How To Pay Taxes If You’re Working As A Freelancer in the Philippines

As of 2018, an estimated 1.5 million online Filipino freelancers are providing their services worldwide.

Freelancers are working in graphic design, as online coaches, virtual assistants, and other jobs where they can do remote work

While it gives freedom from the usual office setup, some freelancers are intimidated by the fact that they are now solely responsible for managing their taxes.

If you’ve decided to join this booming industry and would like to understand the complexity of personal taxation, read our guide on how to pay taxes as a freelancer in the Philippines.

What is online freelancing?

An online freelancer is identified as any self-employed individual who offers their services through reliable online networks.

A freelancer is obliged to pay taxes according to Section 74 of the Philippine Tax Code, but may be exempted if:

  • You are receiving a minimum salary.
  • If total income received is below Basic Personal Exemption amounting to P50,000 and Additional Personal Exemption which is P25,000 per minor dependent.
  • If your yearly salary is P60,000 and below.

(Read: Top 50 Online Jobs in the Philippines: Your Ultimate Online Career Guide)

Requirements needed to register for home-based jobs in the Philippines

A Tax Identification Number (TIN) is needed as this serves as your identity for tax involved transactions.

For applicants, the department provides a BIR e-Registration system where you can conveniently request your TIN online then settle a P500 fee at any BIR branch.

Additionally, you can pay through bank deposit. To check the list of authorized banks, click here. To conveniently pay online, you may use GCash or through Electronic Filling and Payment System (eFPS).

Once you’re paid, proceed to your chosen BIR branch and get your TIN card, which you will use to register as a self- employed professional.

Furthermore, check out the other required documents for registration below:

This will be used to declare a shift in employment or business operation by individuals who already have a TIN.

This will be used as the registration form for self-employed individuals.

This will be used to pay fees and taxes that don’t require tax returns.

  • Birth Certificate authenticated by the National Statistics Office (NSO).
  • Cedula or Community Tax Certificate

If applicable, include the following:

  • Company certification or contract
  • Clear photocopy of Mayor’s Business Permit
  • Certificate of Business Name
  • Marriage Contract
  • Occupational Tax Receipt
  • Professional Tax Receipt

(Read: All Your Questions About BIR Form 2316, Answered)

How to properly fill out BIR forms as a freelancer

After you collected the compulsory documents, it’s time to fill out the BIR forms. Take your time in answering all the needed information as minor errors will void your application.

Refer to the list below that requires your details.

1. BIR Form 1905

  • Fill in your details on the following:
    • TIN
    • Your Revenue District Office (RDO)
    • Full name
  • On Part II, mark “Letter E”: Change in Registered Address
  • Since you will be working home-based, on Field 4E, mark the “Transfer of Home RDO” then log in your new address and Telephone Number.
  • Sign on Field 5 then put your official title.

2. BIR Form 1901

  • On the Taxpayer Type, choose “Single Proprietorship”.
  • Fill in your details on the following:
    • TIN
    • Sex
    • Full name
    • Citizenship
    • Date of Birth
    • Residence address
    • Zip code
    • Telephone number
  • If the source of your income generally comes from online home-based work, mark “Income Tax” and “Other Percentage” then write “Self-Employed” on the “Specify” box.
  • For transactions amounting to P25 and above, it is mandatory to issue a receipt and use a Cash Disbursement Journal and Cash Receipt Journal. Log in at “Registration of Books of Accounts” under “TYPE OF BOOKS TO BE REGISTERED”.
  • If you’re married with children, fill out your civil status found on part two, then declare their names at part three under the “Additional Exemption”. Note that four children are eligible for exemption.

3. BIR Payment Form 0605

  • Fill in your details on the following:
    • TIN
    • On the Line of Business/Occupation, write Self-Employed
    • Taxpayer’s Name
    • Telephone Number
    • Registered Address
    • Zip Code
  • On the “Manner of Payment” section, mark “Others (Specify)” then write “Certificate of Registration (COR)” on the space provided.

Note that you must fill out three copies of this payment form that will be used to pay for your COR.

Steps for Registration

1. Submit your duly filled BIR Form 1901 together with other requirements at the RDO in your area. For location reference, click here.

2. A registration fee amounting to P500 must be settled at the BIR office or any authorized bank set by the servicing RDO.

3. Additionally, pay for the documentary stamp tax and certification fee amounting to P15 each.

4. Participate in the mandatory RDO initial briefing that will enlighten you on everything about tax compliance.

5. After attending, you will receive your COR or Form 2303 together with the Authority to Print (ATP), Book of Accounts and “Ask for Receipt” notice.

Present the requirements for ATP together with the Book of accounts at the RDO for stamping.

Moreover, you will also be given a Ledger and a Journal. Remember to note every transaction and business expenses in your Journal as this can be used as a reference for your quarterly and annual income tax return. On the other hand, monthly to quarterly sales are logged in your Ledger and for income P25 above, there must always be an OR.

(Read: Best Part-Time Jobs In The Philippines For Employees And Freelancers)

Taxes for Freelancers

Type of Tax Description
Monthly Percentage Tax Return
  • Three percent of the total income
  • BIR FORM 2551M and BIR FORM 0605
  • Must be filed every 20th of the month
  • Can be paid at any BIR authorized banks
Quarterly Income Tax
  • Determined from the net income
  • BIR Form 1701Q and BIR Form 0605
  • Must be filed on the 15th of April of the following year
Renewal of Annual Registration Tax
  • BIR Form 0605
  • Every 30th of January

In reference to the BIR’s Amount of Net Taxable Income that you may view here, P18,000 falls on the P10,000 to P30,000 range that bears a computation of P500 + 10% of the Excess over P10,000. Given that, P1,300, that is how much must be paid every quarter.

Annual Income Tax

It is mandated by law that every citizen, regardless of their civil status, will be given right to claim a P50,000 deduction from their gross yearly earnings.

In addition, for married workers with children, an additional deduction can be enjoyed amounting to P25,000 totaling to P75,000. In reference with our example, earning P10,000 a month will provide you P120,000 annually.

To get your Annual Income Tax, deduct your yearly earning equivalent to P120,000 to your P75,000 Personal Exemption amount.

The result will be P45,000 that will then be multiplied to the 40% OSD and will equal to P18,000.

In reference with the Taxable Income table from the BIR 1701 form that you may view here, it will yield P27,000.
Applying the sample from the table above:
P500 + (10% x (P27,000 – P10,000))) = P2,200
For three quarters, your Tax Due is:
3 x P1,300 = P3,900
P2,200 – P3,900 = -P1,700
As it is negative, BIR will provide you with P1,700 as reimbursement for overpaid taxes.

To lift your burden of paying an extra amount, we suggest having your monthly taxes deducted every quarter.

(Read: We Answer Your Frequently Asked Questions About Tax Refunds In The Philippines)

Advantages of registering to the BIR as a freelancer

1. You gain the trust of present and future clients through the issuance of valid official receipts, which shows you’re running a government-acknowledged business.

2. With the use of your filed annual income tax return or BIR Form 1701, you can apply for loans in banks, credit cards, and other accredited lending institutions for various personal needs.

3. It secures the longevity and stability of your business as long as you settle your taxes on or before the deadline to avoid fines and penalties.

4. As a home-based Filipino worker, you are basically managing your own business and paying your own taxes.

5. You will avoid getting persecuted for tax evasion. As per Section 74 of the National Internal Revenue Code of 1997, self-employed individuals are obliged to file a declaration of their assessed earnings for the current taxable year. Failure to do so is punishable by law.