You can still read this guide for added information but we strongly recommend you check out our Updated Filipino Online Worker’s Guide to Paying Taxes – 2020
A lot of online workers have been getting away with NOT paying taxes. I understand that many of us justify not giving our hard-earned money to corrupt government officials. Why pay taxes when you know most of what you’re paying will just line the pockets of greedy and corrupt politicians?
But paying taxes is each Filipino citizen’s obligation. Contrary to popular belief, taxes don’t just go to dirty politicians’ pockets. They also go to building schools, bridges and hospitals. Not paying taxes actually hurts the people who need it most– like students, patients, and farmers– more than it punishes corrupt officials.
With the recent barrage of high profile stories in the media about online workers earning millions, the BIR is looking for ways to catch and punish people who don’t pay taxes. It won’t be long before the BIR finds an online worker and makes an example of him.
Besides helping those who need it most and avoiding becoming a public example, paying your taxes also makes it easier for you to obtain a loan, credit card, passport or visa because these applications all require your tax documents.
Think about it this way– filing and paying your taxes NOW will protect you from the wrath of the BIR in the future.
As Easy As RFP?
The TV ads make it all look so easy. Just register, file and pay.
But the truth is the BIR is still working on how to categorize online workers. We’re not employees in a traditional sense. In some ways we are business owners but most of us don’t operate the same way most businesses do. It’s this limbo situation that complicates the tax system for online workers and discourages many from filing.
To make things easier, we consulted with a BIR certified accountant and an auditor who has a lot of experience with online workers. Not only did he explain in great detail how online workers can register, file and pay, he also taught us how to compute taxes, so you only pay exactly what you owe; no more no less. We also took into consideration the impact of TRAIN and how new BIR regulations are going to affect workers. It’s still a bit complicated but the past few years some things have cleared up.
You must pay taxes. But there’s no law that says you gotta leave a tip.– Morgan Stanley advertisement
Getting your Taxpayer Identification Number (TIN)
The first step to registering as an online worker is getting your tax identification number or TIN. If you already have a TIN, you’re good to go! You don’t need to get a new one.
If you don’t have a TIN yet, you can easily get one through the BIR e-registration system. Once you secure your TIN, you need to pay a Registration Fee of P500 to Authorized Agent Banks (AABs) within your tax area. You can also pay through the following BIR-accredited payment facilities:
Once you have the receipt, you can go to your local BIR office to obtain your TIN card.
With your TIN card in hand, you can begin the process of registering as an online worker.
Online Worker Registration
Below are the documents you need to prepare. To make things easier, we’ve put them into a checklist for you to use as you prepare your documents.
- NSO certified birth certificate,
- NSO certified marriage certificate (if married),
- community tax certificate (cedula)
- Certification from your barangay captain (to certify your address)
- BIR Form 1905 (for those who already have a TIN and used to work in an office, to change your Regional District Office)
- BIR Form 1901 (registration form page 1 and page 2)
- BIR payment form (Form 0605)
For the purpose of this blog post, we’re going to focus national taxation (taxes you have to pay to the BIR). Different local government units might have their own taxation systems and rates which we will not discuss here. We also won’t be talking about how to register with the DTI because there are a lot of resources online you can use for that.
Forms, Forms, Forms
The hardest thing in the world to understand is the income tax. –Albert Einstein
The first thing you need to do is get ae BIR Certificate of Registration also known as Form 1901
The upper portion of page 1 of the form is where you would put your name and newly minted tax identification numbers (TIN). We used a fictional worker, Jose, as an example.
Under the TRAIN law, as an online worker you actually have two options on how to pay your taxes. You can pay the graduated income tax, which allows you to make deductions BUT you have to pay a quarterly percentage tax. OR you can pay 8% tax of your gross sales and you don’t need to pay a percentage tax.
Since Jose earns exclusively through his online job, he declares himself as ‘self-employed’ or as an independent contractor. In this case, Jose declares that he opts for the graduated income tax. If he chose the 8% gross tax, he doesn’t need to check the percentage tax. And when he renews his COR next year, he would have the option to change to 8% if he wishes. But for now, he is choosing the graduated income tax.
A Cash Receipt Book is a book where you record all the receipts that have been issued. All transactions over P25 must have a receipt.
A Cash Disbursement Book is where you record all your expenses in the business.
This might seem like an unnecessary hurdle but there’s actually a very good reason for this. This requirement is the BIR’s way of forcing people to get into the habit of record keeping. But if you prefer to submit Excel records instead, you can actually do so. There’s a separate form for it that you can inquire from your RDO.
Before the train law, there are exemptions for married couples and children. But under the new TRAIN law, there’s no need to declare these exemptions anymore. Now all they need to do is to pay for this Certificate of Registration (COR), by filling out BIR form 0605 (a.k.a. Payment Form) in triplicate to pay for it. The COR costs P500. This COR needs to be renewed every January.
The Payment Form (Form 0605)
Filipinos who are used to paying their own taxes will be familiar with form 0605 because it’s the form you have to fill out to pay for almost every kind of tax. Basically it’s like an invoice from the BIR that you have to fill out yourself.
Below is how to fill out the 0605 for the COR.
Since he using the 0605 to pay for her COR, he only has to fill out the fields below.
As you can see, Jose he’ll be using this form again in the following months to pay for percentage and income taxes.
After submitting the documents and forms listed above, Jose will have to attend a seminar conducted by the BIR examiner in order to get his COR. The seminar usually lasts from 1 to 2 hours. After the seminar, the BIR examiner will give them the date when they can claim their COR.
To be safe, Jose brought his book of accounts to the seminar so he could register it. A book of accounts is used to document business expenses and earnings. He needs to register a new book for every fiscal year.
Once Jose receives his COR, he’ll bring a photocopy of the COR and form 0605 he filled out to pay for his COR to a BIR accredited printing press to have his receipts printed. (The local BIR branches have this list. You just have to ask for it). The printing press will give Jose 12 booklets (each containing 100 receipts) which will last him 5 years. On average, a printing press will charge between P1,000 to P1,500 for 12 booklets.
Let’s Talk About Taxes, Baby!
Before we dive deeper into taxes, I need to put in another disclaimer here.
Local taxes are different from BIR taxes. Local taxes stay with your LGU and the taxes you pay with the BIR goes to the national government. To know more about the local taxes you need to pay (or don’t need to pay), it’s best to ask your LGU.
Let’s congratulate Jose now that he’s a registered taxpayer. This is where the TRAIN law would make the most impact as taxpayers. If he earns less than P250,000 per year, it’s basically tax free. No need to compute for exemptions. As long as you earn P20,000 or less, it’s tax exempt. BUT you would still need to file through the eFPS to declare it AND to get an ITR.
Now what would happen if you earn more than P250,000 per year. What if Jose earns P30,000 a month?
At this point, Jose would have two options. He can either choose to
- pay an 8% tax on their gross income or
- use the graduated income tax table plus 3% quarterly percentage tax.
How do both methods compare?
| 8% Tax on Gross Sales | Graduated Income Tax | |
| Advantages | No need to pay 3% quarterly percentage tax, just compute for 8% | You can declare deductions (itemized or optional standard) |
| Disadvantages | You can’t declare deductions | You have to compute for your income tax and percentage tax |
| Forms Needed | Quarterly Income Tax (based on gross income)
Yearly and Final Quarter Payment of Income Tax
Annual Registration Fee (COR Renewal)
|
Quarterly Income Tax (based on income after deductions)
Quarterly Percentage Tax
Yearly and Final Quarter Payment of Income Tax
Annual Registration Fee (COR Renewal)
|
So what does this mean for Jose?
8% Tax On Gross Sales
If Jose opts for the 8% tax on gross receipts and he has an income of P30,000 per month, here’s how much he needs to pay per quarter:
P30,000 * 12 months = P360,000
P360,000 – P250,000 (non-taxable income) = P110,000 (taxable income)
P110,000 * 8% = P8,800 tax due for the year
P8,800 / 4 = P2,200 tax per quarter
Graduated Income Tax
Since Jose opted for the graduated income tax, he will need to pay quarterly income tax and the quarterly percentage tax
Percentage tax = P360,000 (yearly income) * 3%
= P10,800 percentage tax for the whole year
P10,800/4 = P2,700 percentage tax
For his income tax, we need to compute for his taxable income first by subtracting his deductions. He can have
Wow! Thank you! It clarify everything. Now, I know that paying taxes is not that expensive at all.
But I do have a question, does registering a certificate need to have a business permit or anything? I can use a name aside from own name as the name for every transaction?
According to our consultation with the accountant, it would depend on your city’s local business ordinances. Some cities would require a business permit from the local government while some only require a barangay registration of micro-business. It would be best to consult with your local BIR certified accountant for more information on local ordinances.
in davao city, is a business permit required?
I’m sorry but that’s beyond the scope of my experience. Please consult with a local bookkeeper or accountant to get more accurate information.
Hi, I’m an online teacher and I want to travel abroad. One of the things they ask is my ITR but I don’t know where to start. Because of this post I have an idea of what to do thought the company that I work for already deduct tax from my salary but they don’t provide an ITR. However, they give us Form 2307 which has the breakdown of the tax that I already paid. So now, I don’t know where to start.
How about if our salary is paid in dollar? Is it tax exempted?
We asked our consulting accountant and he said that as long as there’s an exchange of goods and services for money, that salary is taxable, even if it’s in dollars.
In that case, how do we declare that? Do we compute/convert first, or do they have a specific form for it?
Thanks
Hi Maria!
I’m a little confused by your questions. Could you be more specific?
I think she meant it that for example, I receive $500 USD every month. Do we declare the gross amount in the equivalent peso value? Note that the equivalent peso value differs every month.
I consulted with our bookkeeper and she recommends that you use the peso amount. I understand that the value of the peso varies per month, so she suggests using an average amount for that quarter.
does the monthly percentage tax applicable to all online workers or to only those who have online shops/or are online sellers?
According to the accountant we consulted with, it’s also applicable to online workers. But online workers can have it deducted from your income tax payments.
HI! I have read from your comment that monthly percentage tax can be deducted from income tax. May I ask how ? Because aside from the 10% tax that is automatically deducted from my salary (through online job), I also pay 3% of my gross income from my net income. Please guide me. I am bit confused. Thanks!
the 10% is the expanded withholding tax on professionals, and the 3% is what you call percentage tax. If you can see on the new 1701A form that Freelancers earning purely income from profession should use, there is a part IV.C – Tax credits portion there where you can write down all the taxes deducted from you and you paid for the taxable year applicable. As for the 10% deducted from you, you should as for a BIR Form 2307 – (Creditable Tax withheld as source) from your client that deducted it. Its your proof that they really deducted the 10% professional tax and that you need to attach it as well on your Annual ITR Form. on the Form 1701A item 58 that is where you put the total percentage tax(3%) you paid for the first three quarters and on item 59 is where your total professional/expanded withholding tax(10%) for the first three quarter goes. on item 60 is where your total professional tax for the 4th quarter should be written. on item 63 is where all your other taxes paid goes to. then that how you can compute your total tax credits that you can deduct from your annual ITR tax Due. Hope this helps!
monthly percentage tax is applicable to all tax payers (self-employed and business owners) who are not VAT registered. 🙂 the logic of it is similar to withholding taxes for employees.. 🙂
Thanks for the information and link Sarah! This is really helpful!
Thank you for sharing this information. I earn online but I never file for my tax.
You’re welcome! We’re glad our information has been helpful.
Nice one. Very informative. Thanks, Julia!
Thank you Marizel!
Hi, I’ve been an independent contractor since 2017 and got deducted 10% from my income per pay out until now. I didn’t declare or made any changes on my status as employed (call cnter) to self-employed (online tutor).
At the moment, i work two jobs. In bpo and online, what to do? Does my employer in bpo deducts tax and online deducts another tax from me at the same time?
This is so crystal clear! So, paying taxes isn’t that expensive at all like we always thought. Let’s all be responsible citizen virtual assistants. Thanks, Julia!
Thank you Jeralyn!
