We’ve said it before: Working freelance is not always a walk in the park. One of the challenges that tend to take new freelancers aback is the fact that they now have to process their own taxes. (Sorry, what?) Okay, for those hearing this for the first time: Yes, you need to pay taxes as a freelancer. Freelancers fall under what the government calls self-employed individuals, defined 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 providers also fall under professionals.
Last year, self-employed individuals including freelancers like you comprised 27.8% of the employed population in the Philippines, government data show. This gives you an idea of how much contribution you make to the economy. Hopefully this also provides a sense of comfort that you are not alone in having to pay taxes as a freelancer. At your full time job, taxes were something you complain about whenever you see the deduction on your pay slip. You’re probably used to having the folks over at human resource settle everything for you (and keep you from getting sued for tax evasion). But having HR support is one of the conveniences you’d have to do without as a freelancer.As you begin your journey as a freelancer, you need to familiarize yourself with all the documents you need to comply with tax laws. It’s not just about deferring a portion of your income to the government. The actual payment (though probably the most painful) is just one part of the process. You need to set yourself up to pay taxes as a freelancer.
Here’s a guide that we hope will ease the process for you.Am I a professional, a single or sole proprietor?
Writers, graphic designers, videographers and photographers are usually categorized as professionals. This means you receive payment as an individual. However, if you register a business to offer these services (say if you set up a photography studio), you become a single or sole proprietor. You will also need to register with the Department of Trade and Industry.Where should I go?
The government office tasked to collect taxes is the Bureau of Internal Revenue (BIR). It operates on a national level but a taxpayer often transacts only with a Revenue District Office (RDO). There’s a list of RDOs on the BIR website complete with addresses and contact details. The RDO nearest you is your best bet, but the BIR website has a detailed list of areas within the RDO’s jurisdiction.What documents do I need?
- NSO birth certificate
- Photocopy of mayor’s business permit , if applicable
- DTI certificate of business name, if applicable
- PRC ID, if applicable
- Occupational Tax Receipt (OTR) or Professional Tax Receipt (PTR), if applicable
- Contract/company certification, 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)
Step-by-step guide
Step 1:
Fill out the Application for Registration (BIR Form 1901) and submit together with the required documents to your RDO.
If you already have a Tax Identification Number (TIN) as an employee, you need to fill out a different form: the Application for Registration Information Update (BIR Form 1905)
Step 2:
Pay the annual registration fee of ₱500 at the BIR office or any authorized bank located within your district. (Make sure to check with your RDO what banks are accredited to accept this payment.)
Step 3:
Pay for the ₱15 certification fee and the ₱15 documentary stamp tax. A form will be given then, which the you will be attaching to the registration certificate later on.
Step 4:
Attend the required taxpayer’s initial briefing at the RDO which will be conducted by the RDO for new registrants in order to advise them of their rights and duties/responsibilities as taxpayers.
Step 5:
Apply for invoices/receipts using the Authority to Print Form (BIR Form 1906).
Step 6:
The RDO shall then issue the Certificate of Registration (Form 2303) together with the “Ask for Receipt” notice, Authority to Print (ATP) and Books of Accounts.
Step 7:
Register books of accounts (journal/ledger/Subsidiary Professional Income Book and Subsidiary Purchases/Expenses Book) and have them stamped by the same RDO you registered at.
Step 8:
Keep a good record of your income and expenses and pay taxes as a freelancer on a regular basis!And yes, there’s a reason they say taxes--in plural form. Just to give you an overview, we’ve summed up the different type of taxes (including their deadlines) that you need to take note 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
The process required to pay taxes as a freelancer is a constant source of frustration among creatives we work with at GetCraft. But hopefully this guide answered some of your taxing (see what we did there?) questions. If you’re still unsure, there are also services such as Taxumo that might help. We’re also putting together a report about the challenges creatives in the Philippines are facing to start conversations with stakeholders on what we can do together to give the creative industry here a boost. Help us out by filling out our survey. And if you haven’t yet, join our Marketplace to get the opportunity to work with some of the world’s leading brands on their campaigns.ALSO READ:
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