Tax on Freelancers in the Philippines

6 months ago   •   7 min read

By Zekeriya Mulbay

The world of freelancing is changing rapidly, and so is the Philippines. Filipino freelancers are contributing to the country's economy.

Taxes are an important part of any freelancer's life. As a freelancer in the Philippines, you probably know the kind of tax you need to pay each month. However, do you know exactly how much you need to pay and which deductions are available to you?

Though freelancing has led Filipinos to earn handsomely, freelancers do not exempt from freelance taxes (only if they meet some of the requirements), just like their full-time counterparts.

Tax on Freelancers in the Philippines

It doesn't matter whether you're a self-employed freelancer who trades or runs a business or an individual freelancing talent; you will have to file a tax return in the Philippines.

Besides, the bank will manipulate your taxes if you are self-employed. Although, as a freelancer in the Philippines, you'll need to file your taxes per the requirements.

In this article, we will cover critical concepts like- freelancer registration, the requirement of BIR, when to pay your taxes, etc., so that you get free of your tax worries.


Do freelancers pay tax in the Philippines?

Yes, they do. As said earlier, self-employed influencers or freelancers must file their tax returns. Although, you can be exempt from paying tax if you are:

  • Not earning more than 60,000 Php or less (as an employer).
  • Not earning at a higher rate.
  • Annual Personal exemption is lower than your gross income, regardless of whether you're married or not (50,000 Php), and for a child, it's 25,000 Php dependent, the limit of 4.

If you meet any of the mentioned requirements above, you won't be eligible to file taxes or pay them.

Yet, suppose you are making significant money from your freelance business. In that case, you'll need to register with BIR (Bureau of Internal Revenue) to avoid the imposition of penalties.

Do freelancers pay taxes in the Philippines

As mentioned, most freelancers work solo, so it's for you to know whether you're qualified to pay taxes or not. We have grabbed all the information from the official BIR website.

  • If an individual taxable income doesn't surpass 250,000 Php, they won't pay any tax and vice versa.
  • A solo individual makes minimum wages (not qualified).
  • An individual doesn't meet all the requirements or is free from tax or special laws.

By following this table, you'll quickly recognize how much tax you would pay based on your earnings in the Philippines.

Taxable Income YearlyRate %
Between 250,000 to 400,000P20% tax will be charged to an individual.
Between 400,001 to 800,000P20% (previous) + 25% more tax will be charged.
Between 800,001 to 2,00,000P20+25%(previous) +30% more tax will be charged.
Between 2,00,000P to 8,00,000POverall 490,00P and 32% more tax will be charged.

How to register with BIR for Filipino Freelancers?

Before knowing the steps to register with BIR, let's first see the documents required to register yourself as a sole proprietor and your business in BIR.

  • The tax identification number (TIN): You must apply for a TIN on the BIR website, which means submitting an application form. It's indispensable to have this unique code when you enter the workforce.
  • Business Tax Receipt.
  • BIR Form 1905: You will require a TIN in this form, or else you won't be eligible for business registration.
  • BIR form 0605: It is a payment form of BIR.
  • BIR form 1901: It is a form for both self-employed and employees before applying for registration in BIR.
  • BIR form 1906: It's for the authentication of receipt printing.
  • Birth certificate (NSO certified).
  • Other optional certifications include a marriage contract, company certificate, mayor business permit, etc.
How to register with BIR for Filipino Freelancers

These were some documents required for registering your freelance business in BIR.

Now, we'll cover how to register as self-employed in BIR.

There are two steps where you can file your taxes. Let's hear the manual one first.

1. Fill up your BIR form 1901 and submit the required documents. Following are the documents.

  • The Government-issued ID card, Passport, or Driving license.
  • DTI certificate of registration (Optional).
  • BIR form 1906 for the authentication to print ATM forms.
  • Tax receipts, proof of website or channel, Cedula, and book of accounts are essential documents.

2. Head to your local business RDO, which has jurisdiction over your place of residence, and submit your BIR form 1901.

3. You must pay the fee of 500P at the RDO's authorized agent bank. You'll also pay DST and a certificate of registration. There are other alternatives available such as Gcash, to pay your fee.

How to register with BIR for Filipino Freelancers? -2

4. Submit proof of payments at RDO. After that, you'll be guided to attend the orientation meeting of newly registered businesses, which will acknowledge you about the duties of a taxpayer.

5.  After that, claim your documents from the officer, such as BIR form 2303 (Registration Certificate), ATP, BIR invoices, and proof payments receipts.


What Taxes and Charges should a Freelancer pay in the Philippines?

Once you receive COR (registration certificate), you have become an official Filipino taxpayer.

Note: You must renew your COR on 30th January of each year.

Following are the taxes and charges a Filipino freelancer must pay:

Filing your Income Tax Return (ITR)

Monthly Income Taxes

  • Documents required: BIR form 2551M and 0605.
  • A Gross revenue of 3%.
  • Must file a tax return every 20th of each month.

Quarterly Taxes

  • Documents required: BIR form 1701Q and 0605.
  • It is based on business expenses.
  • It is paid every 15th April, August, and November.

Annual Taxes

  • Documents required: BIR form 1701 and 0605.
  • It is paid every 15th April.
When To File Taxes

Filling your income tax return (ITR)

As a freelancer or self-employed worker, you must file ITR. It can be done manually or online. It is a snippet that contains all the necessary info about your taxes paid in a specified period. Likewise, it doesn't matter whether you are an individual or non-individual employee; you must file ITR.

Here are some of the forms for individuals and self-employed taxpayers: -

  • BIR form 1700. (Self-employed individuals earning from bonuses)
  • BIR form 1701. (Self-employed individuals, trusts, mixed)
  • BIR form 1701A. (Self-employed individuals earning from their own business)
  • BIR form 1701Q. (Self-employed individuals paying quarterly).

An individual availing itemized deduction will file BIR form 1701, or if they are available 8% tax rate in the graduated tax return, will file BIR form 1701A.

Filling your income tax return (ITR)

In addition, the BIR will issue you a stamped copy as proof of ITR.


Questions to Answer

1. What are the benefits of registering my freelancing business?

You must file your income return freelance taxes in the Philippines as a patriotic citizen. There are a bunch of benefits to registering your business.

  • It will increase your business growth at an exponential rate.
  • You will not be imposed penalties by BIR.
  • It is an excellent contribution to the country's GDP.

2. When should I file my taxes?

You will file your monthly, quarterly, and yearly taxes based on your income. Moreover, a freelancer can avail of the 8% tax rate on BIR form 1901 instead of paying graduated taxes.

3. What are the payment methods for taxes? Is paying tax dues via ePay an easy way to pay the taxes?

ePay doesn't consume much of your time, and it's easy to pay your taxes in the Philippines. It is an electronic method for paying liabilities and taxes. There are a couple of ways to pay your taxes in the Philippines. Let's hear them.

·    Online banking apps.

·    Landbank ATM.

·    The Gcash, PayMaya, and Moneygment payment apps.

·    DBP (A government-occupied bank).


Conclusion

Dealing with taxes is not fun, but it is an obligation that every law-abiding individual must fulfill. Your taxes won't be deducted automatically from your bank account as a freelancer. You have to file your income tax return in BIR to pay your taxes.

Conclusion

This article provides an overview of the income tax rates for freelancers in the Philippines. It also looks at some of the deductions available to freelancers, steps of paying income tax in the Philippines, registering your freelance business in BIR, BIR forms, etc.

If you're a freelancer, it is crucial to understand the Freelance Tax Philippines that you are liable to pay and how to file them.

For more information about taxes on Freelancers in different countries, read our blog freelancer.guide.

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