Kudos to the writer for this very relevant and informative article. 🙂
Thank you Elijah! =)
Hello! Thank you so much for publishing this article. I think this is very helpful to a work-at-home professional. I just want to ask help regarding my case. I’m a full-time online ESL tutor and my company withholds 10% of my monthly earnings , and provides a copy of BIR 2307 (quarterly). According to my company, BIR classifies us as Professionals (though we’re not PRC-licensed teachers) and not as Business owners. Could you also show us the procedures from registration, to renewals (if there’s any), until the filing of annual ITR? There’s much confusion in filing our ITR and every tutor has different experiences regarding this. Some were required by BIR to get COR, and some were not. Thank you very much for your help! – Lory
You’re welcome Lori! I believe we were able to cover most of the information you are looking for here but I will update this article regularly as soon as we receive updates from the BIR. But as far as we know (based on what our accountant has told us) online workers who are not employed in a company are required to register for a COR. =)
Hello, so I have the same case as Ms. Lori above. Since they are withholding 10% of my tax every month, does this mean that I do not need to file my monthly percentage tax (3%)? Thanks!
Hi Viena,
It would be best if you ask a bookkeeper or accountant about that. He or she would be in the best position to give you advice based on you situation.
viena, i am also a professional and i pay my own taxes and ive learned though the years how to do it but also made some mistakes i had to pay for, as in penalties, anyways… you must pay your monthly percentage tax (3% of gross income) and quarterly income tax and annual income tax. the 10% withheld tax can be used as money to pay for the annual or quarterly income tax.
THANK YOU FOR THIS INFORMATION.
You’re welcome! Glad you like it =)
Thank you for this! Definitely has to be printed 🙂
You’re welcome Nica and thank you for your kind words!
This is extremely encouraging! My mom told me about this but I’m stressed by the forms and I’ve been getting mixed feedback on what to do.
I understand how you feel. To be completely honest, the process is a bit tedious because of all the paperwork.
Just think of this this way, you’ll need an ITR when applying for loans with banks, getting a credit card, or applying for visa if you want to go abroad. Filing and paying your taxes now will make it easier if you have plans to take out a loan or go abroad in the future.
I am wondering if I go itemize my expenses. Will it cover my entire meralco and pldt/ internet bill since it is used both for personal and business purposes? Should the bills have to be under my name?
It would be best to work with an accountant if you want to itemize your expenses. He/she would be able to advise you on what you can include, what you need to have those expenses included (usually receipts), and how to input them in your books.
yes
hi.. i will suggest that its the best way to use the OSD method… specially to all professional workers.
less BIR hassle…
by the way i am a bookkeeper.
i hope it helps.
What is an OSD Method? And how does it help to keep our taxes registered on BIR?
OSD or optional standard deduction is just a method of computing for taxes. It does now help with registration.
since the meralco, internet bill are used for your online job, yes you can include it but as my accountant had told me, only a part of it can be declared. it is for the reason that your whole household shares the services and that its not used purely for your online job. If you rent a space, it can also be included in your expenses. Usually, the allowable expenses would be transportation, representation, repairs and maintenance(for your PC or whatsoever you use in your job, make sure you ask for receipt!), rentals (whether its a room or an area you use for your job), communication(mobile phone bills or telephone bills under your name), taxes and permits(if applicable, let us say so have a PRC as a licensed teacher) and any other expense you incur in your job as a freelancer. You just have to make sure that you keep the receipts and that you record or bookkeep it on your disbursement journal.
Wow! This really is very helpful. I didn’t even know that an online worker has to pay taxes.
This is great info. Thanks!
You’re welcome Henry! Happy to help.
Thank you for this very informative article. I’ve been looking for something like this ever since. It’s very helpful. I have a question though. I currently work as a full-time home-based online worker and has worked in an office setting before so my employer got to file my ITR, but when I shifted to home-based work I was not able to file my ITR because I was at a loss on how to go about it and to be frank was only earning a bare minimum. I don’t have a fixed income and there are times I only earn four-digit income in a month. My question is – isn’t there any exception for minimum wage earners? Also, since I haven’t filed my ITR for the past few years, and should I decide to file now, will I be prosecuted for tax evasion??
I hope you can shed some light to my inquiries. Also, I would like to meet up with fellow online workers here in person to personally go through the process of filing ITR. The gap in my ITR makes me scared to go to the BIR office for fear that I might be questioned and fined. Please help. Thanks a lot.
Hi Gil!
The first thing you should look into is where your TIN is registered. If you used to work in a place far from home, you may need to change your RDO first. In this case, you’ll need to change your RDO using form 1905. But if you’re based in NCR, you can do this online through their website. Its only after you have transferred your RDO to your current address before you can register.
Now, about your taxes. The rates do adjust according to income and if you check the tax tables, if you earn under P10,000 you can be exempted from taxes. And if you don’t have income for a month or a quarter, you can declare a certificate of no income.
As for being prosecuted for tax evasion, it’s not likely. From what our accountant has told us, it’s more important for the BIR right now to encourage people to file and pay for taxes than to prosecute small taxpayers.
Thanks Julia for the reply.
In cases where I only earn less than 10,000 a month, do i need to file a tax exemption form and if yes what form should i use? Thanks.
hi,
this article might help.. ^^ though i know the post is way back 2014, but maybe some might come across this post and is in the same situation as yours. ^^
http://www.rappler.com/business/55548-exemption-filing-tax-bir
Hi Julia, thank you for this info, it helps talaga.:)
You’re welcome Jane! Glad to help =)
Thank you so much for this very helpful information. Will the BIR able to determine how much you are earning in a monthly basis or this depends on how much you declare? Also what if I can only present 3 receipts for just this year, will that suffice? Also, since I am only registering now, will they also ask me to pay those previous years since I started doing online work?
Thanks a lot!
Dee
You’re welcome Dee! Now, about your questions:
Will the BIR able to determine how much you are earning in a monthly basis or this depends on how much you declare?
It will depend on how much you declare, through your receipts.
Also what if I can only present 3 receipts for just this year, will that suffice?
Yes. For example, if there are months that you have no income, you have to declare that. You can ask a BIR accredited accountant for information on how to do that.
Also, since I am only registering now, will they also ask me to pay those previous years since I started doing online work?
According to our accountant, if you want to declare your previous earning, you will have to pay taxes for them. But for the best advice for your circumstances, please consult a BIR accredited accountant
Hi Julia! First of all, thanks for this very useful & informative article. I’ve got a question. In some cases you are advising to consult a BIR accredited accountant. Where can we find them? If we consult them, will they charge us consultation fee? Hoping to receive an answer, thanks!
You can find accrediated accountants here: picpa.com.ph
Hi Julia,
Super thank you for this article! Dami kong natutunan and it really helps me to understand more about taxes. I really need an ITR because of VISA, kaya medyo eager na ko magbayad ng tax even though I’m not earning that much. May hindi lang po clear sa akin (if you don’t mind) Need po ba talaga every month and quarterly ang pagbabayad ng tax? Or kung nagbabayad na po ako every month, no need na to pay quarterly (and vice versa)?
Thank you! 🙂
Hi Regine!
Actually, it will depend on how you compute for your tax. According to our accountant, ginawa sya yung monthly percentage tax and quarterly income tax to make it easier for you to pay your taxes kasi mas maliit sya. If you deduct your monthly percentage tax payments from your quarterly income, liliit or mawawala yung babayaran mo sa quarterly PERO lalaki ng konti yung babayaran mo sa annual.
For best results, consult an BIR accredited accountant or bookkeeper. They’ll be able to help you adjust your tax payments to make it easier and more convenient.
Thanks Julia!
Also, I’d like to ask if need ba talaga ng receipts, ledger? Kasi I don’t really issue receipts to clients because they’re all outside the country. Pano po kaya yun?
Warm Regards,
Regine
Hi Regine!
You still need to issue receipts as proof of income. Dun i-base yung income mo sa kung ano ang nakalagaw sa resibo. You don’t need to send the receipt but do need to issue receipts for any transcation above P25.
Hi Ms. Julia,
follow up ko lng sa questions nya. if ibang bansa ang client then dollar ang payments. is there a need na may ibabangang attachments or reference sa i-issue mong official receipt. maari bang ibang amount ang ilagay sa receipts compared sa halaga ng service you provide?
Thanks
No need to attach documents or reference. What’s in your invoice and receipt is the amount that would be recognized.
Hi Julia,
This is very detailed and finally with a guide on how to fill up the forms properly.
I got my COR on October 17, 2014, when will I start paying for Monthly percentage tax, and Quarterly tax? I don’t have my receipts printed yet.
I hope you can help me because tomorrow will be the deadline. Can I file non income for the third quarter?
Thanks and will be waiting for your reply.
Hi Dude!
Glad you found our guide to be helpful!
I’m sorry I can’t help you with your question. Your case is very specific. I think it would be best to consult with your accountant on what actions you can take regarding this.
Oh, this is my question too.
Hi Julia!
I love your blog, very informative and easy to follow! 🙂 Now I can start planning about paying my taxes. Although, I have a question if how much po ba ang charge sa pag-avail ng services ng bookkeeper or accountant?
Thank you and hope to hear from you soon!
Hi Maria!
Bookkeeper/accountant services would depend on where you are and who you know. Based on our research, a bookkeeper on retainer can cost between 1k-2k per month. An accountant would cost more on retainer. Hiring them for one time jobs would depend on the kind of work you need them to do (organizing your books, computing, etc).
thanks so much for this! so informative and helpful 😀
i went to RDO 53B earlier and when i was going to submit 1901, the lady told me that i need to submit a contract/certificate to prove that i am indeed working online/freelancing. and she did not ask for any IDs/birth certificate etc (reason she cited: i already have a TIN). she told me that all i needed to show/submit was the contract + 1901.
i guess it depends on the RDO/officer huh?
Yes, in a way it also depends on the office. Our accountant admits na now all RDOs (even BIR workers) are aware of the new rules and don’t implement them consistently. But I think the certificate she is referring to is the certificate from your barangay. Parang micr-business registration. Just a certification from your barangay captain that you work from home/home-based worker.
hello again. i submitted the printed email that my “employer” sent me (stating that i am “hired” and will work online/home-based, and how much i’m getting paid monthly) and the BIR officer accepted it. i now have my 2303 and receipts but unfortunately, they misspelled my family name on the certificates (thank goodness the spelling’s correct on the printed receipts)!
i have another question as this will be my 1st time paying the monthly percentage tax, this might sound silly hehe. when paying the monthly percentage tax (or even the monthly and annual income taxes), do i have to go to my RDO? or do i just pay at the accredited bank and that’s it? thanks again
You can just pay at your accredited bank. Your RDO should have the list of banks that accept monthly percentage tax.
Do you have to do it personally? Or can you have someone pay it for you?
HI Mike!
You can pay an accountant or bookkeeper to do all of this for you.
HI,
How about for part time online workers who also have a full time job – wherein they already pay taxes?
Thanks
Hi Grace!
Ibang usapan naman yan. If you choose to declare that income, your taxes could change coz they will add that to your income from your job. In this case, it would be best to consult with an accountant or bookkeeper because that added income will affect how you file and pay your taxes.
Thanks for all these information. The example though is if you’re getting a fixed amount of pay every month. Is the computation the same way if you get different amount on a monthly basis? I am an online worker and never get the same amount of pay every month. So this is confusing for me. Thanks for your help!
Hi Irene!
If your income changes month per month then your monthly percentage tax would change per month and quarterly income tax would also vary. The same computations still apply (3% gross for monthly percentage, the tax table for quarterly), even with the changing income, but you just need to make sure you keep track of how much you earn to make sure.
And if there are months that you have no income, you have to get a form from the BIR to declare that you didn’t have income for that month. You’ll need this to exempt you from payments. This is very important because failure to declare non-income will result in penalties.
Hello there Julia,
Thanks for this very helpful guide! I have a question since I’m working online and I’m earning dollars but diff each month, meaning every when paying quarter tax vary on the salary you earn in a certain month? same computation applies..thus this mean i’m exempted in paying the 3% in paying VAT/percentage tax? since amount paid is dollar then deposit to my account is already converted into peso which apply which is the actual rate of exchange dollar to peso..
