How can you avoid delays in filing freelance tax in the Philippines?
- Register before you start being a freelancer
- Improve your tax knowledge
- Use an online tax calculator to compute your taxes and file them on time
People, who earn income, manage their own business, transfer personal or real properties, are all required to pay taxes. The freelance industry is not a stranger to this involuntary fee. There are many perks to being a freelancer – the decent pay, flexible work hours, and the comfortable workspace.
One of the things that can become a burden is filing taxes. The Philippine Freelance industry is also required as professionals to register under the appropriate category with the Bureau of Internal Revenue (BIR) and get a Tax Identification (TIN) in order to file and pay your taxes. With the passage of the Tax Reform Acceleration and Inclusion (TRAIN) law, all taxpayers with an annual income less than Php 250,000 are exempt from paying taxes.
Professional freelancers, who earn more than that threshold, have to file their income tax based on the graduated tax table as well as three percent percentage tax. In addition, you must pay 12 percent VAT if your annual revenues are greater than Php 3,000,000 but if you qualify as a non-VAT taxpayer, you can opt to pay eight percent on gross receipts.
Becoming a regular taxpayer can be a chore if you are too occupied with projects and deadlines. Good thing there are online tax filing platforms that are perfect for freelancers. Still, you have to file and pay taxes, late filing of income tax return can be a great cause for penalties, which mean additional expenses for you. So, to save yourself from financial, personal, and entrepreneurial inconveniences, here are the tips and common mistakes you have to avoid in filing freelance tax in the Philippines:
Register before you start being a freelancer
Like any other professionals or business, freelancers must be registered with the BIR. In the Philippine Tax Code, it is stated in section 74 that an individual receiving an income with sources within or outside the Philippines are required to pay taxes. Most freelancers forget this requirement and their freelancing gigs remain unregistered with the BIR. Do not imitate others who intentionally avoid this obligation.
It doesn’t matter if you are engaged in full-time or part-time work, if you are earning income from your job, then you have to file and pay your taxes. You should know that the BIR defines the professionals under the category of self-employed as:
- Persons engaged in business and who derive their personal income from such business;
- Professionals such as (1) “persons who derive their income practicing their profession” like lawyers, and those registered with the Professional Regulation Commission (PRC) such as doctors, dentists, certified public accountants, and others; and (2) those “who pursue an art and make their living therefrom,” including writers, athletes, and others. Freelancers and home-based service provides also fall under professionals
If all of the above pertains to you and you haven’t registered your services to the BIR yet, then you should make time to do so. Make sure that you do to avoid being tagged as a tax evader. Prepare the necessary documents and register your services. Accomplish forms and submit supplementary documents to revenue district offices (RDO).
Improve your tax knowledge
In order to steer clear of possible violations, you must have a prior knowledge of what they are. These are not only violations but they are considered criminal violations under the Tax Code, as stated by the BIR and they are as follows:
- Failure to file tax return/s
- Failure to pay taxes
- Deliberate under-declaration of income or overstatement of deductions by more than 30% of that declared per return (substantial under-declaration or overstatement of deductions)
- Hiding or transferring assets or income
- Non-remittance of withholding taxes
- Claiming personal expenses as business expenses (tax shield)
- Failure to register with the BIR
- Keeping more than one (1) book of accounts
- Making false entries in financial books and records
- Use of fake Certificate of Authorizing Registration (CAR), Tax Clearance Certificate (TCC), or other accountable forms
If you are found to have committed a violation of the provisions of the National Internal Revenue Code (NIRC), then you will be subject to the consequences and penalties which are imposed by the BIR.
Use an online tax calculator to compute your taxes and file them on time
The internet provides nifty tools to help you with a lot of daily tasks. One of them is filing and paying your taxes. Basically, online tax calculator is the best go-to guide in computing freelance taxes. Aside from real-time tax calculation, you can also use an online tax-filing platform to pay your taxes. With this, you can manage to skip lines at the bank to pay your taxes, with unlimited accessibility through various payment channels.
An online tax calculator will only require you to enter your income and expense, then that’s it! No more fuss in using calculators and spreadsheets which is a significant benefit for freelancers like you.
Avoiding delays in filing freelance taxes should be on top of your mind at all times. This is to ensure that you can work independently without financial troubles from additional expenses coming from penalties in filing and paying taxes on time. Follow these simple tips and be a regular taxpayer, you will reap long-term benefits from it.