Tax Compliance of Freelancers in the Philippines

“A freelancer, freelance worker, or freelance is somebody who is self-employed and is not committed to
a particular employer long term. These workers are often represented by a company or an agency that
resells their labor and that of others to its clients with or without project management and labor
contributed by its regular employees. Others are completely independent. ‘Independent contractor”
would be the term used in a higher register of English.

Fields where freelancing is common include; music, journalism, publishing, screenwriting, film making,
acting, photojournalism, cosmetics, fragrances, editing, event planning, event management, copy
editing, proofreading, indexing, copy writing, computer programming, web design, graphic design,
website development, consulting, tour guiding, video editing,video production and translating.”

It seems that the freelancer is a broad term applied to self-employed individuals or individuals hired as
independent contractors and not as an employee of the other contracting party. For tax purposes, they
are termed as “sole proprietors” and in this article, let us share you the related tax compliance and what
taxes are you required to pay as a self-employed freelance in the service industry.

1. Payment of registration fees – P500.00 annually.

Registration of your habitual freelance or self-employed is the first step to proper tax compliance. To
register, you fill-out BIR Form No. 1901 for filing with the BIR along with the required attachments
enumerated at the back of the form. One attachment is the BIR Form No. 0605 duly received by the BIR
accredited bank covering your location after payment of P500.oo annual registration fees. In BIR Form
No. 1901, you will choose the tax types applicable to you and for regular filing with the BIR. Check only
those that are mostly applicable and beneficial to you to avoid the inconvenience of filing unnecessary
tax returns. If BIR will do the checking, we suggest you be inquisitive as to the implications that you be
aware.

2. Registering official receipts

After release of the BIR Certificate of Registration, you will be required to register Official Receipts (O.R.)
that you issue every collection from your freelancing business. The fact that your client or customer did
not ask for BIR official receipts will not excuse you from issuing a BIR registered O.R., and this applies
even if your client or customer are based abroad. If you will be caught not issuing O.R., BIR may penalize
you P1,000.00 for every collection you failed to issue O.R., sanction you under Oplan Kandado program,
or worst, charge you tax evasion for imprisonment on fraud and willful attempt to evade taxes. BIR has
accredited printing companies and the same will normally assist you for securing an Authority to Print
(ATP). Normal requirement is at least ten (10) booklets and costs ranges from P800.00 to P1,500.00 a
booklet.

3. Registering and maintaining books of accounts

This is also secured after the release of your BIR Certificate of registration and the cost is minimal – P30
to P60 a booklet. The number would depend on the nature of your registration as follows – four (4)
books for non-VAT, and six (6) books for VAT-registered.

Journal

Ledger

Cash receipts book

Cash disbursements book

Subsidiary sales journal (additional for VAT registered)

Subsidiary purchases journal (additional for VAT registered)

On the books you record the financial matters of your freelancing separate and distinct from your
personal expenses. Collections are recorded as revenue, business expenses are recorded as allowable
deductions. On the other hand, use of collections for personal expenses are recorded as withdrawals of
capitalization and not as business expenses. You do not file this books of accounts along with the returns
but you are required to keep this for at least three (3) years so that if you are lucky enough to be
examined, the BIR will scrutinize your books to determine if you timely paid the right taxes.

You can do the bookkeeping your own, or you can hire a good bookkeeper for the purpose. If you hire
one, we suggest you develop a working knowledge that you may learn in a number of ways.

4. Payment of business taxes – 12% value added tax, or 3% percentage tax;

For being habitually engaged in trade or business, or practice of profession, you will be liable for business
taxes. In short, you pay business tax because you do business as a freelancer and it would not matter if
you actually earn or not, after deducting business expenses for as long as you have gross receipts from
freelancing business. This is where misconception lies for some – they do not wish to pay because they
earn less than their expenses. Business tax in based in the gross receipts or gross sales you make, and
not on the net income you make.
In general, if your annual gross receipts (services) or gross sales (goods) exceeds P1,919,500 (effective
2012 and onwards), you will be liable for 12% VAT. In which case, you must be a VAT-registered where
you compute VAT due based on the difference between output VAT (12% VAT on your gross
receipts/sales) and input tax (12% VAT on your purchases from VAT-registered duly supported by VAT-
registered receipts or invoices. On the other hand, if you do not exceed P1,919,500 and non-VAT or other
percentage tax registered, then, you will be liable for 3% percentage tax based on your gross receipts. If
you registered for non-VAT and later exceeded the VAT threshold of P1,919,500, then, you are mandated
to update registration to VAT using BIR Form No. 1905 and avail of the transitional input VAT.