****We have processed your payment request submitted on 22-Nov-2014.
Amount paid: $200.00 USD
Amount you should receive: 12042.51 PHP (*)
Bank account: Bank of the Philippine Islands account ending in ****
Exchange rate on 10-22-2014 12:06 UTC: 43.7901 PHP/USD****
Also since my client is not releasing invoice for the proof of payment/salary of mine so can release a receipt of payment? I mean pwede ba ako mismo ang mag release ng recibo stating my paid salary.. please help me with this.. let me know..
Thanks Much,
Margie
Hi Margie!
You’re welcome! Now, about your questions…
I have a question since I’m working online and I’m earning dollars but diff each month, meaning every when paying quarter tax vary on the salary you earn in a certain month? Yes, your quarterly tax would vary if you’re earning different amounts every month.
same computation applies..thus this mean i’m exempted in paying the 3% in paying VAT/percentage tax? Percentage tax is not VAT, it’s a business tax. But it would be best to ask your accountant or bookkeeper on whether you are exempted from this tax. But on our consultation, online workers are covered under that tax.
Also since my client is not releasing invoice for the proof of payment/salary of mine so can release a receipt of payment? I mean pwede ba ako mismo ang mag release ng recibo stating my paid salary.. Yes, you can release your own receipt stating your own salary.
Hope my answers helped. But for the best advice that would suit your case, please consult an accountant or bookkeeper.
also Quarterly Income Tax due is Due Date: April 15 (2014), Aug 15(2014), and Nov 15(2014) and Yearly and Final Quarter Payment of Income Tax Due Date: April 15 the following year.
Question: Example I already paid Quarterly tax , April 15 (2014), Aug 15(2014), and Nov 15(2014) on this date so by the the following year(2015) I will pay the Annual tax which is also Due in April 15 (2015)so thus this means the following year(2015) I will pay twice “the Annual tax(2015) + the 1st quarterly tax of 2015 “? let me know.. thanks
I know it’s a bit confusing. I was confused by this at first =) I think the best way to answer this is through an example.
Let’s say you registered January 2015.
On April 2015, you’ll pay your 1st quarterly income tax.
On Aug 2015, you’ll pay your 2nd quarterly income tax.
On Nov 2015, you’ll pay your 3rd quarterly income tax.
On April 2016, you’ll pay your 2015 annual income tax (minus your 3 quarterly income taxes) AND your 1st quarterly income tax for 2016.
Does it make sense? Does it help?
Hi Julia,
This blog is the most friendly and very informative one I’ve encountered (FINALLY!!!)
I am also a bit confused of this process 🙁
I WANT to be good citizen for my country and I WANT to pay my tax properly.
Problem is, I don’t know how. so I researched a LOT but i really find it very complicated and so confusing because there are TONS of forms from BIR (and oh! # of pages too). it’s overwhelming. I think this is one reason why other people would give up even if they really want to RFP haha. (I almost..) good thing that I’ve encountered this BLOG before reaching my limited patience. I’m on the verge of giving up. 😀
I was a regular employee for 5 years and my employer did everything for me.Also the registration of my TIN was technically done by them. I only receive my ITR readily available for me. I was issued with TIN no. and ID card (I must thank them!!).
But I changed my job now. i currently work as job contract employee (or self-employed category). This company issues 2307 when request is made.
I need an ITR so I asked them to give me but they said i should file it to BIR myself.
At first, i was a bit shocked because it seems i am disoriented. but I did my random research and found out that I SHOULD file before the deadlinesssss.
How can do it when i only found out about this in the middle of the year?
a. will i be penalized for not beating the deadline?
b. can i still file for 1701Q1 (even if it’s already 1701Q2 filing now)
c. if i have to do some process such as changing registration from employee to self-employed and cannot beat the Aug 15 deadline for 1701Q2, what would happen?
d. Can i just file 1701 directly without filing 1701Qs?
Please help me on this.
I really wanna RFP right taxes and hopefully this won’t be taken against me by BIR if i was not able to comply in the past due to lack of info dissemination.
Thank you in advance Ms. Julia!:) God bless you and your career!
Pines
Hi PInes!
I’m glad my post was helpful. I’ll try to answer your questions the best thta I can but it would be best to consult with an accountant or bookkeeper so you’ll have solutions specific to your situation
How can do it when i only found out about this in the middle of the year?
a. will i be penalized for not beating the deadline? As far as I know, di naman. Sayang lang co the registration fee is for an entire year. regardless of whether you pay sa January or August, it’s the same price so mas sulit na magpa-register as independent contractor ng January.
b. can i still file for 1701Q1 (even if it’s already 1701Q2 filing now). It’s your prerogative. But I strongly recommend you consult an accountant for this as there might be some penalties involved.
c. if i have to do some process such as changing registration from employee to self-employed and cannot beat the Aug 15 deadline for 1701Q2, what would happen? as far as I know, wala naman penalty.
d. Can i just file 1701 directly without filing 1701Qs? Yes, pwede direct.
also bit confuse on section above stating that government owe Jose of 700php bit not clear can you site an example which it will deduct to your quarterly payment?
I mean minus the 700.. Thanks.. in this point I get confuse =) Thanks.. please
If you look at this form: http://www.onlinejobs.ph/blog/wp-content/uploads/2014/10/form-1701q-04.jpg
You can see a line there, #38, that says “Less Tax Credits” That P700 would go in 38A.
Hi Julia,
Thanks for getting back. so that means i will place the 700 in #38A? para ma credit sya? hmm so computation will be ..
1,300 – 700 = 600 is the total payable? by the way san nakuha ung 900 sa form nah #38K? and also ung 400 na payable ni Jose is for that certain quarter lng ung ung 400 or 400 na lng e pay nya for each quarter? (1st, 2nd & 3rd)..
lastly if -700 ung annual income meaning no need to pay nah? but you need to get the receipt? .. sorry if madami akong tanong.. 🙂
Thank you very much Julia! Hope you can answer my query..
regards,
Margie
Phew, ang dami nga, hehehe.
Okay, I’ll try to answer the all.
First, let’s put this in context muna. Let’s say the P700 is Jose’s excess tax in 2015. He can deduct in the following year either in one of his quarterly payments or in the 2016 annual income tax.
Now, for most of the blog post, I presented one way to compute for Jose’s taxes. A computation that resulted in P700 excess at the end of the year. But I also presented another way to compute for Jose’s taxes. A computation that would not result in excess payment.
In this alternate computation, Jose deducts his monthly percentage taxes from his quarterly income taxes, so he only pays P400 per quarter instead P1,300. In this case, he pays less in each quarter BUT he has to pay an annual income tax of P1,100.
To summarize
Scenario 1: Jose pays a higher quarterly income tax and pays in excess of P700 that he can deduct for the next year.
Scenario 2: Jose pays a low quarterly income but he has to pay P1,100 at the end of the year as his annual income tax.
These 2 scenarios represent the different ways you can compute for your taxes to make it easier for you to pay. Some people prefer to pay higher taxes per month if it means not having to pay an annual income tax (you still need to file it to make the excess valid). While some prefer to pay lower monthly and quarterly taxes per month even if it means they have to pay a bit more at the end of the year.
How you compute for your taxes would depend on your circumstances, which is why we often say that you need to consult a bookkeeper. I remember you mention that your salary would vary every month. And in that case, to get the best computation, you would need to consult one. What we present here is just an example with a very rigid circumstances and the computation is just to help you understand the process. For best results, please consult a tax professional.
Did that help? Did my explanation answer your question?
can you provide me an excel file of the new BIR forms needed specifically the 1601C, 1601E and the 2551M?? Thank you
Hi Ericell!
I’m sorry but those forms are beyond the scope of what this blog post is discussing. But you can find the complete list of BIR forms here: http://www.bir.gov.ph/index.php/bir-forms.html
Hi Julia,
I really appreciate your blog since I’ve been thinking to pay my taxes. But I do not know how.
I just have a question though. Is it possible to exempt from the 3% percentage tax?
Thank you!
Kish
Hi Kish!
Glad the blog post helped. About the exemption from 3% percentage tax, I’m sorry but I don’t know the answer to that. The person who can best answer that would be your accountant or bookkeeper. He or she would be the person best qualified to tell you if you are exempted from paying percentage tax or not.
Thanks Julia. Do you have an idea if we can pay just once a year? If so,how can we compute if we just pay every April 15th?
Also, if the quarterly starts on April 15th, are we still paying for the monthly? So it’ll be monthly tax + quarterly tax?
And for the quarterly tax + the annual tax? Since they are on the same date?
I’m sorry, these questions are bugging me. I just wanted to make sure I know something before going to the BIR. As we know, some officers are different from others.
Thanks alot!
Also, what if we have bonus? Is it considered as taxable as well? Thanks!
What if the employee is paid per hour? How would it be computing his/her tax?
Still the same. You’ll base your tax computation on how much you earned for that entire month.
Hi Jasmine,
Thank you for this article, I have registered last July and I’m still a bit confused about some areas and this helped me. Anyway, would you mind adding a tutorial for the books of account or ledger? Just I still find that part confusing. Thanks!
Hi Krazelle!
Glad to help! I’ll try but I can’t promise anything.
Thank you so much for this info, question though. Is it necessary to file for quarterly income tax? I was hoping I could just do the monthly and then annual income tax.
For personal income taxes, no. You can withhold income taxes monthly if you’re an employer and you have employees, but you’ll still be paying them quarterly/yearly.
This is the best detailed post for paying the online freelancer’s taxes! I am relieved undestanding the processes, forms and the costs of registration and how to pay taxes. Narealize ko di pala ganun kamahal ang magbayad ng tax compared sa regular employees. Thanks Jasmine!
Ask ko lang sa lahat, paano ba maghire ng accountant na may alam about sa itemized deductions sa online freelancing? Saan ba sila mahahanap?
You’re welcome Jenny! Masaya ako at nakatulong to =)
As for hiring an accountant, you can go to the Philippine Institute of Certified Public Accountants. They have local chapters all over the Philippines. There you can ask for a list of accountants that they can recommend.
Hi Jasmin,
Sorry for this, pero ok lang ba pakireject or pakidelete yun comment ko kanina as (Jenny).
Please eto na lang yun i-approve na post kase nandun kase sa comment yun picture ko ^^ Thanks in advance! Here’s my comment:
This is the best detailed post for paying the online freelancer’s taxes! I am relieved undestanding the processes, forms and the costs of registration and how to pay taxes. Narealize ko di pala ganun kamahal ang magbayad ng tax compared sa regular employees. Thanks Jasmine!
Ask ko lang sa lahat, paano ba maghire ng accountant na may alam about sa itemized deductions sa online freelancing? Saan ba sila mahahanap?
Hi po,
I started working in an online company last 2013 and found out just this year na I need to pay taxes. In short d po ako naka file ng ITR last April 2015. However, may full time job I was hired last June , 2014. Moreover, my online company only issues 2307 withholding us 10% of our total income.
So i went to the BIR sa lugar namin and the BIR officer said na forget the Year 2013 and apply for a COR this year and declare a mixed income. They also required me to change my Tin from my current RDO tin to a different place where I do my online business.
Funny thing is sabi niya wala akong penalty at pinaparequire ako mg apply ng DTI, occupational permit sa city hall etc. Please help me po clarify.
If my online company withholds me 10% and I should just be paying 3% according to your article then why is that? Sorry din ako sure.
Hi Don,
The example is presented in the article is that of an independent contractor. The online employer does not withhold any income tax, which is why the example I presented had to register, file, and pay monthly percentage taxes and income taxes.
To be completely honest, I’m a little confused by your story. You have an online job and a full-time job?
Online job started 2013 and full-time job 2014?
If that’s the case, your tax situation would be more complicated and I strongly recommend you consult with an accountant or bookkeeper for this case.
Hi, thank you so much for this – it is very helpful!
