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Quick Guidelines in Filing Freelance Tax in the Philippines

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What are the guidelines that you should follow in filing freelance tax in the Philippines?

  • Check and see if you are exempted from filing and paying your taxes
  • Register with the BIR
  • Prepare necessary documents

 

The Philippines is home to many homegrown talents in various other industries. According to the Philippine Statistics Authority (PSA), self-employed professionals are the second largest class of workers in the country. In the total employment rate of the country during the year 2017, the self-employment population amounts to a total of 27.8%.

That number includes the growth rate in the industry of freelancing. A significant sum of contributions to the development of the economy comes from freelance tax in the Philippines, and it is notable that their population continues to grow.

Due to the rise of remote jobs online, freelancers are catching up with the rate of employed individuals. But unlike those who work for a company, taxes in freelance are filed independently. Employed individuals’ taxes are automatically deducted from their salary as well as benefits like health insurance and Social Security System (SSS) contributions, and this is why self-employed individuals’ take-home pay tend to be a bit higher.

It may be tempting to let your paycheck remain unscathed by freelance taxes deduction but doing so will make you an enemy of the Bureau of Internal Revenue (BIR). Unless you want them knocking down your door, you have to set aside an amount for your contribution.

Being a freelancer means you work on your account in collaboration with either partners or clients. Sometimes they can be based locally or in international arenas. Self-employed individuals may register as either a single proprietor or entrepreneur or as professionals.

Knowing guidelines for filing your tax as a freelancer will benefit you in the long run, so read on below for a quick refresher:

 

Check and see if you are exempted from filing and paying your taxes

 Filing Taxes chart

With the passage of the Tax Reform for Acceleration and Inclusion (TRAIN) law, its amendments include the exemption on income tax for those eligible professionals and organizations. The new personal income tax rates are as follows:

  • Persons with an annual income of Php 250,000 and below are exempted from paying taxes.
  • Php 250,000 to 400,000 will pay 20% of excess over Php 250,000
  • 400,000 to 800,000 = 30,000 + 25% of excess over Php 400,000
  • 800,000 to Php 2,000,000 = Php 130,000 +30% of excess over Php 800,000
  • 2,000,000 to 8,000,000 = Php 490,000 +32% of excess over Php 2,000,000
  • Above 8,000,000 = Php 2.41 million + 35% of excess over Php 8,000,000

 

Register with the BIR

If you do not belong to the category that is exempted from paying their income tax, you have to register with the like everyone else to file your taxes. This process can be tedious unlike for those who are employed in a company due to some extra documents.

Those professionals who are classified as self-employed are those who practice their profession, with or without a license under a regulatory board or body. They will receive payment for the service that they do but they would not receive benefits and compensation the same as what employees get. The examples of those self-employed individuals are private practice physicians, lawyers, and accountants who are on a pay-per-service basis.

Just like them, freelancers are considered as professionals, even when they are not under a regulatory board or body. These include bloggers, web developers, graphic designers, virtual assistants, writers, and other individuals who provide specialized services.

Follow these steps for BIR registration:

  • Obtain a Tax Identification Number (TIN) via the BIR website or the BIR portal if you don’t have one yet. You can skip this step if you already have one.
  • Fill up the Application for Registration (BIR Form 1901) and the payment form (BIR Form 0605), gather the applicable required documents.
  • Submit to the form and the supplementary documents to Revenue District Office (RDO) that has jurisdiction over your place of business.
  • Pay the ₱500 annual registration fee. You can simply go to any authorized bank located within your district and provide them the payment form with your payment. Check with your RDO what banks are accredited to accept this payment.
  • Pay the ₱15 Certification Fee and the P15 Documentary Stamp Tax. A form will be given, which the taxpayer will be attaching to the registration certificate later on.
  • Apply for Invoices/Receipts using the Authority to Print form (BIR Form 1906).

 

Prepare necessary documents

Important Documents

If you are ready to register, then you should be equipped with the requirements. The following are required for the registration:

  • NSO Birth Certificate
  • Mayor’s Permit, if applicable
  • DTI Certificate of Business Name, if applicable
  • PRC ID, if applicable
  • Payment of Professional Tax Receipt (PTR), if applicable
  • An affidavit indicating the rates, manner of billings, and the factors considered in determining service fees (as specified in BIR Revenue Regulation 4-2014)

 

Meanwhile, these are the forms you need to fill out as part of the registration:

  • BIR Form 1905 – for people who already have a TIN number but want to change business. The form is also needed in the case of TIN loss
  • BIR Form 1901 – the first and second page is the registration form. Basically, this is the form for all self-employed individuals.
  • BIR Payment Form 0605 – present this form upon payment in any authorized bank by the Revenue District Office (RDO).
  • Pay via a partner bank or online

 

Key Takeaway

Paying taxes is more than just that chore you dread to do, it is your obligation. With the emergence of TRAIN law, you would have no excuse not to file your taxes since it is an uncomplicated system already. Avoid delays by keeping this in mind and you will be free from distractions that will nag you if you do so.

