If you’re a freelancer in the Philippines using Upwork, you’ve probably seen the recent announcement about a 12% VAT charge starting June 1, 2025, unless you provide a valid VAT ID.
This raised understandable questions from the community:
- “Is this a tax on my freelance income?”
- “Do I now have to register for VAT?”
- “But aren’t clients the ones paying me, not Upwork?”
Let’s break it down—based on what Philippine tax rules say should be happening, and highlight a few areas where freelancers may need clarification from Upwork itself.
What is VAT, and why should Upwork be charging it?
VAT (Value-Added Tax) in the Philippines is a 12% tax on sales of goods and services. Under Revenue Regulation No. 13-2022, foreign companies providing digital services to Philippine-based users are now required to charge VAT—just like local businesses would.
More on this here: VAT on Digital Services Philippines
Since Upwork provides digital services (like platform access, connects, client-matching, and payment facilitation), it falls under the category of Digital Service Providers (DSPs). As such, it should be charging VAT to users in the Philippines—but only on the services it provides, not on the freelancers’ income.
These taxable services include:
- Platform fees (the cut Upwork takes from your earnings),
- Membership fees (like Freelancer Plus),
- Connect purchases.
Important clarification: This is NOT a tax on your income.
Your income from clients—whether foreign or local—remains subject to the usual income tax rules in the Philippines, and Upwork is not responsible for that.
What’s happening is this:
- You use Upwork’s platform and tools, which are taxable digital services.
- Upwork should collect 12% VAT on those services, then remit it to the Philippine government.
This is completely separate from the tax you file with the BIR on your freelance income.
But wait—aren’t the clients the ones paying me?
Yes—and that’s where it gets a bit tricky.
You’re absolutely right: Upwork isn’t the one paying you for your freelance work. Your clients are. However:
- You’re also a customer of Upwork. You pay for access to the platform, tools, connects, and more.
- That makes you the recipient of Upwork’s digital services—and under PH tax law, that service is taxable if you’re based in the Philippines.
So while your client pays you for your project, you pay Upwork for the use of their platform—and it’s that portion that’s subject to VAT.
What if I’m NOT VAT-registered?
This is the case for most freelancers earning under ₱3 million a year.
If you’re not VAT-registered, then:
- You’re still allowed to use Upwork.
- Upwork should charge you (the freelancer) the 12% VAT on their fees.
- You don’t need to register for VAT just to avoid the charge.
However, Upwork’s email makes it sound like there is a choice to avoid it. This is confusing and needs clarification, because Upwork is supposed to always charge VAT regardless of the freelancer’s status.
In Summary
| Scenario | VAT charged by Upwork? | What’s being taxed? |
|---|---|---|
| Non-VAT Freelancer | Yes, 12% | Fees paid by freelancer to Upwork |
| VAT-Registered Freelancer | Yes, 12% | Fees paid by freelancer to Upwork |
| Upwork’s Income from PH clients | Yes, 12% | Fees paid by PH client to Upwork |
| Upwork’s Income from non-PH clients | Outside BIR Jurisdiction | Outside BIR Jurisdiction |
Key Takeaways (and a word of caution)
- Upwork should be charging 12% VAT on platform services for PH-based users
- This is a requirement under PH law for foreign digital service providers.
- This is not income tax. It doesn’t apply to your earnings from clients.
- As of this writing, Taxumo has not spoken directly with Upwork about the exact mechanics of this VAT implementation—so we recommend freelancers reach out to Upwork’s support team directly if unsure.
Need help filing your own taxes in the Philippines?
We’ve got your back.
Taxumo makes tax filing easy for freelancers and solopreneurs. Whether you’re VAT-registered or not, we help you:
- Stay compliant,
- Avoid penalties,
- And make sense of all the changing rules.