Im a bit confuse though in the Annual Income Tax computation. Since your example falls on the 10,000-30,000 bracket, shouldn’t the 27,000 be deducted by 10,000? Since in the tax table it says 500+ 10% of the excess of 10,000?
So it should be P500 + (10% * P17,000) = P2,200? Maybe im just confused with all these numbers. hehe
Hi Mark!
Glad to help and good catch! I’m sorry for the confusing math. I updated the post to reflect the correct figures. Thank you again!
Hello,
I got my TIN through the BIR e-registration system in 2012 but I haven’t paid the P500 registration fee yet til now. What to do? Thanks.
Hi MIn!
Since you already have your TIN you can actually get started on the registration process. It doesn’t matter when you got your TIN, what matters is when you start your registration.
Hi Ms. Julia,
Thanks for making this site forum available for everyone especially for self-employed like me too. I just have a few questions and they are numbered in order not to confuse you. Thanks for the response in advance.
1. I`m a homebased English Teacher (Independent Contractor) and have just registered as Self-employed professional at BIR. My COR was released/stamped on March 3, 2015 (Temporary cert). Such date was the “ink stamp” one just above the Documentary Stamp. However, there was also statement below the trade name and tax type ” *** ONETT: 09/06/2014 Business Registration; 02/18/2015 ” . They accepted my papers on 02/18/2015 so maybe it is the registration date? When should I pay the Percentage tax then, 20th day of the month following March 3,2015 or following Feb. 18, 2015?
2. I am now using the offline e-BIR form because I heard that AABanks don`t accept the manually printed form anymore. Below are the list of deductibles in OSD option of 1701Q (e-form), SHOULD I fill out the 38C, 38E, and 38G at the same time? I am receiving 2307 from the company so I just filled out 38G but filling out the other two seem redundant.
38 Less: Tax Credits/Payments
38A/B Prior Years’ Excess Credits 38A 38B
38C/D Tax Payment/s for the Previous Quarter(s) 38C 38D
38E/F Creditable Tax Withheld for the Previous Quarter(s) 38E 38F
38G/H Creditable Tax Withheld per BIR Form 2307 for this Quarter 38G 38H
38I/J Tax Paid in Return Previously Filed, if this is an Amended Return 38I 38J
38K/L Other Payment/s Made (please attach proof of payment-BIR Form No. 0605) 38K 38L
38M/N Total Tax Credits/Payments (Sum of 38A,C,E,G,I & K/38B,D,F,H,J & L) 38M 38N
39
3. How about for the 2nd quarter? Which field items above I should fill out?
🙂 Thanks for the response in advance.
Joe
Hi Joe!
I’ll try to answer what I can but I would recommend it would be best if you consult with a bookkeeper.
1) When should I pay the Percentage tax then, 20th day of the month following March 3,2015 or following Feb. 18, 2015? It would depend on when you start earning (when you started issuing your receipts). The amount and date of your receipts is where you will base your monthly percentage tax.
2) 38A/B Prior Years’ Excess Credits 38A 38B – Yes if you and your spouse had tax credits from last year
38C/D Tax Payment/s for the Previous Quarter(s) 38C 38D – Yes if you and/or your spouse paid your previous quarterly income tax
38G/H Creditable Tax Withheld per BIR Form 2307 for this Quarter 38G 38H
38I/J Tax Paid in Return Previously Filed, if this is an Amended Return 38I 38J – consult with the company that provided your 2307
38K/L Other Payment/s Made (please attach proof of payment-BIR Form No. 0605) 38K 38L – your registration payments would qualify here
38M/N Total Tax Credits/Payments (Sum of 38A,C,E,G,I & K/38B,D,F,H,J & L) 38M 38N – just take the total of everything you listed above.
3. How about for the 2nd quarter? Which field items above I should fill out? – It’s basically the same as with the first quarter.
hello julia.. my boss has a due payment on nov.15 2015 for quarterly income tax.. but it is sunday.. so i should pay on the 16 of this month nov.2015 but i forgot to pay.. do i have any penalties now if i will pay on the 17th of nov. 2015..?
Hi Pauline,
I’m sorry but I don’t know how to answer this. Your best recourse would be to ask the BIR.
Hi,
Thanks for the great infos here. I’ve just started my online business. And I have only one receipt issued (645 pesos) for December. Do I still need to pay the 3 % percentage tax?
Hi Joy!
I think it would be best if you ask your bookkeeper/accountant regarding that. I bet there might be exemptions.
I have questions sis, pls help me…
I already have TIN since 2000 pa, when i was an employee, but stopped working for very long years, only on year 2009 when i started my freelance online work in oDesk.
Then only this coming year I have decided to register as self-employed professional…
Questions:
1. Since I already have TIN (but no issued TIN card), can I pay first the 500pesos registration fee at BIR accredited agent bank before going to my RDO and file the requirements, and file BIR Form 1905 for registration information update ( from employee-to self-employed professional)? Pls I need your response… your response will greatly help me…..
HI Len!
Yes, you can already register BUT you have to double check with the BIR where your RDO is (regional district office). The RDO is the place where you registered your TIN and your taxes would filed/paid. If you’re going to register as a self-employed individual, you might be asked to transfer your RDO (from your old office to where you will be working). If that is the case, you may need to request a transfer of RDO.
Hi, nabasa ko po yung comment ni ‘pol’ regarding sa certificate from barangay. Nagresearch ako and I found this article http://www.nanaynotebook.com/2011/07/woes-of-business-registration-in.html. Pero since magreregister ako as Professional and not Single Proprietorship kelangan ko pa rin ba ng certificate from barangay?
Also, nag register ako ng TIN online and after ko makuha yung TIN ko may kasamang 1901 form pero yung 1901 form na yun is different sa form na nilink nyo. Yung 1901 form na nareceive ko is January 2009 while yung nandito sa post at sa bir website is January 2000. I’m not sure kung ipprint ko ba dapat to or magffill up ulit ako sa BIR using may TIN number.
Eto yung screenshot nung form: http://ibin.co/1n0VfE0aSAF3
And thank you po sa pagpost ng article, very helpful. thumbs up 🙂
HI Mac!
Pasensya na pero yung pag-register as Professional is beyond my scope. I think it would be best if you ask your accountant/bookkeeper/local BIR on how this would work.
Nagsearch ako ulit and eto yung nakita ko “if you choose to not register a trade name and only choose to use your name as the registered name, you don’t need to submit DTI certificate”. So I think di ko na kelangan ng Mayor’s permit and DTI. Nakita ko rin sa 1901 form ko na yung business name na nakalagay is yung full name ko.
Hi!
Thank you very much for this blog post! Napakalaking tulong niya.
I wonder though kung OK lang mag-declare ng income without proof of receipt? Let’s say I am issuing receipts this year pero last year wala akong na-issue na receipts kasi hindi naman na-require ng client. Can I just come up with a figure dun sa forms ko?
Thanks in advance!
Hi Katz!
Pwede ka naman mag-issue ng receipt kahit na di hingin ng client. The BIR will base your income kasi from your receipts. Mag-issue ka nalang rin ng receipt kahit di kukunin ng client mo.
Hello po!
This coming April 15 will be the first time I will pay my quarterly income tax (I just started working this month) and I am still cannot quite comprehend just how to go about paying my tax as a self-employed individual, that is, until I stumbled upon this very informative article of yours. Thank you very much for posting this the examples given really made it easy to understand. haylabyu po :* hahahaha
You’re welcome Pio! Happy to help =)
Hello po!
This coming April 15, will be my first time ever to pay for any sort of income tax (I just started working this month) and I still cannot quite comprehend just how to go about paying my taxes as a self-employed individual, that is, until I stumbled upon this very informative article of yours. Thank you very much for posting this! The examples given really made it easy to understand. haylabyu po :* hahahaha
hello
gusto ko pong itanong kung ano pong gamit nyo sa pag-isyu ng receipt through online? kumuha po ba kayo ng Authority To Print form to use digital invoicing system po ba na accredited ng BIR? o ini-scan nyo nalang po ba yung receipt na job-ordererd by BIR tapos ini-email sa client?
thankyou for this website mam! 🙂
Scan receipt and send to client. So you still have the original copy and the scanned image would serve as back-up for you and your client.
pano po pagrecord nyo sa reciept pag halo-halo ang type of currency.. minsan po my USD, CAD, EURO at Pounds ang bayad ng clients online,,,, kino-convert ba sa PHP based on the exchange rate at that time ang ilalagay sa resibo or yung mismong currency ng client? ok po ba sa BIR pag sa reciept ay USD tapos sa book of accounts ay PHP? or dapat bang PHP lahat for consistency?
Hello! 🙂
I’ve been working from home now and I file my own income tax. However, I have never received any tax refund. How do I get this back? When I was working for a conventional office, the company would give it to us automatically. Your help would be greatly appreciated. Thanks in advance!
According to our accountant, it’s possible to get a refund but difficult. Especially if you’re filing as a sole proprietor and the refund isn’t that much. The more practical course is just to have your excess payment deducted in your next payment. But if you really want to get a refund, I strongly suggest you ask for advice from an accountant or the BIR for this.
I am working remotely online (regular employee) for an AU based company.
if I file these documents do I still need to give them a proof of income?
Thanks a lot for this article really helped out a lot!
If you are a regular employee, you shouldn’t have a problem. As an employee one of your company benefits would be to have your company withhold and pay your taxes for you. And the proof of this would be your ITR.
But if your company does not do this for you, then under Philippine law, you are considered an independent contractor and you would have to register, file, and pay taxes as I described in the article.
Hi! Thank you so much for this article!! I have the same scenario as Raf. Is it legal to use OSD in our tax computation? I would just like to clarify because as a regular employee, we don’t have actual clients and we don’t issue OR. Should we just make receipts to comply with BIR requirements?
Thanks in advanced!
Hello. Thanks for this guide. Guess what, we already had our Certificate of Registration last month (and we are still processing our receipts). Indeed, BIR offices have different set of requirements. In fact, in our place, we are required to pay for a Professional Tax Receipt (PTR) for P300. However, there was one time when my friend was asked with a Mayor’s Permit… but as advised by one of the BIR employee, we processed his application the following day, and everything went well…
Julia, can you help us? We don’t know how to put entries in our book of accounts. We are asked with only 2 book of accounts: a ledger and a columnar. We are totally clueless as to how we are going to record the salary we got in the book of accounts. Please please help us… Feb 20 is almost running near…
Hi Julia,
If one hires an accountant, how much is their estimated service fee per month?
Hi Jin,
It would depend on your arrangement with your accountant. Based on our research here in Davao, it would cost around P1k – P3k per month. But you could haggle, like only hire them to process your papers or only during your annual filing, etc.
Can you please expound? What would be the best thing to hire them for, just annual filing? I don’t fully grasp the process yet.
Please read through the article again for clarification.
If your questions is regarding hiring accountants/bookkeeper, you can hire them on retainer (pay them every month) to do everything for you. If you can’t, you have the option of only hiring them once a year to help you with your annual income tax.
This article was helpful! But I was looking for an answer on how’s the process for online jobs which already WITHHELDS TAXES from workers’ salaries. I hope someone can help me.
If the online business you are working for already witholds taxes then you don’t need to pay anymore. Just make sure to get your ITR every January and file it every April =)
It’s same case with me. My company withholds tax. Do I need to file quarterly too, pay percentage tax, pay an Annual Registration Fee (COR Renewal)?
If your company already withholds tax, you don’t need to pay percentage tax, quarterly, etc. You do have the option of filing your taxes once you receive form 2316 from your employer. You don’t need to pay any extra, just file it.
Hi,
This article is really informative, thanks a lot! Anyway, I just want to ask the name of the printer that offers that kind of price? I’ve been getting higher prices for 10-20 booklets for 2000-5000.
I hope you can also create an article about filling in a Journal and a Columnar since I’ve been trying so hard to understand and know their difference from each other.
Thanks
The printers we asked are based here in Davao. You’ll have to ask your local BIR for a complete list of accredited printers.
Thank you for that suggestion. We’ll add that to our list of future blog topics.
Hi I’d like to know if you are working under a family business under what category of a taxpayer you should enlist? Also, if your salary would around 5k a month?
