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BIR Form 1701A: 8% or OSD, With Worked Examples

BIR Form 1701A is the annual income tax return for people earning purely from business or profession who use either the 8% flat rate or graduated rates with the 40% Optional Standard Deduction. Most full-time freelancers and creators in the Philippines file it by April 15.

If all your income comes from your own work, whether that's freelancing, selling online or a YouTube channel, and you don't want to itemise every expense, 1701A is the simpler annual return. The form itself does the heavy lifting: you choose one of two methods and it walks you through the sums.

Who can use 1701A

The BIR prints it at the top of the form: individuals earning income purely from business or profession, who are either on the graduated rates with the Optional Standard Deduction, or have opted for the 8% flat rate. If you also have a salary, or you want to deduct your actual expenses, you need Form 1701 instead.

Creators are squarely in scope. The BIR's RMC No. 97-2021 classifies individual influencers as self-employed, with their platform and brand income treated as business income.

Method one: the 8% flat rate

The 8% option replaces both the graduated income tax and the percentage tax. It's available if your gross sales or receipts and other non-operating income don't exceed 3 million pesos. On the form, you add up your net sales and other income, take off an allowable reduction of 250,000 pesos (for purely self-employed people), and apply 8% to what's left.

Example: 8% ratePesos
Net sales and receipts for the year1,000,000
Less the allowable reduction250,000
Taxable income750,000
Tax due at 8% (my own sum)60,000

No percentage tax on top. That's the big attraction.

Method two: graduated rates with the 40% OSD

Here you deduct a flat 40% of your net sales as the Optional Standard Deduction, with no receipts to justify it, then apply the graduated table to what's left. You'll also have paid percentage tax during the year on your 2551Q returns, because the graduated route doesn't replace it.

Example: OSDPesos
Net sales and receipts for the year1,000,000
Less OSD at 40%400,000
Taxable income600,000
Tax: 22,500 plus 20% of the excess over 400,000 (my own sum)62,500

In this example the two methods land close together on income tax, but the OSD route also carries percentage tax for the year, which tips it clearly towards 8%. Your own numbers will differ, so run both.

The catch: you choose 8% early

You can't pick the cheaper method when you file in April. In your first year, the 8% choice is made on Form 1901 or on your first quarterly 2551Q or 1701Q. In later years, it's Form 1905 at the beginning of the year, or your first quarterly return. Miss it and the graduated rates apply. Put a reminder in January.

Filing it

  1. Pick the right tax code on the form: II015 for business income or II017 for professional income on the 8% rate; II012 or II014 for graduated rates.
  2. Fill in Part IV.A for OSD or Part IV.B for 8%, not both.
  3. Deduct tax already paid during the year, including credits from your 2307s listed in your SAWT.
  4. File electronically through eBIRForms or eFPS by April 15, and pay through any authorized agent bank or online channel.
  5. If the bill is large, you can pay up to 50% as a second installment on or before October 15.

Married? The form has a column for your spouse and asks whether you're filing jointly or separately.

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What the form doesn't need

Because the OSD and 8% methods don't depend on itemised costs, you aren't attaching a pile of expense receipts. You still keep books of accounts and issue invoices, though; 1701A simplifies the maths, not the record keeping.

What to have ready before you open the form

  • Your TIN, RDO code and registered address (if the address is out of date, the form itself tells you to update it with Form 1905 first).
  • Your total sales and receipts for the year, from platform reports, invoices and bank records.
  • Any other non-operating income, such as interest from a business account.
  • Your quarterly returns for the year and the tax you paid on them.
  • Every 2307 from Philippine clients, already listed in your SAWT.

Which method suits which kind of creator

  • Low costs, steady income (writers, virtual assistants, most YouTubers and TikTokers): the 8% rate is usually simpler and lighter, because it also wipes out percentage tax.
  • High costs (a seller buying stock, a videographer renting kit): the 40% OSD may still be generous, but compare it with Form 1701 and itemised deductions before deciding.
  • Close to 3 million pesos in sales: the 8% option disappears above that line, so plan for graduated rates and possibly VAT.
  • Salary plus side income: 1701A isn't for you at all; you file 1701.

Whatever you choose, run the numbers in December so the January choice is a decision, not a default.

My verdict

For most creators and freelancers with modest costs, 1701A on the 8% rate is the cleanest way to file. Run both methods on your real numbers once, decide in January, and stick to the quarterly dates. If you're planning how much to set aside, see my guide to how much you can earn before tax and my tax tips for the self-employed.

Frequently asked questions

Who should file BIR Form 1701A?

Individuals earning purely from business or profession who use the 8% flat rate or graduated rates with the Optional Standard Deduction. Mixed income earners and anyone itemising use Form 1701.

What is the 250,000 pesos on Form 1701A?

It's the allowable reduction for purely self-employed people on the 8% rate. You deduct it from your sales and other income before applying 8%.

How much is the OSD on 1701A?

40% of net sales, receipts or fees. You deduct it without listing actual expenses, then apply the graduated rates.

When is Form 1701A due?

April 15 for the previous year, with up to 50% of the tax payable as a second installment by October 15.

Can I choose 8% when I file 1701A?

Only if you elected it earlier, on Form 1901, Form 1905 or your first quarterly return of the year. Otherwise graduated rates apply.

Published and maintained by the Lilach Bullock team, covering marketing, AI and business growth.
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