How to Elect the 8% Income Tax Rate on BIR Form 1701Q and BIR Form 1905

Electing the 8% income tax rate is a registration-and-return act, not an informal preference. Under NIRC Section 24(A)(2)(b), RR No. 8-2018, and RMO No. 23-2018 (May 21, 2018), self-employed individuals must signify the option on the correct BIR form at the start of the year — then live with that choice until year-end.

New registrants: elect on BIR Form 1901 and the first quarterly return #

A newly registered sole proprietor or professional elects 8% when the business tax profile is created. RMO No. 23-2018 allows signification on BIR Form 1901 and/or BIR Form 1701Q, or on the initial quarter return (BIR Form 2551Q and/or BIR Form 1701Q) after the business or profession starts.

Practical sequence for a new freelancers’ registration:

1. Complete BIR Form 1901 (Application for Registration) and indicate the intention to avail of the 8% income tax rate option where the form and RDO process allow.
2. Confirm that your tax types match a non-VAT, Section 116 profile (unless another exemption applies) — VAT registration disqualifies the 8% option entirely under RMO No. 23-2018.
3. On the first quarterly income tax filing for that year, select the 8% option on BIR Form 1701Q so the election appears on the return that computes the tax.
4. Keep books of accounts and issue official receipts even though the tax is computed on gross, not on net after deductions.

For the broader 1701Q filing workflow after the election is in place, see How to File BIR Form 1701Q. Background on what the rate itself is appears in What Is the 8% Income Tax Rate for Self-Employed Individuals?.

Existing taxpayers: BIR Form 1905 plus the first BIR Form 1701Q #

Existing individual business taxpayers who already file percentage tax need a registration update. Under RMO No. 23-2018, they may file BIR Form 1905 at the beginning of the year to end-date the quarterly percentage-tax form type, provided the 8% option is also selected on the initial BIR Form 1701Q.

Typical checklist for an existing non-VAT sole prop who wants 8% this year:

1. File BIR Form 1905 early in the year so the registration record end-dates BIR Form 2551Q as a required form type for the period covered by the election.
2. On BIR Form 1701Q for the first quarter, explicitly select the 8% income tax rate option.
3. Do not continue filing Section 116 percentage tax on BIR Form 2551Q for quarters covered by a valid 8% election — the 8% tax is in lieu of that percentage tax (see 8% Income Tax vs Percentage Tax: Do You Still File BIR Form 2551Q?).
4. Remember that BIR systems may restore the 2551Q form type at the start of the next year unless you elect 8% again — yearly re-election is mandatory.

Registration-update mechanics for RDO transfers and form-type changes are also discussed in BIR Form 1905: Update Registration and RDO Transfer.

Irrevocability and yearly re-election #

Two timing rules catch most taxpayers. Once elected, the 8% option is irrevocable for that taxable year under RMO No. 23-2018 — you cannot switch mid-year because expenses rose or OSD looks better. The election also does not carry over: each year starts on graduated rates unless 8% is signified again.

That irrevocability is why the first-quarter filing is the decision point. Missing the election on the first BIR Form 1701Q generally locks you into graduated rates (and ordinary Section 116 percentage tax filing) for the rest of the year. Conversely, electing 8% means you cannot use OSD or itemized deductions on the business gross for that year — the tax is on gross sales/receipts, not net income after deductions, under the TRAIN framework implemented by RR No. 8-2018 and RMO No. 23-2018. Compare that trade-off in 8% Income Tax Rate vs Graduated Rates and Optional Standard Deduction vs Itemized Deductions.

Worked example: existing graphic designer electing for 2026 #

Maya, a non-VAT freelance designer since 2023, has been filing BIR Form 2551Q and BIR Form 1701Q under graduated rates. For 2026 she expects ₱900,000 in gross receipts and modest expenses, so she elects 8% using BIR Form 1905 plus her first-quarter BIR Form 1701Q.

If Maya’s Q1 return is filed on graduated rates without selecting 8%, she cannot “fix it later” with an amended preference — the year’s option is already set. If her cumulative gross later exceeds ₱3,000,000, different mid-year rules apply under RMO No. 23-2018; see What Happens If You Exceed ₱3 Million Under the 8% Income Tax Option?.

Frequently asked questions #

How do new business registrants elect the 8% income tax rate? #

Under RMO No. 23-2018, a new registrant may signify the 8% income tax rate option upon registration using BIR Form 1901 and/or on the initial quarterly return — BIR Form 1701Q and/or BIR Form 2551Q — of the taxable year after the business or profession begins.

How do existing taxpayers elect the 8% rate? #

Existing individual business taxpayers typically file BIR Form 1905 at the beginning of the taxable year to update registration information (including end-dating the quarterly percentage-tax form type) and must also select the 8% option on the first quarterly income tax return, BIR Form 1701Q.

Is the 8% election irrevocable for the year? #

Yes. RMO No. 23-2018 provides that once the 8% income tax rate option is elected, it is irrevocable for that taxable year — no mid-year switch to graduated rates is allowed simply because the taxpayer changes their mind.

Do I have to re-elect 8% every year? #

Yes. The 8% option is effective only for the taxable year in which it is made. At the start of each succeeding year, taxpayers automatically revert to graduated rates unless they again signify the 8% election.

What happens if I forget to elect 8% on my first BIR Form 1701Q? #

If you do not signify the 8% option on the first quarterly income tax return for the year (and have not otherwise validly elected under RMO No. 23-2018), you remain on graduated income tax rates for that taxable year and generally remain subject to Section 116 percentage tax filing on BIR Form 2551Q.

Summary #

New registrants elect the 8% rate on BIR Form 1901 and/or the first quarterly return; existing taxpayers pair BIR Form 1905 registration updates with the 8% selection on the first BIR Form 1701Q. The choice is irrevocable for the year and must be made again every January cycle — miss the first-quarter signification and graduated rates (plus ordinary percentage tax) usually apply for the rest of the year.