You file and pay percentage tax return or BIR Form No. 2551M not later than the 20th day of the month
following the applicable month. On the other hand, you file and pay monthly VAT return or BIR Form No.
2550M not later than the 20th day of the month following the applicable month, and the quarterly VAT
return BIR Form No. 2550Q not later than the 25th day of the month following the applicable quarter.
Likewise, if you are a VAT registered, you will be required to submit a summary list of sales and
purchases, and issue VAT O.R. with VAT separately shown. Please note that every failure is subject to
penalty so do not miss out.

5. Withholding taxes

In paying some expenses, you are automatically appointed by the BIR as a withholding tax agent. If you
have some employees, you are required to withhold tax on compensation every payroll, remit monthly
using BIR Form No. 1601C with a summary return at the end of the year using BIR Form No. 1604CF and
issue withholding tax certificates to employees using BIR Form No. 2316 annually or after separation
from employment. If your salary to them is a minimum wage only, then, the same is exempt from
withholding tax, including the holiday pay, hazard pay, overtime pay, and night shift differential. Should
you provide de minimis benefits, the same is also not exempt from withholding.

For specific expenses, you will be required to withhold expanded withholding taxes like rental payment
of 5%, professional fees of your bookkeeper and other professionals you hired 10%/15%, commission of
10%, and the likes specified in Revenue Regulations No. 2-98, as amended. Withholding is based on the
amount you paid, excluding VAT, if any, and amounts paid should also be issued O.R. by your service
providers. You will be required remit monthly expanded withholding taxes using BIR Form No. 1601E
with a summary return at the end of the year using BIR Form No. 1604E and issue withholding tax
certificates to payees using BIR Form No. 2307 quarterly or every after payment.

6. Filing and payment of income taxes

You are likewise required to file and pay quarterly and annual income taxes based on taxable net income
at the rate of 5-32% using the tax table prescribed by the BIR. You pay income tax if your free lancing
generated taxable income measured by the difference between your gross receipts and deductible
expenses – business expenses and personal exemptions of p50,000 a year and P25,000 for every
qualified dependent child up to four (4). If you were withheld 10% or 15% or 2% upon your collections,
please secure your BIR Form No. 2307 because they are your advance income tax payments deductible
from your income tax returns.

Quarterly taxable net income is the difference between your gross receipts and business expenses, and is
required to be filed not later than 15th day of the month following the end of applicable quarter using
BIR Form No. 1701Q. Annual income tax return is filed not later than April 15 after the end of the
applicable calendar year.

7. Audited financial statements (AFS)

If your gross receipts in any one quarter exceeds P150,000.00, your annual income tax return must be
accompanied by a financial statements audited by an independent certified public accountant, except if
you opted for optional standard deduction (OSD) in your income tax returns, where, in some instances,
you may find some tax savings under OSD. Your bookkeeper cannot make the audit because of the
requirement of independence in mental attitude in our profession, so it will normally refer your account
to another auditor. AFS is not just for simple compliance. It could serve as your opportunity for check
and balance to determine whether your account had been properly handled, and establish the credibility
of your financials with the government agencies and third parties, such as when securing financing with
banks and financing institutions. This will cost you some amount based on the volume of your
transactions.

8. Local tax compliance

You will likewise be required to secure annual community tax certificates, and business permits with the
municipality or city of location. Please note that, as a rule, a business permit is a requirement for legality
and you business or undertaking without it will be considered illegal. It may cost you some amount and
an ounce of effort to secure one. You can either do it yourself, or secure some service providers actively
engaged to secure one as they are more familiar with the process and the requirements. This will save
you more headaches and irritations in processing.

Summary
The above only enumerates the most material tax types and there could be more depending on the
transactions, like documentary stamp tax on lease agreements. For start-up freelancers, tax compliance
is the least thing that comes to priority but the most important consideration that you cannot go away
with. For me, tax compliance and trade, business, or profession always go hand in hand with. In all you
business endeavors, you must take into account tax compliance so you can really enjoy the full benefits
of your success. I feel pity those who succeed in the business endeavors after years, but, suddenly pulled
to the ground by tax evasion charges. BIR is now aggressive on tax administration and more taxpayers
and even CPAs are becoming targets of tax evasion. It will not only destroy your savings invested in your
properties, but, also the credibility of your name that you have long developed through he years. It takes
time to develop one, but, so easy to destroy.

(Garry S. Pagaspas is a Resource Speaker with Tax and Accounting Center, Inc. He is a Certified Public
Accountant and a degree holder in Bachelor of Laws engaged in active tax practice for more than seven
(7) years now and a professor of taxation for more than four (4) years now. He had assisted various
taxpayers in ensuring tax compliance and tax management resulting to tax savings rendering tax studies,
opinions, consultancies and other related services. For comments, you may please send mail at
garry.pagaspas@taxacctgcenter.org.)

