Think your business size only matters to clients?
The BIR thinks otherwise.
Under the new Ease of Paying Taxes Act (Republic Act No. 11976), your annual sales now determine your official classification, and the tax benefits that come with it.
Your business size isn’t just a label, it directly affects how you comply, file, and benefit under the updated tax framework.
Through Revenue Regulations No. 8-2024, the Bureau of Internal Revenue (BIR) now officially classifies businesses based on their annual gross sales or receipts, aligning compliance requirements with capacity and scale.
Official BIR Classifications
| Category | Annual Gross Sales / Receipts | Description |
|---|---|---|
| Micro Taxpayer | Less than ₱3,000,000 | Ideal for freelancers, self-employed professionals, and small businesses. May qualify for simplified returns and reduced penalties under the Ease of Paying Taxes framework. |
| Small Taxpayer | ₱3,000,000 – less than ₱20,000,000 | Growing enterprises with moderate operations. Covered by standard filing requirements but may enjoy certain administrative reliefs introduced by RA 11976. |
| Medium Taxpayer | ₱20,000,000 – less than ₱1,000,000,000 | Established businesses with larger capital or regional branches. Often monitored under the BIR’s medium-sized taxpayer programs. |
| Large Taxpayer | ₱1,000,000,000 and above | Major corporations under the BIR Large Taxpayers Service. |
What “Gross Sales or Receipts” Means
For classification, gross sales or receipts refers to the total business income from trade, profession, or services during a taxable year, net of VAT if applicable. It excludes:
- Compensation income (employee salaries),
- Passive income (interest, dividends, etc.), and
- Income excluded under Section 32(B) of the Tax Code.
This definition comes directly from Section 2(C), RR 8-2024.
Why These Thresholds Matter
Your classification determines your level of compliance and the administrative benefits you can access. Under the new system, micro and small taxpayers enjoy:
- Simplified income tax returns (maximum two pages)
- Reduced civil penalties for late or inaccurate filings
- Digital filing and payment options via eBIRForms and eFPS
- Faster processing and simpler documentation for registration and audit
While the classification doesn’t automatically change your income-tax rate or VAT status, it helps ensure that your compliance burden matches your business size.
How to Check Your Classification
- Review your latest Income Tax Return (ITR) or Audited Financial Statement (AFS) and note your total annual gross sales or receipts.
- Compare your figures with the threshold table above.
- Update your classification each year if your sales increase or decrease significantly, the BIR may reclassify your business accordingly.
Note: Under transitional rules, businesses registered in 2022 and prior years are classified based on their 2022 gross sales. If no data was submitted, they are initially classified as Micro, except VAT-registered taxpayers, who are classified as Small (Section 3, RR 8-2024).
Key Takeaway
Knowing where your business stands, Micro, Small, Medium, or Large, helps you file accurately, reduce penalties, and maximize efficiency under the Ease of Paying Taxes Act.
When you understand your classification, you don’t just comply, you strategize for growth.
At Bong Corpuz & Co. CPAs, we help businesses stay accurate, compliant, and audit-ready with confidence. Message us today to learn your BIR classification and discover how to optimize your tax compliance under the new Ease of Paying Taxes Act.
Legal References
BIR Revenue Regulations No. 8-2024 (Sections 2 & 3)
“Taxpayers shall be classified as follows: (A) Micro Taxpayer – gross sales less than ₱3,000,000; (B) Small Taxpayer – ₱3,000,000 to less than ₱20,000,000; (C) Medium Taxpayer – ₱20,000,000 to less than ₱1,000,000,000; (D) Large Taxpayer – ₱1,000,000,000 and above.”“For classification purposes, gross sales shall refer to total sales revenue, net of VAT if applicable, during the taxable year… excluding compensation income, passive income, and income excluded under Section 32(B).”
(Source: https://bir-cdn.bir.gov.ph/BIR/pdf/RR%20No.%208-%202024.pdf)
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