How to Reduce Your Philippine Tax in 2020

how to reduce tax legally Philippines

Reducing your taxes can be a daunting task, but it is not impossible. In fact, there are many legal ways to reduce your tax bill. This blog post will outline some of the most popular methods. So, whether you are a business owner or an employee, read on to learn how you can save money on your taxes.

If you own a business, April is probably your least favorite months-it’s tax season. Not only do you need to worry about your business tax, but there is also an individual tax. With all these taxes to stress about, you may seek to elicit some advice on tax evasion, but that is never a good idea. So, instead of putting you and your business in danger, why not try these legal tax reduction tips-how to reduce taxes 2020? Some may sound straightforward and obvious, but you’ll be surprised at how many business owners fail to follow the basics.

Let’s begin.

Top 5 On How To Reduce Taxes Legally in the Philippines

1. Make sure you paid the right taxes to reduce taxes.

Some business owners think they are clever by not issuing receipts. After all, without tickets to show, you pay less tax. Wrong. The BIR knows all the tricks and strategies business owners use and can quickly figure you out. When they do, you’ll be paying hefty fines and penalties; you’d regret your ‘smart’ idea. When it comes to taxes, honesty is indeed the best policy. The only way you can sleep sound at night is by playing by the rules. Get a bookkeeper to record your actual receipts and pay taxes accordingly carefully.

There are different type of taxes, and each taxes it has benefits and disadvantages. You should know what income should be taxable and which incomes are exempted from taxes. By doing so, will decrease your income subject to income. Besides, you should also know what expenses qualify to be declared or not.

If you’re engaged in business, you may consider declaring your incomes under 8% professional tax or the regular income tax rates. To know more about choosing the proper tax for your business, read No Payment of Tax on Your Online Business in the Philippines.

2. Keep your accounting records organized.

The best way to be organized is to have a system from the beginning. For example, you can use a simple folder system and put all your income tax payments (monthly, quarterly, and annual) in one folder. Then, when preparing your annual tax return, you can cross-check them easily. Remember that even a slight error in filing your return can cost you dearly, making the organization a habit.

3. Consider automating your accounting system.

Although manual accounting systems are affordable, they have one disadvantage- human error. Unfortunately, the BIR doesn’t give any leniency if the cause of your violation is human error. Your job is to ensure your accounts are in order, and a computerized accounting system may be the answer. Although automated systems like Quickbooks require a fee, they can save you a lot of money in the long run.

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4. Consider computerizing your payroll system.

If you have less than five employees, then keeping manual records may suffice. However, if you have more than five employees, you should seriously consider automating your payroll system. Since your income tax filing includes your payroll and employee deductions, computing them correctly about how much the payroll expense can save you a lot of money.

5. Know how to reduce tax legally.

As we mentioned, tax evasion should never cross your mind as a business owner. Instead, do your research and discover how you can reduce tax payments legally. One of the tricks you should master is how to charge different expenses and business activities to save on taxes.

Check out this video on how to reduce your taxes legally in 2020

 Here are a few examples to reduce taxes 2020: 

• If you have a business that does some research and development. You can charge travel expenses, both international and local, as tax-deductible -make sure you visit your suppliers along the way.

• Donations for charitable causes are 100% tax-deductible as long as they are accredited non-governmental organizations. If the organization is not registered, you can still deduct up to 5% of your income if you are a corporation and 10% if you are an individual proprietor.

• Writing off bad-paying clients as “bad debt expense” is another way to save on taxes. If you have bad-paying clients for more than 12 months, changing their status to “bad debt expense” can save you a lot.

• Hiring family members is another strategy to reduce your taxable income. The salary you pay to family members is a deduction from taxable income.

• Representation expenses include meeting clients in a restaurant or other establishment or even travel expenses incurred going to customers. You can charge from 0.5% to 1% of net sales to this account as long as you collect all the receipts.

• Deducting tax withheld in advance by customers can also save you some pesos. Make sure you have the BIR form 2307 so you can claim them against your taxable income.

• Opening a small business can give you 100% tax savings. As long as your assets are below 3 million pesos, you are eligible to apply as a Barangay Micro Business Enterprise (BMBE). Once you are approved, you can enjoy 100% income tax exemption and exemption from minimum wage plus lower local taxes.


If tax season is a dreaded time of the year for you, there is a lot you can do to reduce your tax in 2020. As long as you follow these wise business practices, you will find yourself with lower fees as time goes by. So, instead of hating tax season, view it as a time to grow and improve your business. And remember, if you need any help on how to reduces taxes, send us a message or leave a comment.

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4 Replies to “How to Reduce Your Philippine Tax in 2020”

  1. If you have a small business like a sari-sari store and already have aBarangay Micro Business Enterprise (BMBE) and DTI. Do you need to registered also to BIR?

  2. Where can I get sworn statement of assets and liabilities? I already apply bmbe and I registered in bir when that sworn statement of assets and liabilities will use?

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