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert
opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to
your circumstances.

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Freelance Tax in the Philippines

With the advent of the digital age, freelance work has become a ubiquitously common source of income
for people all across the Philippines. One of the most defining elements of freelance work is the internal
and operational freedom that it entails: freelancers offer independent services under self-established
terms (not bound to a larger corporate structure). Although freelancer services in relation to income are
not necessarily fixed and vary on a case-to-case basis, freelance tax in the Philippines is mandatory with
strictly enforced laws. Not all freelancers are obliged to pay taxes. There are clear conditions that
determine a freelance worker’s required tax compliance. Many individuals embark on building long-term
businesses beginning as startup freelancers. There have been several cases where people have ventured
into small freelance work that is exempt from tax and eventually grew their endeavors into successful
large-scale operations only to find themselves penalized for tax evasion due to their ignorance of
complying to their due tax laws. So if you are at the beginning stages of your freelance pursuits and are
still exempt to filing freelance tax in the Philippines, it is important to at this point, get acquainted with
all the factors that go into the process. Working under full-time employers means that matters
concerning your taxes are most likely being handled by human resource personnel. Freelance work
requires that you either hire an accountant for your bookkeeping and tax concerns or you can take care
of it yourself. This article aims to serve as a comprehensive guide that covers the basics on every aspect
that concerns freelance work in line with freelance tax in the Philippines, and to also provide a clear and
elaborate blueprint for the various steps and procedures when it comes to registration, filing, and
payment of freelance tax in the Philippines. Freelance work can be identified as any type of self-
employed service that is not bound to any form of a long-term employer. Although many freelancers are
purely independent contractors, there are agencies that represent freelance workers and resell their
labor to clients (with or without project management) The different fields of typical freelance work
include:

Journalism

Publishing

Screenwriting

Filmmaking

Acting

Music

Photojournalism

Fragrances

Editing

Event Planning

Copy Editing

Copy Writing

Event Management

Copy writing

Proofreading

Indexing

Computer Programming
Web Design

Website Development

Consulting

Video Editing

Translating

Video Production

Content Writing

Modelling

The Bureau of Internal Revenue (BIR) is the central governing body that facilitates and oversees tax
policies, documentation, and compliances. The BIR firmly classifies self-employed professionals as those
practicing and receiving personal income from their profession with or without license from a ruling
board. With the new digital models for freelance work and income, the BIR has implemented greater
scrutiny as to the clear guidelines for different self-employed tax cases. These are the primary conditions
for tax exemption:

If you are earning minimum wage.

If your gross income is significantly below Basic Personal Exemption (Php 50,000, regardless of marital
status) and Additional Personal Exemption (Php 25,000 per child dependent with a maximum of 4).

If your annual salary from your employer is Php 60,000 and below.

People have different conceptions, sentiments, and attitudes towards the tax system in the Philippines.
There is a common reluctant disposition towards the payment of taxes, but theoretically and regardless
of the political climate and its conditions, tax compliance ultimately leads to greater development.

Freelance Registration

When it comes to freelance tax in the Philippines, the BIR classifies freelancers within a specified
category that is legally perceived as a mixture of employees and business owners. At this point, the BIR
has not yet established a clear category for strict freelance work. According to BIR standards, freelancers
fall under the general definition of self-employed professionals. Persons that attain personal income
from businesses:

Those practicing a profession and registered under the Professional Regulation Commission (PRC) such
as doctors, lawyers, dentists, public accountants, etc.

Those pursuing art as a means of personal income (including freelance and home-based work) such as
writers, athletes, etc.
Taxpayer Identification Number (TIN)

The first step to getting fully registered as a freelance worker involves acquiring a Taxpayer Identification
Number or TIN. This is the number that is utilized for tax-related purposes and all matters that concern
accounting. The BIR offers an e-registration system wherein you can apply to get your number online.
There is a registration fee of Php 500 for each year. This fee can be paid in any branch under the
Authorized Agent Banks (AABs) that is most convenient for your area or location. There is also an option
for payment through online means: GCash or Electronic Filing and Payment Systems (Efps). Once the
payment is made, you are now ready to visit the closest BIR office within your area to claim the TIN Card.
The TIN Card will then be used in the process of getting registered as a self-employed professional that
works and earns income through digital platforms. REQUIREMENTS FOR REGISTRATION For individuals:

NSO Certified Birth Certificate

Community Tax Certificate or Sedula

BIR Form 1905 (for those already with TIN Number and are applying for business activity change)

BIR Form 1901 (registration form pages 1 and 2 are the forms for self-employed professionals)

BIR Payment Form 0605 (the form required for majority of Philippine tax types)

Photo Copy of Mayor’s Business Permit (if applicable)

Certificate of Business Name (if applicable)

Occupational Tax Receipt (if applicable)

Professional Tax Receipt (if applicable)

Marriage Contract (if applicable)

Contract or Company Certification (if applicable)

Affidavit indicating rates, billings, and service fees (according to BIR Revenue Regulation 4-2014) STEPS
FOR REGISTRATION

Fill out BIR Form 1901 then submit along with the documentation requirements to the Revenue District
Offices (RDO) that has jurisdiction over the business place.

