We all want to start the year well, so to kick off 2025 to a good start, business owners, employees, and freelancers must stay updated on the latest BIR tax table and government contributions. These updates will help you understand how to plan better this year to keep your finances healthy and running smoothly.
No changes in BIR Tax Table
After subtracting any allowed expenses and exemptions, the Bureau of Internal Revenue (BIR) sets tax rates based on your net taxable income. This means you only pay taxes on what you earn after those deductions. Here’s the 2025 BIR tax table to help you compute how much tax you’ll pay:
| Amount of Net Taxable Income (PHP) | Tax Rate |
| ₱250,000 and below | 0% |
| Over ₱250,000 – ₱400,000 | 20% of the excess over ₱250,000 |
| Over ₱400,000 – ₱800,000 | ₱30,000 + 25% of the excess over ₱400,000 |
| Over ₱800,000 – ₱2,000,000 | ₱130,000 + 30% of the excess over ₱800,000 |
| Over ₱2,000,000 – ₱8,000,000 | ₱490,000 + 32% of the excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,410,000 + 35% of the excess over ₱8,000,000 |
Tax Rate Options for Business Owners
However, Business owners have flexibility when it comes to choosing how to compute their income tax. Here are your options:
- 8% Income Tax Rate
- Ideal for small businesses with minimal expenses.
- Applies to gross sales or receipts after deducting the ₱250,000 exemption.
- If mixed income earner, ₱250,000 is deducted from employee compensation. No ₱250,000 deduction already on the income tax of business.
2. Optional Standard Deduction (OSD)
- Deduct 40% of your gross sales or receipts instead of listing your expenses.
- This simplifies the process but may not always result in lower taxes.
3. Itemized Deduction
- Deduct actual business expenses from your income to lower the taxes.
- Requires maintaining detailed records of all expenses for proper documentation.
4. BMBE (Barangay Micro Business Enterprise for Sole-Proprietor Business Only)
- Total assets (excluding land) should not exceed ₱3 million.
- If your business qualifies as a BMBE, you may enjoy tax exemptions on income.
- Business type must involve micro-scale operations and typically cater to local markets.
Choosing the right method depends on your business size, income level, and expenses. Consult with an accountant or tax expert to determine the best option for your needs.
Updates on Government Contributions
In addition to paying taxes, contributing to financial security programs like SSS, PhilHealth, and Pag-IBIG is a great way to protect your future and ensure your financial security. Let’s look at any changes for 2025:
- SSS Contributions
- The SSS contribution rate has increased to 15% for 2025.
- Of this, employers will shoulder 9.5%, while employees contribute 5.5%.
- If you’re self-employed or a voluntary contributor, you’ll pay the full 15%.
Check on your SSS contributions here: https://www.sss.gov.ph/sss-contribution-table/
2. PhilHealth Contributions
- The PhilHealth premium rate remains at 5%, with a minimum monthly contribution of ₱500 and a maximum of ₱2,500.
- Contributions are still shared equally between employers and employees. Self-employed individuals pays for the full amount.
3. Pag-IBIG Contributions
- Pag-IBIG contributions remain unchanged at 2% of the monthly salary, with employers matching the amount.
- Maximum monthly compensation for contribution purposes remains at ₱5,000, making the maximum contribution ₱200 per month.
How to Prepare for the Year Ahead
- Double-Check Your Payroll
Employers must adjust their payroll systems to reflect updated tax rates and contribution percentages. For employees, review your payslips to ensure deductions are accurate. - Plan Your Budget
Higher contribution rates could lead to a decrease in the amount of money you take home or increase your expenses. It’s a good idea to plan ahead so you can manage these changes without any surprises. - Consult a Professional
If you’re not sure about the computations or how these updates affect you, consider consulting a CPA or financial advisor. They can help you strategize and make the most of your finances.