with the salary still taxed at PHP 62,500, for a smaller total. That looks like an easy win, but it depends entirely on your expenses. The 8 percent ignores costs, so it favors a low-overhead service business. If your expenses are heavy, the graduated route taxes only your net profit and can come out ahead. The flat rate also requires you to qualify, which generally means your gross stays under the PHP 3,000,000 VAT registration threshold and that you elect it on time. Treat the 8 percent rate, the PHP 250,000 figure, and that VAT threshold as the assumptions this calculator uses, and confirm your eligibility and the current numbers with the BIR.
Can I use 8 percent for my business and still be taxed normally on my salary?
Yes, and that is exactly how the tool treats it. The 8 percent election covers only your self-employed or professional income. Your compensation from an employer always runs through the graduated table regardless of what you choose for the business side, because your employer withholds on it separately.
Does the 8 percent replace the percentage tax too?
For the business income it elects to cover, yes. The 8 percent option is meant to stand in for both the graduated income tax on that income and the 3 percent percentage tax, so you are not charged the percentage tax on top. That is one reason it can simplify life for a small service provider. Verify the current percentage tax rate and the rule with the BIR, since the relief rate has shifted before.