Pay the (Php 500) registration fee at a BIR office or AABs of the concerned RDO.

Make sure that you have all the necessary forms along with adequate photo and digital copies. Submit
all required documents.

Pay the (Php 15) certification fee and the (Php 15) documentary stamp tax. The form that you will
receive will later be attached to the registration certificate of the taxpayer.
Attend the RDO initial briefing for taxpayers and new registrants in order to get briefed an advised on the
different rights and duties of tax compliance.

The RDO will then issue Form 2303 or the official Certificate of Registration (CoR) along with the Ask for
Receipt notice and Authority to Print (ATP) and Book of Accounts.

Submit all requirements for ATP along with registration of the Books of Accounts (expenses book,
journal, subsidiary professional income book, subsidiary purchases) for the RDO to stamp.

Value Added Tax (VAT)

The BIR requires that registered freelancers ay tax fees whether earning or not. Tax deductions are not
based from net income; they are based from gross receipts. 12% VAT – Freelance businesses with sales
and gross receipts that surpass Php 1,919,500 are liable for 12 % Value Added Tax, otherwise only 3% is
required. 3% VAT – For this classification of VAT, freelancers must file BIR Form 2550M (VAT) and BIR
Form 2551M (percentage tax) on the 20th and 25th month following the applicable month.

Freelance Tax Filing and Payment

Freelance Tax Filing and Payment Once you finally acquire your CoR, you are now an officially registered
tax payer. As a Filipino freelancer, here are the regular tax dues that you need to be aware of: Monthly
Percentage Tax

3% of your Gross Revenue

BIR Form 2551M (Monthly Percentage Tax Return) and BIR Form 0605

Deadline Date – the 20th of every month

Payable in BIR Partner Banks

Quarterly Income Tax

Based on Net Income

BIR Form 1701Q (Quarterly Income Tax Return) and BIR Form 0605

Deadline Date – April 15th, August 15th, and November 15th

Annual Income Tax (Last Quarter Payment)

BIR Form 1701 (Annual Income Tax Return) and BIR Form 0605

Deadline Date – April 15th of the following year

Renewal of Annual Registration Tax (CoR)

BIR Form 0605

Deadline Date – January 30th of every year

When it comes to freelance tax in the Philippines, your annual and quarterly income taxes are required
to be filed and paid based on tax income rates ranging from 5-32 % prescribed by the BIR. Quarterly
taxable net income is the differentiating factor between business expenses and gross receipts. These
requirements are to be filed on or before the 15th day of every month. Expanded withholding tax is
applied for expenses such as hiring outsourcing personnel, rent dues. Those listed under Revenue
Regulations No. 2 – 98 must be remitted to the BIR on a monthly basis.

Local Tax Requirements

Local Tax Requirements You are required to have a business permit ad annual community tax certificates
in order to operate on legitimate business standards. If you fail to comply with the local tax requirements
of your location, your business is not legally legible for operation, and you will get sanctioned or
penalized.

Important Notes on Freelance Tax

Tips for Submitting and Filing Documents When filling out the forms along with the required documents,
it is important to already have them fully ready when visiting the BIR office because a BIR representative
will provide you with a date in which you have to come back and receive your CoR. Make it a point to
remember to bring your Cash Disbursement and Cash Receipt Journal Books for registration. You are
going to have to register a new book for every fiscal year. Make sure to photocopy your CoR and Form
005 and take them to the Accredited Printers of Receipts of BIR. The accredited center will provide you
with 12 booklets that contain 1000 receipts. These booklets can be used for the next 5 years. Freelance
Categorization For freelance tax in the Philippines, many individuals inquire as to which taxation category
the nature of their services falls under. If you are a graphic designer, content writer, virtual assistant,
online coach, etc. you fall under the PROFESSIONAL category. While if you are a fashion designer, food
cart franchise owner, selling baked products, etc. you fall under the SINGLE or SOLE PROPRIETOR
category. Freelancers that fall under these 2 categories do not require a Mayor’s Permit and Baranggay
Clearance.