These quick guidelines in filing freelance taxes is also a way for you to be mindful of your responsibility so brush up on these tips if you ever feel puzzled.

What Fresh Grads Need to Know About Tax Filing Philippines

What Fresh Grads Need to Know About Tax Filing in the Philippines

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What are the things Fresh Grads need to know about tax filing in the Philippines?

  • Relevant Terms and Provisions on Tax Filing
  • Process of Tax Filing in the Philippines
  • Computing Taxes using a Tax Calculator

 

Fresh graduates always hear the phrase, “Welcome to the real world!” But what those people fail to mention is that the real world is made up of tons of responsibilities like the exhausting task of tax filing. In the Philippines, there are two classifications of taxpayers: corporate or individuals. Individual taxpayers are either employed or self-employed. As self-employed, you can either register as a single proprietor or entrepreneur, or as professionals.

These are just the basics of what you need to know about tax filing. There is still the matter of the process of filing and paying your taxes. Thankfully, there are tax calculators online that can help you with that. Before you do that, you have to possess the know-hows in doing your obligation as a taxpayer. Knowing your taxes and complying with the provisions is the primary task in tax filing but you also have to be knowledgeable with other information about tax filing.

Computing your taxes on a tax calculator will produce instant results but make sure that you still brush up on your tax knowledge and what it entails for you as a young professional. Here are the things you need to know about tax filing in the Philippines:

 Relevant Terms and Provisions on Tax Filing

Relevant Terms and Provisions on Tax Filing

First and foremost, what are taxes and why do you have to pay them? Taxes are used by the government for the development of the country’s basic social services that are essential to the betterment of the lives of the citizens and the overall economic growth. Individuals and corporations pay taxes to the government, which are then used to finance expenditures. Revenues collected from taxes are used for additional expenses for the country.

This is collected through the income tax of professionals. According to the Bureau of Internal Revenue (BIR), an Income tax is a tax on a person’s income, earnings, profits from their estate, assets, or other pertinent items of gross income. A tax return is the excess taxes paid during a given tax year. The income tax return must be filed and paid annually by a company or an individual.

Income in the Philippines is divided into three categories which are taxed separately and they are as follows:

  • Compensation Employment Income – this income is taxed at a progressive rate based on the gross income after a deduction from the personal and additional exemptions but without deductions for expenses.
  • Passive Income – this income which includes dividends and interest, is subject to tax at 7.5%
  • Business Income and Professional Income – this income is taxed based on progressive rates on net business income after deduction of certain specified expenses.

Process of Tax Filing in the Philippines

The next step to graduation is finding a job. You may opt to be employed in a company, start your own business, or be a freelancer, choosing any means you have to file your Income Tax Return (ITR). When you are deriving income from your job, you are required to file your ITR. Being part of a company means that they usually file your ITR for you, but if not, you will have to file them yourself.

It is also important to note that minimum wage earners.

You should have a checklist of the documents needed for filing taxes which are as follows:

  • Three copies of BIR Form 1700
  • Certificate of Income Tax Withheld on Compensation
  • For self-employed individuals, individuals deriving mixed income, you will need to fill up three copies of BIR Form 1701

After making sure that you have the complete documents, you may now proceed to the nearest Authorized Agent Bank (AAB) of the Revenue District Office where you are registered and present the duly accomplished BIR Form 1701, together with the required attachments and your payment. After that, you will now receive a copy of a stamped and validated form from the teller of the AAB or Revenue Collection Officer.

It is also important to note that pursuant to the TRAIN law, there are income earners who are exempted from filing their ITR which includes minimum wage earners, your gross income (total earned for the past year) does not exceed your total personal and additional exemptions or your income derived from a single employer does not exceed Php 60,000 and the income tax has been correctly withheld.

Understanding tax filing is one of the essential skills that a fresh graduate should have. If you are feeling a little stumped, you may ask help from your human resources or accounting personnel, or just research about it on the internet.

 Computing Taxes using a Tax Calculator

Computing Taxes using a Tax Calculator

There are plenty of tax calculator applications in the internet, even the BIR website has one. You only need to input your basic salary/statutory minimum wage earner and de minimis benefits (the facilities and privileges of relatively small value provided by an employer to employees, as means to promote their health, good will, contentment, or efficiency).

Then the tax calculator will give you the total cumulative average method. It actually withholds taxes, where the total supplementary compensation is equal or greater than the total regular compensation.

Key Takeaway

Being a newbie in the professional world can be tough what with all the things you need to know to get by. Knowing things about tax filing can be an edge in industries because it means you are aware of your financial capabilities.