Hi Nica!
It would be best to ask your accountant/bookkeeper about that. We can’t answer this because it goes beyond our scope.
Hi Julia,
I have some question;
1. I already signup eTIN but i forgot my TIN and im not sure kung tama bayong mga information na na-provide ko. Ngayun pwedi bang mag signup ako uli ng new eTIN number?
2. Can I itemized my internet bill, phone bill, electric bill? kasi ginagamit ko lng naman ito for clients or for my online job.
3. In odesk we already deducted of 10% of our total paid. Kailangan parin ba namin mag bayad ng Tax?
4. Saan ko e issue ang receipt? to odesk/elance? to my clients? or to my self?
5. I already working online for 3 years. Ngayon lng ako nag decide to file a tax. Kailangan kurin ba bayaran anf last 3 year?
Thank you.
Hi Kien!
1. Unfortunately, you can’t get a new TIN number. But you can ask your local BIR for help to find your TIN using your name. =)
2. Yes, but it’s best to consult an accountant/bookkeeper in order to do this correctly.
3. The 10% that odesk deducts from you is not for taxes. It’s their fees. It’s how they earn. So yes, you still have to pay taxes.
4. You issue the receipt to you client but you don’t need to send it. You can just send a digital copy (if they ask for it) or keep it for your records.
5. Not necessarily, unless you wish to declare it. But it’s best to consult an accountant for advice regarding this.
Thank you for this! So helpful… =)
You’re welcome!
Hello, ask ko lang po. Ilan months po kayo nakakuha ng ITR after makapagbayad ng tax?
Hi Jodie!
Medyo confusing yung tanong mo. Kasi if you’re an independent contractor, you file your own taxes. If you work for a company, you have to ask them kung kelan mo sya makukuha for you to file.
Hi,
Im from Rizal, if I register and started to pay tax for couple of months and relocated to Laguna, do I have to register again?
Peter
You need to file for a transfer for RDO (regional district office). Go to your local BIR office for the form and to get help to do this.
Hello Julia,
I’ve been doing freelance work since 2008 and i never filed a single ITR.tsktsk. not that i intentionally avoided paying taxes but i was just not aware of the process. i actually thought im free of any tax liabilities since most of companies that i work with deduct around 11% from my salary for tax.recently i registered my business and thats when i realized i should actually pay around 30-32% annually. Now, i have to apply for a Schengen visa and one of the requirements is the ITR.is it ok if i pay for this years ITR only? will they see on their records that i have tax liabilities and require me to pay everything .This is just really stressing me right now. accounting freelance work will be hard, but to account all the transactions since 2008 will be a nightmare. and i just cant afford to pay them. I also needed to submit latest itr next month but i read that filing is still on april. can i go to bir and file even if its not april yet. i dont know how it works.
Hi Leo!
In your case, it would be best to consult with an accountant. Since you plan to get a visa, it would be better to consult with a tax professional first.
Hi! may tanong po ako regarding taxes. For example po annually ako nagbabayad ng tax. tapos 40% OSD ang pinili ko. Ibig po bang sabihin nun, hindi ko na pwedeng ideduct ang monthly percentage tax sa annual taxable income ko dahil naka 40% osd na ako? help naman po. naguguluhan talaga ako.
another question po, need ko ba talaga magregister sa dti, at kumuha ng business permit? aside dun sa COR ng bir?
Thanks.
HI Bryan,
You can still deduct the monthly percentage tax from the tax you are about to pay.
About the DTI, yes, you would need to register.
But it would be best if you consult your accountant/or bookkeeper.
Thanks so much for this article! I’ve been reading about freelance tax for a long time and I always get turned off once it becomes uber complicated. Your step by step process and especially your examples with exact figures are a big help! Thanks again and God bless 🙂
You’re welcome!
Hi Julia,
I’m just wondering ma’am if you have an idea about the BMBE Act (Barangay Micro Business Enterprise Act) that exempts registered micro business owners for the income tax, and as a, considerably, business owners, can online workers maximize this law?
And do you have an idea on how to file this incentives for income tax exemption?
Thank You Ma’am! Your blog is answer to all our prayers 😀 hehe!
Regards,
Ryan
I haven’t heard of that but thanks for bringing that up! I researched on it and found this: http://businesstips.ph/how-to-register-as-a-barangay-micro-business-enterprise-bmbe-in-the-philippines/
I think this is something online workers can take advantage of! Thank you!!!
Update on this =)
I visited our local DTI and asked about this. Yes, VAs can take advantage of this but it would still require us to register with the BIR in order to take advantage of the benefits.
Yes, we still have to register. See http://www.nanaynotebook.com/2013/03/bmbe-certified.html
And we still have to pay the percentage tax and file a return each year. The form we need to fill and file is 1701AIF that can be downloaded from http://www.lawphil.net/administ/bir/frms/aif/1701aif.pdf
Thanks for this information ! It’s really helpful!
hello.. thanks for all the information i have learned. basing on the computations from this website, i have also tried to use a higher figure. I used 30,000. (this is not my salary but i just want to make a different scenario not so far from experience) As an online teacher, i don’t know exactly how much i will receive the next month due to delayed payments, and withdrawal of students (others don’t continue to study anymore. Don’t know if it matters but i have no employer. My students pay me directly.) Let’s say I opted for OSD. so 90000- 36000 = 54000 (quarterly income- OSD= taxable income). My category is 30,000 but not over 70,000. Basing on the formula- P 2500 + 15%( 54,000 – 30,000 ) = P6100. So i need to pay this amount quarterly. Am i right?
Now for my Annual Income Tax, i am going to follow the formula again.
I am single and no dependent so i am only entitled to a P50,000 deduction from my gross income yearly. So let’s say i earn 360,000 a year (basing on 30,000 a month) minus 50,000 is 310,000. Take away again the 40% OSD (124,000) so my taxable income is 186,000. This part, i am not sure if i am doing it correctly. I am under 140,000 – 250,000. so P22500 + (25% * (P186,000 – P140,000)) = P34,000. and since Iv’e paid for the past 3 quarters, P18,300, my annual income tax is P15,700. Is my calculation correct?
I hope to read a reply from you soon. I desire to pay my tax accordingly and so i am eagerly learning. Thank you very much.
Hi Crunky!
Yes! Tama yung computations mo. But you should also remember na deductable yung monthly percentage tax mo, so pwede pa yan bumaba. Yung monthly percentage tax mo at 30,000 is P600. Multiply 600 by 12 months, you get P7,200. Pwede mo pa ma-deduct yan from your annual income tax na P15,700. So ang babayaran mo nalang is P8,500.
Hi ma’am,
First of all, thank you po sa article nyo kasi ang dami kong tanong na nasagot nitong article. Ang dami ko na kasing na-search pero dito ko lang nakita yung ganito ka-detailed na explanation.
Pero meron lang po akong gustong linawin at additional questions, kung pwede? Bale yung questions po ay tungkol sa isang registered business na sole proprietorship, and at the same time I’m working din online.
1. Pwede bang hindi magbayad ng 1701Q every quarter at sa halip, magbabayad ka na lang ng 1701 para sa buong taon?
2. Between OSD and Itemized Deductions, pipili ka lang ng isa dito, right? Kung OSD ang napili mo which is 40% of Gross, hindi mo na kailangan pang i-submit yung mga resibo gaya ng sa internet bill, electricity, etc?
3. Kahit ba sa registered business pwedeng OSD lang ang piliing deduction or kailangan yung Itemized?
Thank you po in advance!
Regards,
BenG
Hi BenG!
I’ll try to answer your questions the best way that I can. But I still strongly recommend that you consult am accountant or bookkeeper since they would know best on how to handle your situation.
1. Based on my consultation with the accountant, pwede naman. But paying quarterly would make it easier on the pocket and easier to keep track.
2. Pag OSD,yes, di mo na kailangan magpakita ng resibo. Assumed na kasama na dun sa 40%.
3. Depende yun sa anong klaseng business. In this case, it’s best to consult your accountant.
Hope I’ve been able to help!
“1. Based on my consultation with the accountant, pwede naman. But paying quarterly would make it easier on the pocket and easier to keep track.”
Does this mean pwede mo rin skip lahat, monthly and quarterly, and only pay yearly? And bakit “easier on the pocket” pag nag bayad ka ng monthly/quarterly/yearly instead of just yearly?
Does this mean pwede mo rin skip lahat, monthly and quarterly, and only pay yearly? – Yes, you have the option of doing this.
And bakit “easier on the pocket” pag nag bayad ka ng monthly/quarterly/yearly instead of just yearly? – Think of quarterly payments as “installment” payments on your tax. The tax you pay every quarter ultimately adds up to your annual income tax. If you pay just once a year, you’re paying a lump sum. If you pay per quarter, you pay tingi-tingi.
Ahh alright. I thought by easier on the pocket, you meant cheaper somehow lol. Thanks
You’re welcome!
To the author of this article, thank you very much for explaining this complex matter in detail!
Welcome!
Hi thank you so much for your reply,
I think we need the help of an accountant for us to file our taxes (esp. the annual income tax)
do you anyone who you can refer to us?
Thanks!
Hi,
Also to follow up on my previous comment,
I managed to ask an accountant i found online and he/she can process my ITR 2316 and gave me the amount I need to pay for taxes, how is this different with the forms mentioned above?
I’m currently working for a company(home based full time) based in Sydney, Australia.
Thanks!
Hello! I have been a freelancer since 2012 and I am now planning to register as a taxpayer. Say, I plan to declare my earnings since 2012, which specific taxes do I have to pay? The percentage tax, quarterly ITR or annual ITR? Kase based sa understanding ko, dine-deduct din naman yung pecentage tax at quarterly ITR dun sa ITR, tama ba?
I know late registration or filing is subject to penalties so before pursuing my registration, gusto ko muna sanang i-compute how much tax, I need to pay. Thanks. 🙂
Hi, may tanong po ako. Wala po kasi akong TIN, then I started working last September 2014 pa. My employer did not ask for my TIN, so hindi ko na rin na-process yung pagkuha nun. But then every payroll, they deduct taxes from my salary. My question is, pwede ko bang kunin lahat yung dineduct nila na tax sa salary ko, since I’m leaving the company na? Ang point ko naman kasi is hindi naman nila naihulog lahat yun sa BIR since wala akong TIN. And if ever man na makuha ko yung lahat ng tax ko, hindi ba yun against the law since ide-declare daw ako nung company na “zero” (I don’t know what they mean with that.).. Hope matulungan mo po ako kung ano ang gagawin ko. Thank you in advance! 🙂
Hi Claire!
I’m sorry but this is beyond the realm of our experience. The best person to ask would be an accountant or lawyer.
Hi,
I just want to point out that since Percentage Taxes are supposed to be deducted as an itemized deduction under “Taxes and Licenses”, then you cannot deduct that from the Income tax payable.
So while your first example is correct, the second example where you deducted the Monthly Percentage Taxes from the Quarterly Tax payable is incorrect.
Also to add: Personal deductions are actually deducted AFTER deducting the OSD.
So using your example above, the annual income was 120,000, after OSD the taxable income becomes 120,000-(.4 x 120,000) = 72,000.
Then you can apply the personal deductions, so: 72,000 – 75,000 = -3,000. Further applying the quarterly taxes you already paid, then that becomes: -3,000 – 3,900 = -6,900. Even considering Percentage Taxes are already integrated in the OSD, BIR actually owes Jose so much more in credits 🙂
I stand corrected: since the personal deduction of 75,000 is bigger than the taxable income of 72,000, then the tax due would actually be 0, not -3,000. But the 3,900 that you’ve still paid can applied for as tax credit. Sorry if I had a lot of comments, I couldn’t find an edit button for above.
That’s okay =) I hope the post has been helpful.
Hi Ms. Lisa,
So you mean po quarterly, you don’t need to deduct the percentage tax? Pero you still need to deduct the personal allowable deductions even after you have deducted the OSD?