Online Freelance Tax Filing with TAXUMO

It is evident that there are many intricacies that go into freelance tax in the Philippines. There is a clear
sea of formalities and aspects that need to be clarified for the specifications of a case per case basis.
Being a freelance worker requires major bursts of effort as to making sure that you save as much of your
income while adhering to proper tax compliance policies. As mentioned earlier in the article, there are
now online means to file and pay all of your tax related matters. TAXUMO is the best online tax filing
platform that is most ideal for freelancers, self-employed professionals, and small business owners all
across the Philippines. Taxumo thrives in their efficiency and professional programming. They provide
real-time tax calculation in order to avoid the hassles of bill sock and for you to be fully aware of where
you are with your taxes and payment. The auto-generated tax forms rid you of the time and effort
consuming difficulties that comes with filling up complicated tax forms. Another amazing feature that
Taxumo provides is that they offer multiple payment channels so you do not have to worry about staying
in long lines at the bank or any other payment channel. With Taxumo, you can effortlessly access your
tax information whether at home or abroad, as well as learn more about tax filing in the Philippines, tax
computations in the Philippines, and many more. Being responsible and paying taxes is easily done
through your computer or smartphone. There is no need to have any prior accounting knowledge with
the flawless services that Taxumo provides. Everything is directly in one platform; there is no need for e-
BIR or e-FPS forms. Taxumo is the most ideal app for freelancers in the Philippines. Click here for more
on the online tax filing and payment services of TAXUMO.

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BIR TAX GUIDE FOR SELF EMPLOYED, PROFESSIONALS AND FREELANCERS

As a self-employed, freelance online marketer and professional Filipino taxpayer, I am logging here my
detailed experience and learnings in paying my tax obligations here in the Philippines.

I had a hard time looking for a complete guide for BIR tax for freelancers online that’s why I resolved to
myself that I’ll make one to be of better help for other self-employed / consultants like me.

I am including my subjective observations, opinions and comparisons as well as objective public data and
guidelines.

My writing style is to make this as layman-ish as possible by using common terms that majority of
ordinary Filipinos will understand especially those that are not professional book-keepers, lawyers or
CPA’s.

Outline and Navigation

WHO ARE CLASSIFIED AS FREELANCERS?

Contact admin@bryanvillarosa.com or 09088128227 for Advertisement Inquiries

The word “freelancer” was not specifically mentioned in the BIR Tax Code (Internal Revenue Code), but
the description and function describes this type of worker.
The rise of the internet came with the rise of online jobs. Some people in other countries, especially the
West, would prefer to hire talents in other countries for lower cost of labor.

Sites such as Upwork provide this kind of opportunity to many Filipinos. As a result, there’s a new breed
of workers have a different kind of work situation .

Freelancers can be classified as self-employed or mixed-income individuals.

SHOULD FREELANCERS PAY TAXES?

According to the Internal Revenue Code, any person whether personal or juridical (e.g. a business), is
required of:

Filing a return or statement (if no income, it’s still required to file BIR returns)

and shall have a TIN (Tax Identification Number) given by the BIR

IMPORTANCE AND BENEFITS OF FILING TAXES

1. Nation-building – one of the very core reason for paying taxes, besides it is required by law, is that we
are contributing for the good of our nation. We hope to build our country, support our government
officials and create a better environment for ourselves when we pay taxes.

Spiritually speaking, it is also God’s command and will for us. When Jesus was asked about paying taxes,
He answered “Give unto Caesar what is Caesar’s; and give to God what is God’s”

2. Law-abiding Behaviour – to say it abruptly, it is illegal not to pay your taxes. If you have a registered
before, you would incur charges or penalties which is, as of November 2018, costs P1,000 per
unsubmitted form. According to our BIR seminar speaker, they increased this from P300 before so that
Filipinos will learn the hard way and won’t forget to fulfill their duties as citizens who benefit from public
goods. You will know this if you visit the Receiving Department of BIR.

3. Loan Requirement – You may need a loan someday for the following reasons:

* Emergency Expenses * Events Expenses * Medical Expenses * Home Improvement * Car Loan *
Calamity Loan * Travel or Vacation Expenses

Lending institutions such as banks and financing corporations would require a tax proof from you when
you need to burrow money someday. If you wrote “self-employed / businessman / or freelancer” as your
occupation, the proof that you must present for loan is most likely the Annual Income Tax Return of the
previous year. Rather than burrowing money from informal lenders such as 5/6, banks have much lower
interest rates where you can also establish a credit history. So, working on your taxes is also a way of
opening up a way to save yourself from headaches of needing finances in the future.

