8% Income Tax vs Percentage Tax: Do You Still File BIR Form 2551Q?
A valid 8% income tax election replaces Section 116 percentage tax for that year — so qualified electors generally do not file BIR Form 2551Q. Under NIRC Section 24(A)(2)(b), RMO No. 23-2018, and RR No. 8-2018, the flat 8% tax is expressly in lieu of both graduated income tax rates and the percentage tax under Section 116.
Keep 1701Q and 2551Q Deadlines Straight FREE →8% electors: file BIR Form 1701Q, not BIR Form 2551Q #
RMO No. 23-2018 provides that a qualified 8% elector is not required to file the Quarterly Percentage Tax Return, but must file quarterly and annual income tax returns, re-elect each year, and keep books and receipts. In practice, pay 8% on BIR Form 1701Q and skip Section 116 on BIR Form 2551Q while the election is valid.
In practice that means:
- Compute and pay the 8% income tax on BIR Form 1701Q (and settle the annual return)
- Do not also pay Section 116 percentage tax on the same gross through BIR Form 2551Q while the election is valid
- Keep registration and form-type records consistent — RMO No. 23-2018 describes end-dating the 2551Q form type for the election year while the Percentage Tax – Quarterly tax type may remain on record
Filing steps for the income tax return are in How to File BIR Form 1701Q. For what the 8% rate itself is, see What Is the 8% Income Tax Rate for Self-Employed Individuals?. Election forms (BIR Form 1901 / BIR Form 1905 + first 1701Q) are covered in How to Elect the 8% Income Tax Rate on BIR Form 1701Q and BIR Form 1905.
Graduated-rate taxpayers: BIR Form 2551Q still applies #
Choosing graduated income tax rates (or failing to elect 8% on the first quarterly return) leaves Section 116 percentage tax in place for non-VAT taxpayers below the VAT threshold. Those taxpayers still file BIR Form 2551Q on quarterly gross sales or receipts at the applicable percentage tax rate under Section 116, in addition to income tax on BIR Form 1701Q.
That dual filing is exactly what the 8% option is designed to simplify. A non-VAT retailer on graduated rates who never elects 8% continues the ordinary 2551Q + 1701Q pair; the same retailer who validly elects 8% collapses the Section 116 piece into the 8% income tax computation. Step-by-step percentage tax filing is in How to File BIR Form 2551Q. Broader VAT versus percentage tax context: VAT vs Percentage Tax in the Philippines.
| Profile | Income tax return | Section 116 percentage tax return |
|---|---|---|
| Qualified 8% elector (under ₱3M, non-VAT) | BIR Form 1701Q at 8% on applicable gross | Not required while election is valid |
| Non-VAT on graduated rates | BIR Form 1701Q on net taxable income | BIR Form 2551Q still required |
| VAT-registered | Graduated rates (8% unavailable) | N/A — files VAT returns (e.g. BIR Form 2550Q) instead of 2551Q |
Mid-year exceptions: when 2551Q comes back #
Two situations restore percentage tax even for someone who started on 8%: exceeding ₱3,000,000 mid-year (catch-up percentage tax until VAT starts under RMO No. 23-2018), and starting a new year without re-electing 8% (graduated rates return and the 2551Q form type may be restored).
- Exceeding ₱3,000,000 mid-year. RMO No. 23-2018 requires percentage tax from the beginning of the year until VAT liability starts after the breach, plus a shift to graduated income tax with credit for prior 8% payments. Details: What Happens If You Exceed ₱3 Million Under the 8% Income Tax Option?.
- Next taxable year without re-election. The 8% option does not carry over. At the start of the following year, taxpayers revert to graduated rates and the 2551Q form type may be restored in BIR registration systems unless 8% is elected again.
Neither situation means you should have been filing both 8% income tax and Section 116 percentage tax on the same gross during a clean, valid election year — that would double-tax the Section 116 component the election is meant to replace.
Worked example: same receipts, two filing paths #
Ben’s non-VAT consulting practice earns ₱400,000 in Q1 2026 with no other non-operating income. The table below contrasts a valid 8% election — income tax only on BIR Form 1701Q — against staying on graduated rates, which still requires BIR Form 2551Q percentage tax on the same gross.
| Path | Q1 income tax | Q1 percentage tax | Forms filed |
|---|---|---|---|
| Elects 8% | 8% × (₱400,000 − ₱250,000) = ₱12,000 on YTD excess | ₱0 Section 116 (covered by 8% election) | BIR Form 1701Q only for this pair |
| Stays on graduated rates | Graduated tax on net income after OSD or itemized deductions | 3% × ₱400,000 = ₱12,000 Section 116 | BIR Form 1701Q + BIR Form 2551Q |
Ben cannot claim OSD or itemized deductions on Path A because the 8% regime taxes gross, not net. On Path B he can choose OSD or itemized deductions for income tax — and he must still pay the separate percentage tax. Decision framework: 8% Income Tax Rate vs Graduated Rates.
Frequently asked questions #
Do 8% income tax electors still file BIR Form 2551Q? #
Generally no. Under NIRC Section 24(A)(2)(b) and RMO No. 23-2018, a qualified self-employed individual who validly elects the 8% income tax rate does so in lieu of both graduated income tax rates and the percentage tax under Section 116, and is not required to file the quarterly percentage tax return while the election remains valid.
Which return do 8% electors file instead of BIR Form 2551Q? #
Qualified 8% electors file the quarterly income tax return, BIR Form 1701Q (and the annual income tax return), which computes the 8% tax on the applicable gross base. They must still maintain books of accounts and issue receipts or invoices.
Who still needs to file BIR Form 2551Q? #
Non-VAT individuals and businesses subject to Section 116 percentage tax who did not elect the 8% income tax rate — including those on graduated income tax rates — still file BIR Form 2551Q on quarterly gross sales or receipts at the applicable percentage tax rate.
What if I elected 8% but later exceed ₱3 million mid-year? #
RMO No. 23-2018 requires percentage tax from the beginning of the year until VAT liability starts after the threshold breach, even though you previously skipped BIR Form 2551Q under the 8% election. You must also shift to graduated income tax rates and update registration for VAT.
Does electing 8% end-date BIR Form 2551Q on my BIR registration? #
RMO No. 23-2018 contemplates that self-employed individuals availing of the 8% option remain registered with the Percentage Tax – Quarterly tax type while the 2551Q form type is end-dated for the election year, and that the 2551Q form type may be restored at the start of the next year unless 8% is elected again.
Summary #
Qualified 8% electors file BIR Form 1701Q and skip BIR Form 2551Q for Section 116 while the election is valid; graduated-rate non-VAT taxpayers still file both. Mid-year ₱3,000,000 breaches and years without re-election bring percentage tax back under RMO No. 23-2018 — so track which regime you actually elected before assuming 2551Q is optional.