Personal exemptions are deducted in the yearly computation of tax, not quarterly. But you can also deduct your quarterly payments to your yearly tax payment.
that’s a very good point to raise Lisa, somewhat clears to this very amazing article that Julia made 🙂
More power to the two of you!
Thank you Joe! Glad we’ve been able to help.
Hi,
any info on how to fill out the 1700 ebirform? I was told that the info would come from my 2316 but not sure which is which info to fill up – the job aid just indicates – fill out if applicable..
Hi,
Not sure why my inquiry did not post.. I would want to know how to fill out the 1700 eform, was told of a bir rep that what is in my 2316 is what i need to put in the form. but im not sure which info is which – not even the job aid help cause it would only state “if applicable”.
thanks
Hi K!
Please read through the post again. I did give some instructions on how to fill out this form =)
Hi, good evening. I would like to ask regarding my TIN. I used to work in Manila specifically in Imus, Cavite. I applied/registered my TIN there but now I am residing in Iloilo City and working as an online tutor. I wanna ask if I need to transfer my registration of my TIN from Cavite to Iloilo?
Hi, good evening. I would like to ask regarding my TIN. I used to work in Manila specifically in Imus, Cavite. I applied/registered my TIN there and worked in a hospital so I am considered as an employee. But now I am residing in Iloilo City and working as an online tutor. I wanna ask if I need to transfer my registration of my TIN from Cavite to Iloilo? And do i need to change my category from an employee to individual contractor? And what steps do i need to follow for the application? 🙂
HI Shayne!
Now, about your questions…
Your TIN – you will need to request for a change your RDO (regional district office). Our TINs are registered usually where we first find employment or where we first register. Since you initially worked in Cavite and moved to Iloilo, you’ll need to go to the Iloilo RDO and ask for their help in the transfer.
Category – Yes, you would need to register as an independent contractor. I provided instructions on it in the blog post =)
Hi, Julia! This is a very helpful article. Thanks a lot! I’m a little confused regarding receipts, though. Is this something I can obtain from the BIR as well? All I can present as proof of income are a bank statement and the payments I received posted on my account through oDesk, if you’ve heard of it.
Also, on one of the comments, you mentioned that it’s dependent on what is declared. What if I earn, say, 30K per month solely through online freelancing. Is it possible to put a cap on that when I declare my monthly income? Can I declare only 20K on the receipts? And if what I earn is in dollars, will I need to convert it to PHP when filing taxes? Would the daily fluctuation in currency conversions affect it?
Thanks a lot!
HI Stef!
I’ll try to answer your questions the best that I can. But if you need more information, I strongly suggest you also consult with a bookkeeper or accountant. They’re the experts =)
I’m a little confused regarding receipts, though. Is this something I can obtain from the BIR as well? – No. What the BIR provides is the permission for you to have receipts printed. What’s different from receipts printed from BIR accredited printers and receipts we just print ourseleves is that the BIR will recognize what you put on the accredited receipts as your proof of income.
What if I earn, say, 30K per month solely through online freelancing. Is it possible to put a cap on that when I declare my monthly income? – Yes
Can I declare only 20K on the receipts? – Yes
And if what I earn is in dollars, will I need to convert it to PHP when filing taxes? – Yes
Would the daily fluctuation in currency conversions affect it? I don’t think so. The BIR only looks at what is declared in your receipts and books, which is declared in pesos.
Hi, I just want to ask other than the forms when paying taxes what are the other attachments I need to include when paying? This is my first time paying my percentage and quarterly income tax.
All the necessary documents are listed in the blog posts. You’ll also need your receipts and books
So for payment, I will need 0605, 2551M and 1701Q. Then receipts and books? So the bank will require this when paying?
The banks will not require it but it’s best to keep them at hand and ready just in case.
I see, thanks di ko pa kasi na uupdate yung books ko, pinag aaralan ko pa kung pano mag log hehe. Meron po ba kaung tutorial nun or ibang resource na pede ko makita?
Unfortunately we don’t have any tutorials for that. The best person to ask would still be your bookkeeper or accountant.
Hello!
thank you for this very informative article!
I have a question though, I have been working with an online English company. They asked me to pay 1,500 bond which is refundable if I resign after a year. So if I wasn’t able to complete a year with them, they will ot return the bond.
Due to some reasons and other problems with this company, I decided to resign. I completed paying the said bond. But they wont give me my salary completely. they told me I would get only half of it. Will I have a stand against this company?
Also, are these kinds of company registered in BIR?
I’m sorry but I don’t have enough information to answer your question. The best person to ask would be your local accountant or lawyer.
Hi! If the company already takes a withholdin tax from your salary, do you still need to file to BIR? And you’re just a freelancer in that company, with no fixed income
Hi Rosie!
I’ll try to answer your question the best I understand. But the best person to ask would be a bookkeeper or an accountant.
If you’re a freelancer or an independent contractor, you need to file and pay for your own income tax.
If your company is withholding tax from you, they need to provide you with a BIR form 2316 as proof that the your tax is being withheld and paid on your behalf.
hi! 🙂 ask ko lang po ung process ng pagffile ng form 2307… Nung nagwork po kasi ako sa alabang nagtransfer ako ng RDO from cavite to makati. Dito po tlaga ako sa cavitw nakatira. Hindi na po ako nagwowork sa Alabang ngaun bale nagtuturo na ako as homebased tutor. Ok lang po ba na ifile ko ung form 2307 dito sa RDO sa cavite? thank you po:)
Hi Shaw,
I’m a little confused as to why you would need file a 2307. I think it would be best if you direct your question to a bookkeeper or accountant.
Hello Julia! Thanks for this blog post, super helpful! Pupunta ako ng BIR tomorrow to register. If I opted for the “40% standard deductible”, do I still need to register a “Cash Disbursement Book” sa Form 1901 ko? Wala akong tiyagang mag itemize ng expenses ko kaya I prefer the automatic 40% deductible.
Hi Zia!
I’m glad you found it helpful. Yes, you still need a cash disbursement book. Even if you opt for the 40% deductible, you still need to list the expenses you incurred with your registration, buying your receipts, your month percentage tax, quarterly income tax etc. This is important because you can add them to your deductibles.
If you need a more detailed (and more accurate answer) it would be best to consult your bookkeeper or accountant.
Hi, I have another question. Ano po yung Return Period sa form 0605? Same lang ba yun ng deadline? Di kasi pwedeng ileft blank sa ebirforms.
Eto yung screenshot: http://ibin.co/1xWXtX8HPoVC
Hi!
Thank you so much for posting this article. It’s really helpful!
I really want to register soon but there’s only one thing that really concerns me (which is really discouraging) is about the “even you choose the standard optional deduction you still need an accountant or bookkeeper to help fill out the form”.. Or the whole bookkeeping thing in general. Since I’m so clueless about all this, is my only option would be hiring an accountant or bookkeeper? (which I don’t even know how) How does it work? I thought I could just do it all by myself but seems like not.
I’m really sorry for still being confused. If you could explain that part to me in details that would really be great. Thank you so much! God bless!
Hi Eric!
We often recommend that you still consult a bookkeeper or accountant because we are not tax experts. What we presented here in the article is just once scenario of an online worker. Things would change if your circumstances are different. You don’t need to hire a bookkeeper full-time but it would be best if you consult with one so they could advice you on the best way to deal with your taxes.
Hi mam this article is very impormative. I have a question when filing 1701 annual income tax. I’m using the eforms of bir I am confused if I will choose between compensation or business income. Since I was registered as a self employed professional and every quarter the company gave me 2307 for filing of 1701q and 2551m. I’m a little confused on how to fill up this since It was my first time. If ever there would be a refund, what is the process thank you very much and more power
Hi Siz!
According to our bookkeeper, if you are self employed, you choose business income. Compensation income is “sweldo” and usually applies to employees.
Hello po, question lang. Kailangan po ba talaga yung 0605 every time you file 2551M po? I’ve been a taxpayer for six months na po eh, pero hindi ko na-realize at di rin ako pinagsabihan sa bangko na kailangan ko po yung 0605. Thank you!
You’re welcome!
Hi Julia, thanks for the info. I also have a question. I had 2 employers last year and I wasn’t able to submit/ process a 1905. My current employer already provided me a 2316 for 2014. Should I be worried with anything? Should i do anything? I’m afraid to ask anyone from hr since they might tell me that I have to pay a penalty. Thanks.
Hi Gen!
The best person to ask would be an accountant or bookkeeper regarding this. Since you have 2 employers, the circumstances would be different from the one we presented here.
Hi Ms. Julia,
Thank you very much, you are very accommodating and generous to answer all the queries, it’s very helpful. I would like to ask for some help with regards to filing of 1701Q. Ever since, filing of my taxes has been handled by an accountant but the I decided that I want to handle it myself as to avoid open cases kc medyo napabayaan ng accountant ko. Kaya ako na ang personal na nagpa file. In my 2014 1701 (ITR) filing, i had a tax credit amounting to around 8k, if i file my 1701Q for the first quarter of 2015, do i need to put the amount on the portion where it says “38A/B Prior year’s excess credit”. Second question what is the supporting documents I need to attach to support my tax credit?do i need to xerox and attached my 2014 1701?
HI Ms Carrie!
I’m glad you found this blog post helpful. I’ll try to answer your questions the best that I can but I strongly suggest that you still consult with an accountant or bookkeeper to get the best advice suited for your situation.
Yes, you do. You’ll need to a photocopy and original copy of your 2014 1701.
Hi Ms. julia,
I just want to share my experienced last week when filling my itr in RDO43a
Currently I am working as IT consultant classified by my company as individual payor,
and monthly they deducting us 10% . Upon filling my ITR-My company gave us 2307 and I ask a bookkeeper to compute my tax. Then I went to the BIR to file my ITR with 1701 form . they ask me to get a number and verify . Upon checking to the personnel at verification–>He check on my TIN and that that I am classified as under local employment. I said that I am now practicing a profession and then told if I process before a 1901 or change status. I never process any change of status or process any form-my service company also not told us to process or inform that it should be done. It was the 1st time, I used to be an employee before, so no idea or information to process that – we just assume and the only thing we know that we are are deducting tax by our service company. They told me that the company should file in behalf of me not mine and the company should give 2316 instead.
So I ask them what should I do, I was forwarded to the “Officer of the Day” to consult my issues…they ask me I should process change status to professional and requiring me to get a COR and a book. but since I am filling my ITR for 2014 it was late then and they said there’s a possiblities to be penalized because it has been 2 years that my status is that..last 2013, my service company filed on us but with same status but not even detailing the need of the COR or book. I present them the copy of my 1701 for 2013 tag as prof,.They said possibilities that last year it was overlooked and just received by the BIR or bank without verification.
So, I said there’s no need to get a book and register because starting this year I was already employed by a company. So, they just advised me not to change my status because it will be complicated since my curent is local employment so it’s just the transfer of RDO will do. So , in other words, they advised me not to file for 2014 and since I am not payable, rather, I am refund for an amount of money–the risk and sad to know that I’ll will be no longer refund the money. Well for me it’s ok not to refund, my only concern that my status will be corrected and no issues encounter on the future.
Since they said for this 2015 a new computing will apply on me under an employee.
I only abide on the law on filling but since this thing hassle me a week to process , I just follow the advised of BIR, since they know best of what I think. I appreciate also the BIR RDO 43a because they really scan all process checking on what’s going on my status, because my other colleague was able to pass their !&)! to othe RDO with ease, and they said no checking done on them, even in banks that only accepts payment w/o verification.
What do you think
Hi Christine!
Thank you for sharing your story! This is really helpful and I’m glad your RDO has been really helpful. And yes, it is best that you followed their advice and it’s great that you also consulted a bookkeeper regarding your case.
Hi,
I have question po. Pagnagfile po ba ng monthly percentage tax? idededuct ko rin un pagnagbayad ako sa quarterly?
Thanks
HI Miehle!
According to our accountant, yes, you may have it deducted with your quarterly if you want. But it’s best to consult with a bookkeeper to make sure that you’re doing it correctly according to your circumstances.
Thanks for the great explanation!