4. Housing Loan / PAGIBIG Requirement – as a real estate professional, one of my work is to help my
clients who are self-employed professionals to avail a housing loan of PAGIBIG or the Home
Development Mutual Fund (HDMF). As a self-employed person, you must present ITR, Audited Financial
Statement and Business Permit so you can be approve for a loan. Without ITR, you will have a hard time
getting a home loan if you want or need it someday.

5. Overseas Requirements – There may come a time that ITR would be required from you when you
travel abroad as a tourist or work as an employee. According to our BIR speaker during the seminar,
some employers or embassies require ITR that’s why it’s better to properly work on it. If you are a
freelancer now, it’s still a need because when opportunities come, you will be ready.

6. Patriotism and Nationalism – I think the best way to show your love for your country is to support your
government and its programs. Yes, some argue that there is corruption but the burden is not yours. We
have justices to work on that. Our duty is to support the nation where we are also benefiting.

ADVICE: PRIOR TO REGISTRATION

Attend BIR Seminar – I think this should be the first thing to do before you start your tax obligations. But
this depends because some may require to file requirements first, so this should go ideally.

Here are things suggest as you attend the BIR educational seminar:

List down all the questions that you have in mind

Ask those questions to the BIR seminar speaker – they are regularly doing it, most likely once a week

You can ask your questions to a specific window or counter of BIR but have in mind that their obligation
is to process a certain task

Define your occupation, profession, source of income or income-generating activities

If time does not allow, you can approach the seminar speaker after the session for your specific inquiries.
This is their obligation and would be glad to help you.

FIRST STEPS FOR REGISTRATION OR UPDATE OF REGISTRATION FOR FREELANCERS / CONSULTANTS /

SELF-EMPLOYED PROFESSIONALS

1. GET A CERTIFICATE OF REGISTRATION (COR)

This marks the beginning of your relationship with taxes. This is the “foundation” document because
your COR will define your Trade Name, Address of Business, Income-Generating Activities / Tax Type and
your Tax Forms.

The best thing to do I recommend is to tell the BIR assessor about your profession or means of income.
This will help them identify your matching duties. You can try to negotiate easier obligations if possible.

Your COR document will tell you the tax obligations you need to comply with.

When you register, there are important data you should bear in mind
Trade Name – as a freelancer or self-employed providing services, this will be your complete name

TIN Number – apply for one if you don’t have

Address – usually this is your permanent address. I recommend an address where you don’t regularly
change such as your own house, parent’s house or where you stay for long-term. You would have to
display the COR, BIR poster and 0605 at this address which may be checked by the authorities at some
point.

Registration Date- defines when you start to issue Official Receipts and write on the logbook

Line of Business / Industry / Activities

At the bottom part, you will see the REMINDERS with Bullet Points. These contain the obligations that
you have to bear in mind.

If you have no COR or TIN yet, use BIR Form No. 1901

If you have a previous COR and TIN, the easier way is to update your registration using BIR Form No.
1905

2. UPDATE OF TRADE NAME, TAX TYPE OR ACTIVITIES

If you have a current COR and TIN from your previous business, consider UPDATING instead of closing.
Closure of business requires many documents and processes and the BIR officer suggested me that I
should just update my Tax Type and Trade Name.

Before, I was a Sole Proprietor with Monthly Sales Tax and Quarterly Income Tax. BIR suggested that I’ll
just update my trade name from sole proprietorship to self-employed professional, and my tax
obligations to quarterly sales tax and quarterly income tax.

3. PROFESSIONAL / OCCUPATIONAL TAX

My sources of income are:

Freelance SEO and Digital Marketer

Insurance Agent of SunLife

Real Estate

Before BIR changed my COR, I need to submit a Professional / Occupational Tax Receipt from the city
government.

So I went to the city government center (City Hall) and the department in charge required me to submit
proof that I am a freelance / online job worker and insurance agent. So the requirements or proofs to
present are:

Certificate of Earnings or you can ask a Certificate of Employment from your employer

Certificate of Agency from Sun Life as an Insurance Advisor

PRC Receipt or License as a Real Estate Agent

Get a Professional Tax Receipt or known as PTR (or Occupational Tax Receipt) from the City or Municipal
Government Office.

Photocopy it.

Present the PTR to BIR

Go back few days later or next week to get your new or updated certificate of recognition.

You will be given your COR and BIR Signage at red orange fonts. Display this at the address that was
stated at your COR.

Please note that BIR might check this so put it in a frame and hang on a wall.

