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Freelancing is on the rise in the Philippines, reflecting a growing trend in the workforce. As tax season approaches, understanding the tax obligations for freelancers becomes crucial. This article aims to guide freelancers through the process of filing taxes in the Philippines, covering essential topics such as tax planning, preparation, and the steps involved in filing income tax returns. Learn how to navigate the intricacies of tax season and ensure compliance while optimising your financial management as a freelancer.
What is an Income Tax Return?
An Income Tax Return (ITR) is a document where individuals declare their income, deductions, and tax payments to the government. It serves as a record of a taxpayer's financial activities during a specific period, typically a fiscal year. Filing an ITR is a legal requirement in many jurisdictions and is used by tax authorities to assess and calculate the individual's tax liability. The document provides transparency regarding one's financial affairs and ensures compliance with tax regulations.
Who is Required To File an ITR?
In the Philippines, the requirement to file an Income Tax Return (ITR) is generally applicable to the following:
Individuals
Resident Citizens:
Individuals residing in the Philippines, regardless of where income is earned. This includes individuals who have single or multiple employers within a taxable year, self-employed individuals and professionals and mixed-income earners who earn both compensation income and business or professional income.
Non-Resident Citizens:
Filipino citizens working abroad who meet specific criteria.
Resident Aliens:
Foreign nationals residing in the Philippines for 180 days or more within a calendar year.
Non-Resident Aliens Engaged in Trade or Business:
Foreign nationals earning income from Philippine sources.
Non-individuals
Domestic Corporations
The term corporation shall include one person corporations and partnerships but shall exclude general professional partnerships that are receiving income from sources within and outside the Philippines.
Foreign Corporations
This includes corporations receiving income from sources within the Philippines only.
Estate and Trusts:
Estates and trusts with taxable income.
When To File an ITR in the Philippines
In the Philippines, the tax season typically runs from January 1 to April 15 each year. During this period, individuals are required to file their Income Tax Returns (ITRs) for the previous taxable year. It's essential to be aware of key dates and deadlines to ensure compliance with tax regulations.
For the tax year 2024, the deadline for filing Income Tax Returns is on or before April 15, 2025. It is crucial for taxpayers to submit their ITRs within this timeframe to avoid penalties and ensure a smooth process. Planning and preparing ahead of the deadline can help individuals gather the necessary documents and information required for accurate and timely filing with the Bureau of Internal Revenue (BIR). Stay informed about any updates or changes to the filing deadline to meet your tax obligations in the Philippines.
What Are The Requirements for Filing an ITR as a Freelancer?
Secure these initial documents to register your business/profession to the BIR:
Two (2) valid IDs + photocopies
PRC License (if applicable)
Proof of residency
Certificate / Contract / Portfolio to explain and show proof of your work
Proceed to your Barangay Hall to get your Barangay Clearance or Certificate
Proceed to your Municipal / City Hall to get:
Occupational Tax Receipt (OTR) for professionals without a PRC License
Professional Tax Receipt (PTR) for professionals with a PRC License
Get your Taxpayer Identification Number (TIN)
You also need to get your TIN for your freelancer BIR registration. Most freelancers I know already have a TIN because they were previously employed and the company got the TIN on their behalf. In any case, you should know the BIR Revenue District Office (RDO) your TIN is connected to.
EDGE Tutor Tip: To know the RDO your TIN is connected to, you can visit the website of BIR which is https://www.bir.gov.ph/ and chat with Revie (Interactive Taxpayer Assistant of BIR). From there you can choose a query and one of them is the RDO Finder which allows a taxpayer to identify which RDO is a TIN registered to.
If you still don’t have a TIN:
Download and fill out BIR Form 1901 for Self-Employed.
Register online (it is temporarily unavailable since 11 Feb 2022 due to system enhancement). You need to visit the nearest BIR office to register manually instead. See this list of BIR Regional/District Offices (RDO).
