Tax 101: Freelancer’s Tax in the Philippines

Freelancers can register as a single proprietor, entrepreneur or just a professional. Whatever type of freelancer you may be, you will need to pay income tax to the BIR as it is a part of your duty. Many self-employed professionals rather not pay this because it can be really tedious, expensive, and a lot of them are just too lazy to go through with the process. With a tax calculator in the Philippines to help you compute and these tips, you will be able to understand the freelance tax better:

Tax 101: Freelancer's Tax in the Philippines 1

Since they are their own employer, their own TIN can be filed online

The advantage self-employed individuals have over employees, is that they can file their TIN online while employees have to go to BIR themselves. After a successful application u, you can pay 500 pesos through authorized agent banks, eFPS, or G-Cash.

To have a TIN, you will need to submit the BIR FORM 1901 or Application for Registration for Mixed Income Individuals, Estates and Trusts, along with these requirements

  • NSO Birth Certificate
  • DTI Certificate of Business Name, if you won’t be using your full name

Some may also need to submit these: Professional Regulation Commission ID, PTR from local government, and the mayor’s receipt.

If you have a TIN because of former employment, you need to change your status from employed to self-employed. 

Keep note of all your receipts

The income tax is one of the taxes a freelancer has to pay, and you pay it whether you earn in local or foreign currency. It can be paid in two ways, and both will be deducted from a professional’s income. You can do the standard deduction which will automatically remove a portion of your salary, up to at most 40%. Here, you do not to keep track of your expenses receipts or any financial and accounting books. Also, the tax percentage will vary depending on how high or low you earn.

If you choose to the option of itemized deduction, you will definitely need to take care of your receipts. Your payments will come from operational businesses expenses such as rent or research and development expenses and you will need to present proof to the BIR, with receipts being an example.

If you do business locally, you will also have to worry about the business tax. These refer to taxes that occur between you and your client, which is the Value added tax. Here, BIR Form 1906 needs to be submitted so that you have the authority of producing (OR) official receipts.

Freelancers need to keep track of all sales receipts, so that they will be able to calculate Output VAT. If you have revenue that is above 3 million pesos, you will be liable for 12 percent VAT in every customer transaction. Professional who earn below that value will be liable for eight percent VAT of all their earnings.  

Hire an accountant if possible

If you still find the process of calculating tiring, even with a tax calculator, an accountant can be a lifesaver. Not only will this person be able to organize your cash receipts better, the accountant can also keep these important account books:

  • Cash disbursement
  • General journal
  • General ledger

Key Takeaway

As a freelancer, paying your taxes can be a very rigorous process, but it needs to be done. By keeping in mind all the information mentioned above, the freelance tax will never be a problem for you again.

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