4. REGISTRATION STAMP FOR JOURNAL / COLUMNAR

A columnar is where you log your income with the corresponding official receipt number
Buy a columnar (3 or 5 columns), fill up a form and have it stamped at the BIR

Some things to note:

Columns: Date of receipt | Issued To | Amount | Receipt Number

Optional: Running Balance

Start on the day you received your COR

This Columnar is required as part of your Audited Financial Statement and Annual Income Tax Return

5. PRINTING OF RECEIPTS – AUTHORITY TO PRINT

Requirements for Printing of Your Receipts:

Bring your Annual Certificate of Registration or 0605

and Photocopy of Certificate of Registration to the Printer

6. DOWNLOAD THE EBIR FORMS 7.2

To Download the latest eBIR Form (7.2), click here.

The download should begin automatically.

You must use Windows Operating System in order for this program to function. No support for Mac OS
yet.

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Written by Marc Adrian

According to the Philippine Statistics Authority (PSA), the second largest class of workers in the country
are the self-employed. They made up about 27.8% of the total employment rate in the country in 2017.
The self-employment population also have a growing rate of freelancers, due to the rise of remote jobs
online. As the self-employed population continues to grow, their contribution to the economy now bears
as much gravity as those who are employed.
For freelancers and self-employed individuals, taxes are sometimes easy to forget. Unlike employed
individuals whose taxes are automatically deducted from their paycheck along with benefits like health
insurance and SSS contributions, take home pay tends to be a bit higher for the self employed. Thus, it’s
tempting to just pocket all of that money every payday and move on. But unless you want the Bureau of
Internal Revenue (BIR) to come knocking at your door, it’s wise to set aside a chunk of those funds to pay
Uncle Sam his due.

Who are considered as self-employed?

Taxpayers in the Philippines are classified into two types: corporate or individuals. Those who who fall on
the individual taxpayer category, are those who are either employed (or a compensation income earner,
which includes minimum wage earners) or self-employed.

Self-employed workers are those who work on their own account or with one or a few partners or in
cooperative. In these jobs, the remuneration is directly dependent upon the profits derived from the
goods and services produced by the person running the livelihood.

Self-employed individuals may register as either single proprietor or entrepreneur (other than marginal
income earners or those earning less than ₱ 100,000 annual gross revenues), or as professionals.

Single proprietor vs professionals

Professionals who are classified as self-employed are individuals who are practicing their profession,
with or without license under a regulatory board or body. They receive payment only for the service that
they do, but they don’t receive benefits and compensation because they aren’t employees. Examples of
self-employed professionals are private practice physicians, lawyers, and even accountants who are
basically on a pay-per-service basis.

For your information

Freelancers are considered as professionals despite not being governed by a regulatory board or body.
As is the case of bloggers, web developers, graphic designers, writers and other people who provide
specialized services.
Meanwhile sole proprietors are individuals who run their own business. It can be the most simple form
of business, as long as it’s registered through the Bureau of Trade Regulation and Consumer Protection
(BTRCP) of the Department of Trade and Industry (DTI).

For your information

BIR’s definition of self-employed

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 providers also fall under
professionals.

How to register as self-employed at BIR

Just like everyone else, the self-employed are required to register with BIR for tax filing. The process can
be a bit more tedious compared to tax registration for employment due to some extra documents.

Requirements

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

Affidavit indicating the rates, manner of billings, and the factors considered in determining service fees
(as specified in BIR Revenue Regulation 4-2014)

Forms to fill -out

BIR Form 1905 – for people who already have a TIN number but want to a 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).

Step-by-step registration

Step 1

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.

For your information

Issuance of TIN is free of charge

Step 2

Fill up the Application for Registration (BIR Form 1901) and the payment form (BIR Form 0605), gather
the applicable required documents.

Step 3

Submit to the form and the supplementary documents to Revenue District Office (RDO) that has
jurisdiction over your place of business.

Step 4
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.

For your information

Check with your RDO what banks are accredited to accept this payment.

Step 5

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.

Step 6

Attend the required taxpayer’s briefing at the RDO before the release of the BIR Certificate of
Registration (COR or BIR Form No. 2303) and the “Ask for a Receipt” Notice (ARN). The COR will reflect
the returns that must be filed and the taxes to be paid.

Step 7

Apply for Invoices/Receipts using the Authority to Print form (BIR Form 1906).

Step 8

Register books of accounts (Journal/Ledger/Subsidiary Professional Income Book and Subsidiary

Purchases/Expenses Book) and have them stamped by the same RDO.
Bookkeeping and invoicing requirements

Self-employed individuals, especially professionals are required to maintain books of accounts using any
acceptable method of accounting (accrual or cash basis) consistently. All of their accounts are required to
be preserved within the prescriptive period (three years from the close of taxable year) for post-audit
examination.

There are guidelines that should be followed upon invoicing, such as the:

Receipts or sales invoices should each have corresponding serial numbers.