Submit the form and get your TIN from your RDO.
If you already have an existing TIN:
To change your status from employed to self-employed, download and fill out BIR Form 1905.
If you need to change your RDO, indicate “Transfer to another RDO” on the form, and submit to your old RDO to have it changed. RDO transfer processing time takes about seven (7) working days.
EDGE Tutor Tip: You don’t need to accomplish BIR Form 1905 if you will apply as self-employed in the same RDO. BIR Form 1901 will already suffice.
Compile all the BIR requirements
Barangay Clearance
Occupational Tax Receipt / Professional Tax Receipt
Stamped BIR Form 1905 (if you transferred RDOs from Step 2)
Stamped BIR Form 1905 (for the registration of Books of Accounts)
Accomplished BIR Form 1901 – three (3) copies
BIR Form 0605 (for paying) – three (3) copies
Birth Certificate – original and photocopy
Marriage Certificate (if applicable) – original and photocopy
Title of Property (if you own one) – original and photocopy
Notarized Lease Contract and Authorization Letter from Renter (if property is leased; know the size of the property as well) – original and photocopy
Proof of Billing with the address that you will use – original and photocopy
Two (2) valid IDs – original and photocopy
*See the official BIR checklist of documentary requirements for self-employed (CDR F1101).
How to file taxes for freelance work (Self-employed Individuals)
Filing Income Tax Returns (ITR) as a self-employed individual in the Philippines involves several steps. Here is a comprehensive guide:
Step 1: Determine the Appropriate Form
When it comes to annual tax filing for self-employed individuals in the Philippines, choose the appropriate BIR form based on your income source: BIR Form 1701 - Mixed-Income Earners, for those earning from both business/profession and employment. BIR Form 1701A - Purely Business Earners, exclusively for individuals earning solely from business or profession. For quarterly filing, regardless of income source, use BIR Form 1701Q. Always stay updated with the latest BIR guidelines and consult a tax professional for compliance with current regulations.
Step 2: Gather Necessary Documents
Collect supporting documents such as books of accounts, financial statements, official receipts, invoices, and other relevant records.
Step 3: Update and Verify Information
Ensure that all personal and business information is accurate and up-to-date. Check the completeness of the required attachments.
Step 4: Compute Gross Income
Calculate your gross income, considering all earnings from your self-employed activities.
Step 5: Deduct Allowable Expenses
Identify and deduct allowable business expenses from your gross income to arrive at the taxable income.
Step 6: Compute Income Tax
Use the appropriate tax rates and compute the income tax payable. Refer to the BIR tax tables for the correct rates.
Step 7: Fill Out the BIR Form
Complete the chosen BIR form, providing accurate details about your income, deductions, and tax computation.
Step 8: Attach Required Documents
Include supporting documents such as financial statements, books of accounts, and other necessary attachments. Ensure that all receipts are properly documented.
Step 9: Pay the Tax Due
If you have a tax payable, settle it at an authorized bank or Revenue Collection Officer.
Step 10: Submit the Completed Form and Attachments
File the completed BIR form and attachments at the Revenue District Office (RDO) having jurisdiction over your place of business.
Step 11: Receive the Stamped ITR and Acknowledgment Receipt
After submission, you will receive a stamped copy of the ITR and an acknowledgment receipt.
Step 12: Keep Copies for Your Records
Retain a copy of the filed ITR, acknowledgment receipt, and all supporting documents for your records.
It's important to note that tax regulations may change, so it's advisable to check the official website of the Bureau of Internal Revenue (BIR) in the Philippines or consult with a tax professional for the most up-to-date information.
Filing Taxes as a Freelancer
In summary, this article has outlined essential steps for freelancers in the Philippines to navigate the intricacies of filing taxes. Key takeaways include determining filing requirements, gathering necessary documents, and completing the appropriate BIR forms. Freelancers are encouraged to prioritize tax compliance, steering clear of potential penalties and ensuring a seamless process.
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