But how about money earned from trading foreign stocks online (or forex, for that matter)? How is this computed? Should each trade be reported? This seems unreasonable and taxes would be way up there especially for day traders.
In this scenario, the trader resides in the Philippines, but the brokerage is in the US or another country. Nothing I’ve found in BIR circulars or even in our laws.
Hi Jim!
Thanks for commenting. Unfortunately, this is beyond our scope. The best person to ask would be an accountant for this.
Thank you so much for the helpful guide!
Question: What about training courses that we buy to upgrade our skills? Are they deductible?
Thanks!
Hi Joy!
Ideally yes but it would be best to ask your accountant or bookkeeper for the best answer.
Hi Julia,
Do I need to go to DTI and city hall first if I choose to pay taxes as an independent contractor (use my name)? No plans of registering a business (sole proprietor), just wanted to know if I can go directly to BIR and follow steps in the blog.
Thank you,
Michelle
Hi Michelle!
We actually asked the DTI and they said that you don’t need to register with them if you just work from home or work as an independent contractor. But once set up your own office, you may need to register with the DTI.
Hi Mam!
I find this article very helpful indeed, but with the advent of online filing I wonder if you can put up a step-by-step instruction with pictures on how to go about it. I am a computer literate person but I do find it intimidating to go through the process of online filing. I think this will also benefit other freelancers out there.
Thank you for considering my suggestion.
More power and God bless.
Hi Gilbert!
Unfortunately, the online registration is beyond our scope. But we will keep that in mind once we start creating follow up articles.
Hi julia is this also applicable to online sellers who don’t have physical store that sell goods and provide services thanks
Hi Mary!
Yes, this is also applicable to online sellers.
Hi Ma’am!
Thanks for the information. It’s very informative and helpful.
Question: If I registered my business this May 2015, my Monthly Percentage Tax will be paid on June 20, 2015, right? How about for the 1701Q and 1701? Should I consider it as calendar year?
Hi!
I consulted with the accountant and he says that you start paying when you start earning. However, if there are months that you dont have income (for example, you didn’t earn anything in June) you have to declare that you didn’t have any income. Same with 1701q and 1701. But for the best answer, please consult your accountant. He/she would best understand your situation and give the most accurate response.
Hi. Thank you so much for posting this. Ang laking tulong po. Tanong lang po, pag late mo pong nakuha ang COR mo magkano po kayang penalty ang aabutin nun? Hinahanap ko po kasi sa website ng bir di ko po mahanap. Aabot daw po ng 10K pataas?
Hi Sarah! I’m sorry but this is beyond my scope. The best person to ask would be your BIR regional district office for information.
Hi Ms Julia,
Just wanted to clarify about my deductions in my current company.
In this company I’m currently associated with, they said we are categorized as “self-employed, freelancing professional sharing your expertise with our company” , and I am being deducted 20% tax (10% every 15th and 30th of the month). I just wanted to clarify if this is valid or just. I’m totally confused on these charges and I am really in need for an enlightenment.
By the way, I’m currently out of the country and really have no other way to confirm this concern, hence, I’m leaving it all to your hands.
Thank you in advance and God bless!
Hi Liann,
Freelancers or self employed professional pay their own taxes and as far as I know there shouldn’t be any deductions. But the best person to talk to about this would be your company’s HR or accounting. Clarify what these deductions are. They might be something else completely.
Thank you. 🙂
Hi Julia,
Can you also post a copy of a filled-out From 1905 for guidance?
Also, are insurance payments, (i.e. Manulife) tax deductible?
Hi Novee!
Re: insurance payment, please check with your accountant or bookkeeper. He or she would be the best person to answer that question.
Re: filled out form. The filled out form is actually posted on the article. But please note that the article only presents one very specific scenario of online workers and the example presented here shouldn’t be taken as an absolute guide for everyone. It would be best to consult with your accountant or bookkeeper if you want to accurately fill out your form with consideration to your circumstances.
Hi!
Thanks for this wonderful post!
It’s crystal clear and I would like to say its the best guide on paying taxes here in the PH for freelancers.
If I have an net income of 100,000.00 per month. I have followed your calculations including deductible expenses and I came up with the following results:
MONTHLY: PHP 3,000.00
QUARTERLY: PHP 18,500.00
ANNUAL (INCOME TAX): 150,120.00
– PHP 1,200,00.00 (TOTAL)
– DEDUCTIONS
– PHP 50,000.00 (PERSONAL EXCEMPTION)
– PHP 480,000.00 (OSD)
– PHP 55,500 (TOTAL QUARTERLY PAYMENT)
– PHP 36,000 (MONTHLY PERCENTAGE TOTAL)
TOTAL DEDUCTIONS: PHP 621,500.00
– TOTAL TAXABLE INCOME: TOTAL (1,200,000) – TOTAL DEDUCTIONS (621,500)
: PHP 578,500.00
// Since I fall on the over 500,00 bracket, I should compute the 32% of the excess
// above 500k so;
( 578,500.00 – 500,000 ) *0.32) = 25,120.00 + 125,000.00 (according to tax rate)
// So
TOTAL ANNUAL INCOME TAX: 150,120.00
I would like to ask if my computation is right and are there any options to lessen the tax burden? If you can email me then it would be great, I would like to talk to you more about tax rates and doing business., etc. If that’s okay for you, I don’t mind paying you hourly 🙂
Cheers 🙂
Hi Joseph!
Wow! Thank you for the offer. I’m glad that the article was helpful. But I think the best person to consult would be a bookkeeper or an accountant, especially with your high rate. He or she would know more of what deductibles you could qualify for =)
Joseph, I think mali ung computation mo sa deduction.. ung quarter and monthly payment.. deduct ata yun sa annual income tax, hindi dun sa percentage bracket computation.. so total annual mo dapat is 103,900 not 150k..
Hi, I work for a Singaporean company as a regular employee. I work remotely and I travel to Singapore from time to time to meet my boss and to other countries too. Now my question is, do I need to file for an ITR for myself? My friend called BIR sometime before the Apr 2015 deadline and they told her we don’t need to since we are not employed in the Philippines. I’m greatly confused. Help would be appreciated. Thanks!
This article mainly focuses on independent contractors or freelancers. In your case, you are employed with a Singaporean company which makes your situation different. It’s great that you consulted with the BIR on this since they would be the people who know best. If you’ve already explained to the BIR your work situation and they have said that you’re exempted then good for you! =)
Hi Mam,
Very informative. Thanks for sharing. I have a question for u though, 1) I wonder what is the use of the receipt? We’ve been documenting our expenses using book of account so im wondering kung saan gagamitin ung receipt.n anong ilalagay sa receipt? Will bir need that in the future? 2) Can we just pay the monthly n annual tax kc advance nmn ung pang quarterly para d na madami ang papers.hehe. 3) I wonder if u can also create process in paying taxes for small businesses like computer shop, same lng b? Thanks so much.
Joan
Hi Joan!
I’ll try to answer your questions the best that I can but it would be a lot better if you consult with an accountant or bookkeeper.
1) I wonder what is the use of the receipt? We’ve been documenting our expenses using book of account so im wondering kung saan gagamitin ung receipt.n anong ilalagay sa receipt? Will bir need that in the future?
The receipt is the basis of what you put in paper. Basically, everytime you earn money you should issue a receipt. And what’s on the receipt should be what’s in the book of accounts.
2) Can we just pay the monthly n annual tax kc advance nmn ung pang quarterly para d na madami ang papers.
Mahirap yun kasi you base your taxes on your income.
3) I wonder if u can also create process in paying taxes for small businesses like computer shop, same lng b?
Similar lang sila pero not completely the same. In the case of a computer shop, you probably have to pay rent for the space, register your business with the DTI, etc. When you have an actual shop, better if you have an accountant/bookkeeper to help you keep track.
Hi. We filed 2551M form online and i believe we need to go to the bank for the payment. Do you know what documents we need to bring/present to the bank? Thank you in advance!
Hi Rosula!
For the monthly percentage tax, you just need to print out your 2551M and a 0605.
Hi Julia,
I wish I’ve come across your post months ago. Nonetheless, still very helpful. Thank you so much!
Anyways, can you please recommend a good bookkeeper in Davao?
For accountants/bookeepers, you can ask your local BIR or check out http://www.picpa.com.ph/. It’s a nationwide list of accountants and bookkeepers =)
Hi,
I am not proud to say that I wasn’t able to pay my taxes in my previous company as a consultant and now I am transferring in a new company as a regular company. Are ITRs required when transferring to a new company? How will I process it and will I get penalties for the unpaid years? Thanks.
HI Annie!
As far as we know (and based on the advice of our accountant), ITRs are not required when transferring to a new company. But it would be best to consult with an accountant for the best answer, since you previously worked as a consultant.
tanong lang po yung sa form 0605 kelangan din po ba ng triplicate copies pag magbabayad ng monthly, quarterly at annual tax?
at kelangan ko pa po bang ibigay sa RDO yung copy ng monthly, quarterly at annual tax returns?
salamat
Hi John!
Thank you for your questions. Okay, now the answers
Yung sa form 0605 0605 kelangan din po ba ng triplicate copies pag magbabayad ng monthly, quarterly at annual tax? – Ideally yes so you would have your own copy and for filling purposes.
kelangan ko pa po bang ibigay sa RDO yung copy ng monthly, quarterly at annual tax returns? – Only when you’re audited.
Hi, thanks for the very informative blog. I just want to ask, are other percentage taxpayers also required t o submit the BIR form 0605? Is it submitted together with the 2551M when paying to AABs?
Hi Dani!
Our information is limited to online workers/independent contractors so regarding other percentage taxes, we wouldn’t know. The best person to ask about this would be an accountant or bookkeeper.
Hi Ma’am,
Tanong lang po, a friend of mine started online job last October 2014. All of her clients are from abroad, ngayon kailangan niya kasi ng ITR for 2014, and on process pa ung pag update ng RDO niya (from previous employer RDO to her home address RDO), Is it okay to file ung ITR niya for 2014 even if hindi pa siya register sa BIR as self employed? Wala pa po siyang COR. And hindi po siya nagbayad ng percentage tax for that year.
For 2015, she’s processing na ung BIR registration niya, kailangan pa ba niyang magfile ng mga bir returns form January or from the time na lang po na registered po siya?
Thank you in advance.
Hi Sam!
Ang tanong ko next is nag-file ba sya ng certificate of no income? Kasi kung registered ka pero di ka nakapagbayad ng percentage tax or any tax, you have to file that. Yes, you friend would have to pay penalties. As to how much, it would be best if he/she consult an accountant or bookkeeper for it to get more details.
Hi. Thank you for posting this! After days of both confusion and frustration, I finally found a simplified process for a tax dummy like me. I didn’t want to risk filing unless I understood clearly the process. I have one question, though. I was asked by BIR to obtain an OTR (Occupational Tax Receipt) from the City Hall. My job is purely online (as an ESL trainer) and I work for an average of 4 hrs. a day. Can I contest needing to get an OTR or is it really necessary? Also, how can I issue a receipt with my line of work?
Hi Algam,
Evens as an ESL trainer, you will need to issue an OTR. It’s covered for all professionals who are does not have a PRC license and yes, you will need your receipts when you file for taxes. If you check the blog post, part of the registration process would be having these receipts printed with an accredited printing press.
Now, how can you issue receipts to your clients since you work online. You don’t have to send them the actual receipts. You can just send them the electronic copies if they ask for it or just create the receipt and keep it for your own records. When you’re audited, the BIR will check your journal against your receipts, which is why if you want to declare your income and you want that income in your ledger, you have to write it in your receipts first then write it in your ledger.
I know, it’s weird and redundant but that’s how they work =(
Hi! Thank you for posting this. It has been both frustrating and confusing the past days as I was skeptical to file my taxes without clearly understanding the process I need to go through as a contractor (who relies on online job). Sadly, most people that I talked to in my line of work either doesn’t know the exact process or just did the registration and stopped right there. This is such a big help for tax dummies like me.