The name of the business, the TIN, and business address of the Professional should also appear on the
invoice.

Receipts or invoices should be issued to every payment received by the professional.

The original copy of receipts or invoice should be issued to the client upon the transaction. Meanwhile, a
duplicate copy should be preserved in the place of business for a period of three (3) years from the close
of the taxable year.

For your information

Revenues exceeding ₱150,000 should have their be audited and examined by an independent certified
public accountant, and shall have their books accompanied by relevant documents (such as certified
balance sheets, profit and loss statements, and others)

Tax rates

On February 2018, the BIR released Revenue Regulation RR 8-2018 which details the implementation of
income taxes under the TRAIN law. Under the TRAIN law or Republic Act (RA) No. 10963, self-employed
individuals and professionals will be subjected to the following tax regulations:

If annual gross sales or income is ₱3 Million or below

Self-employed and professionals with annual gross sales or income receipts not exceeding the VAT
threshold of P3 Million have the option to choose between these two tax rates:

Eight percent (8%) of gross sales or receipts and other income, in excess of ₱250,000 instead of the
graduated income tax rates and percentage tax (no option to register for VAT); OR

Graduated income tax rates of 0% to 35% on net taxable income, plus 3% percentage tax (No change in
computation of Net Taxable Business Income)

The graduated income tax rates are the same as the Personal Income Tax Rates and Tax Tables here and
summarized below.

BIR Income Tax Table (for the years 2018-2022)

Bracket Taxable income per year Income tax rate

1 ₱250,000 and below 0%

2 Above ₱250,000 to ₱400,000 20% of the excess over ₱250,000

3 Above ₱400,000 to ₱800,000 ₱30,000 + 25% of the excess over ₱400,000

4 Above ₱800,000 to ₱2,000,000 ₱130,000 + 30% of the excess over P800,000

5 Above ₱2,000,000 to ₱8,000,000 ₱490,000 + 32% of the excess over ₱2,000,000

6 Above ₱8,000,000 ₱2,410,000 + 35% of the excess over ₱8,000,000

BIR Income Tax Table (from year 2023 onwards)

Bracket Taxable income per year Income tax rate

1 ₱250,000 and below 0%

2 Above ₱250,000 to ₱400,000 15% of the excess over ₱250,000

3 Above ₱400,000 to ₱800,000 ₱22,500 + 20% of the excess over ₱400,000

4 Above ₱800,000 to ₱2,000,000 ₱102,500 + 25% of the excess over ₱800,000

5 Above ₱2,000,000 to ₱8,000,000 ₱402,500 + 30% of the excess over ₱2,000,000

6 Above ₱8,000,000 ₱2,202,500 + 35% of the excess over ₱5,000,000

8% withholding tax for self-employed and professionals

The 8% withholding tax rate replaces the two-tier rate of 10% (for self-employed and professionals
earning less than ₱720,000 income every year) or 15% (for those earning more than ₱720,000 per year).

The 8% withholding rate is applied on the income, regardless of the amount, and is reiterated in BIR’s
Revenue Memorandum Circular No. 1-2018 issued on January 4, 2018 which states that:

“Change in the Creditable Withholding Tax Rate on lncome Payments to Self-employed lndividuals or
Professionals.”

The following lncome Payments to Self-employed individuals or Professionals shall be subject to 8%:

professional fees, talent fees, commissions, etc. for services rendered by individuals;

income distribution to beneficiaries of Estates and Trusts;

income Payment to certain brokers and agents;

income Payments to partners of general professional partnership;

Professional fees paid to medical practitioners; and

Commission of independent and/or exclusive sales representatives, and marketing agents of companies.”

If annual gross sales or income is above ₱3 Million

However, the tax rule is simpler and more straightforward for self-employed and professionals receiving
annual gross sales or receipts exceeding the ₱3 Million VAT threshold. If their gross income or sales
receipts total more than ₱3 million, they do not have a choice and they must follow the graduated
income tax rates (as shown above) on the net taxable income, plus VAT.
Filing your Income Tax Return (ITR)

Filing for a tax return for the year is a straightforward process. If the documents and bookkeeping has
been consistently complied, filing should be as easy as these three steps:

Download and accomplish the ITR form from BIR’s website.

Proceed to Authorized Agent Bank of RDO where you are currently registered and present your filled out
BIR form and required documents.

Receive duly stamped and validated form as proof of ITR filing.

Having to deal with taxes is no fun at all, however, it is a responsibility every law abiding citizen must
comply with. As the BIR would put it:

“If you love your country, then pay your taxes. “

Make sure you file your taxes on or before April 17, unless you don’t mind paying for penalties and late
charges.