Just a few questions, though:
1.) My RDO asked me to obtain OTR (Occupational Tax Receipt) from the city hall. Going through the article, I did understand that there is a need for a Cash Receipt book and a Cash Deimbursement, as well. However, can I contest getting an OTR? I’ve read another blog that says an OTR is like a Mayor’s/Business permit and isn’t really necessary.
2.) In our line of work as individual contractors (self-employed), we don’t really get to issue receipts to our clients, especially in my case as an ESL tutor. So, do I just fill-in receipts every time I receive my compensation? Is it then solely for my earnings or is it also for expenses?
I find this blog the most credible since you were able to inquire closely with a registered BIR Accountant. Thanks.
HI Algam!
I think I answered most of your questions in the previous comment. As to the OTR, yes you will need it and it is applicable. I haven’t been able to put this in the blog post because this process can vary from city to city. In some cities it’s easy to get and OTR and in some, not so much. So it’s best to check with your city hall on how to get your ITR. If they ask you what you do, just say independent contractor or sole proprietor. Most people aren’t familiar with online work yet so they might get confused.
So, do I just fill-in receipts every time I receive my compensation? – Yes
Is it then solely for my earnings or is it also for expenses? – Solely for earnings. But you should also fill in your expenses in the ledger, especially if you opt for itemized deductions. Also make sure you keep the receipts.
Sorry I can’t give better answers. The best person to consult would be an accountant or bookkeeper.
Hello. I just want to ask when applying for tin online there are these questions:
*Do you intend to engage in trade or business? Yes No
* Do you intend to practice your chosen profession / perform service for a fee as self-employed individual? Yes No
* Are you at the same time an employee? Yes No
I’m working as an employee of an IT Company
It’s for a long-term position
HI Charmaine
I’m confused about your questions. Are you asking on how to answer them?
The best answer would be the honest answer. The questions won’t affect the process of obtaining your TIN. It’s mainly to help them decide on what category to put you in.
Hi! I got confused with all the info I got. So I want to ask about a specific situation.
Like the other who gave their comments, I too am a home based online tutor/ independent contractor. I used to be a local employee, a term used by the BIR personnel I talked with. I resigned in 2014 and became an “official online tutor/independent contractor” last May 30, 2015. The company said it will deduct 10% of my salary if I will have the Sworn Declaration that I am receiving an income of less than 720,000 pesos a year in accordance with Revenue Regulation 30-2003, notarized and stamped by the BIR. If I don’t do this before June 30 they will deduct 15% tax. I went to BIR and they told me to change my status of employment first, because according to their record, I am still a “local employee.” I went back to my company and they said, no tutors have experienced this before. My situation was the first. All tutors before me had no problem and BIR just stamped and accepted the Sworn Declaration without the change of status. Now I’m confused and don’t know what to do. Can you give an advice? Thank you.
Hi Sonya!
To be completely honest, I’m stumped as well. This is the first time I’ve encountered this question. And our accountant friend said that it would be best if you talk with your company accountant or local BIR on how to iron this out. Without all the information available it would be difficult to give an accurate answer. Sorry!
Hi Julia,
First, I want to say thank you for going out of your way to explain these kinds of things. They are very helpful for freelancers like me. Anyway…
Much like some of your readers/posters, I am getting into the tax thing quite late. I started working as a freelancer at quite a young age (early college years) and have been making a good amount of money through directing and videography. However, because of the deductions that were there, I honestly thought that was enough tax-wise. Oops. Wrong! Now that I’m sort of moving up “the ladder”, I’d like to properly abide by the law and actually pay my taxes (even if I know part of it will go to the crocodiles in congress/senate and Malacanang- yikes).
So my question are:
1. Being a freelancer since 2011 and not having paid a single ITR, how much will I have to pay considering I have no real way to track down my fees of past years?
2. Will I go to jail or something if I can’t afford them? Will I get penalized? How will I get penalized?
3. Or is there some kind of trial-by-combat/ amnesty I can avail of?
I honestly just want to do this right now that I am more knowledgeable about this grown-up stuff but just don’t know where to start. I’m scared that once I actually start paying my taxes, BIR/Mrs. Henares will come knocking at my door whisking me away to some unknown dungeon in Westeros and feeding me to dragons… while having the news posted on Inquirer to make an example out me.
Anyway, I hope you can help me with this. Where do I start? Where do I begin? I see that your usual reply to cases like mine is to “consult with an accountant/ tax person” but where do I even find him/her? And for my case, what do I do without being penalized or locked up (or is this part completely unavoidable? 🙁 ) And when you say “consult with an accountant/ tax person” does this mean people like me are doomed? Is that the nice way of saying, “sorry buddy, you’re in big trouble… so go talk to someone who may be able to save your butt!” haha.
Seriously though. I hope you can help someone like me. I just want to do what’s right but don’t know where to begin.
Thank you so much Julia and I hope to hear from you soon! 🙂
Hi Nic!
Thanks for the comment! First and foremost, I need to explain that I am not a tax professional. I have consulted with an accountant and bookkeeper on this article (and on most of the questions here) and as much as possible I only answer questions that I understand completely. For everything else, I tell my readers to consult an accountant/bookeeper because they would be the best people to give you the right answers. There’s an accountant in almost every city in the Philippines and here’s a directory of them: http://www.picpa.com.ph/
Now, about your questions:
Where do I start? Where do I begin? – You should start by getting your TIN if you don’t have that yet. The procedure is also in the article. You can do it online or go to your RDO.
1. Being a freelancer since 2011 and not having paid a single ITR, how much will I have to pay considering I have no real way to track down my fees of past years? – This would depend on whether you already have your TIN or not. If you don’t have your TIN yet and you haven’t registered yet as an independent contractor, you don’t need to worry about this. If you already have your TIN and you’ve been registered since 2011, then it’s time to get an accountant.
2. Will I go to jail or something if I can’t afford them? Will I get penalized? How will I get penalized? Regarding the penalties, it depends. Some penalties are small enough that you can afford to pay them. Some penalties can be negotiated if you make an effort to put things in good order.
3. Or is there some kind of trial-by-combat/ amnesty I can avail of? Yes, there are amnesty programs.
Hi,
I would like to ask if there is any issue or problem with having two jobs with the proper deductions and remittance of taxes. I have 2 employers since it is a need for me to have more than one job because of financial needs for my family. I work at night in a bpo industry and I also work at day time both are full time, both my employer are deducting me exact withholding taxes. Will I be question or will there be any problem in the future? though I don’t have plan of staying long/ keeping in one of my job. This is just temporary bec of financial problem. Some says I might be ask by your office…
Thank you so much,
Hi!
Thank you for your comment but unfortunately, this is beyond the scope of our knowledge and experience. The best person to ask regarding your taxes would be a bookkeeper or accountant.
Hi po! Ask ko lang po, I have registered online and got my TIN but I haven’t paid the 500php fee until now. Ngayon po ay hinihingan ako ng TIN ng company ko. Okay lang po b na yun ang ibigay ko though di pa ko bayad sa fee? Nagwoworry ako na bka kumuha yung employer ko ng TIN para sa kin at magdoble ang TIN ko. Thanks po.
Hi Ella,
Check the BIR’s website or visit your local RDO to see if your TIN is registered to your name. If there’s no TIN attached to your name, then you can have your employer get your TIN. If the TIN number is already registered to your name, pay the P500 as soon as you can and give it to your employer.
Hi!
I just want to ask I am trying to get a TIN Number because it is recquired for the job that I am applying online. I went to BIR and told me that one of the requirements is the company certificate but the company does not issue this certificate because they say that I am an independent contractor. What should I do? I really need to finish the requirements as soon as possible. Hoping that you could help me.
You don’t need a company certificate to get a TIN number, you can just apply as an individual/independent contractor. And it would be easiest if you apply for your TIN online. Just visit the BIR website for more details.
Thanks so much for this!
Can you recommend a BIR accredited accountant/bookkeeper with good (affordable) fees for self-employed individuals like us? I understand we also have to pay an accountant a monthly fee, thus another deduction from our income aside from the taxes.
Thanks!
Hi Nina!
Sorry we can’t recommend anyone since it varies from area to area. You can ask your local BIR for a list of accredited or your local PICPA chapter. Regarding bookkeeper, in our case, we pay our bookkeeper a quarterly retainer’s fee, not monthly. And it depends on the kind of transactions you need accomplished.
Thank you for this article!
I work as an editor via onlinejobs.ph and get paid below 10k every month since I’m only doing this part-time. I don’t have any other job, just this one. My salary is paid by the employer through Paypal. I already have a TIN since 2011 and I’ve only started working online since last year.
Is my ‘salary’ taxable?
Will I be penalized for not declaring my meager income and paying my taxes?
Your response will be greatly appreciated.
Thanks!
Hi Ana!
Under a certain amount, your income could be tax exempt. I forgot what the exempt amount though. Best to ask a bookkeeper for more info.
I need ITR, for visa Application, I do have TIN already and have worked for the company as apprentice for 9 months 4 years ago and I think I’m exempted because i earn 4 thou. If i go to BIR now, and declare that I’m working for online job earning not fixed income more than 10 thousand, what should I bring as proof as I received only payment thru paypal..Printing Paypal transaction and showing this as receipt is that ok?..If not how can I obtain receipt as proof of income to them?
Okay, you have a TIN but are you registered as an independent contractor?
You didn’t get a TIN ID or ITR from your former employer? If not, most likely the call center you worked for has your TIN registered at their RDO (regional district office). If you can figure out what RDO your former company belongs to, you can ask that RDO for your TIN.
I actually have my tin that I used since I worked.
what if I have two gig one full time & one part time with different outsourcing company?
Which RDO will I get ? will it be the full time?
And once I get the RDO what is the next process.
Thanks.
If you work mainly from home as an independent contractor, use the RDO of your home address. Once you have your RDO, you can start registering as an independent contractor with your RDO.
What are the form will I complete ? I’m hired by outsourcing company to work from home. I can’t say that this is business income since I’m not directly working with clients.
Please educate me more.
Thanks,
Shary
That depends. Are you hired by the company as an employee or are you hired as an independent contractor. If you’re hired as an employee, then you won’t have a problem since the company would be the one doing the processing. If you’re hired as an independent contractor, then the procedures of the blog post would be applicable to you.
Hi Julia,
I actually hired an assistant for myself and I’m paying him every month.
I believe this will be part of the deductible expenses right? And on the side of the assistant what should be done then, should he do the same procedure as above?
Will wait for your response.
Thanks.
@Shary – You hired an assistant so I’m going to assume you’re not in the Philippines. If this is correct, check this out:
http://www.onlinejobs.ph/blog/simplified-taxes-another-way-outsourcing-saves-your-business
If you’re in the Philippines, I don’t have a good answer for you. Maybe someone else can chime in with help?
Hi Julia,
Because I have been employed all my life, just looking at the tons of forms needed and the payments needed to be made, monthly, quarterly and annually, makes me dizzy. I’m caring for my mom (she’s bedridden) that’s why I’m looking at working from home (contractor) in the near future. I have been scouting the net for information I need to know before I jump into the virtual world (this includes paying SSS, Pagibig & Philhealth voluntarily). But don’t get me wrong, this blog is as clear as crystal. Thanks heaps!
Though, I want to know, is there an option for us to make the payment, say, just quarterly or once every year, perhaps (to save us the trouble of going through it every month or every 3 months since these payments get deducted to the tax amount at the end of the year anyway) for more convenience?
I hope you can enlighten me.
God bless 🙂
HI Kylie,
For benefits and taxes, yes, you do have the option to pay quarterly and in fact, this is the recommended practice. For taxes, you have the option to pay it once a year.
Hi Julia. I have some questions/clarifications.
You mentioned this on your article: “But the truth is the BIR is still working on how to categorize online workers.”
Reading you article and a few comments from your readers, I came up with these questions:
1) If you’re an online worker and your income is generated from an overseas source/employer (ex. US, UK, Europe), are your subject to pay taxes here in the Philippines? If yes, can you cite a BIR law for that? Otherwise, can you clarify please or guide me in relation to your statement above why one should not pay taxes at this moment considering that BIR is still working…
2) I’m thinking of Overseas Filipino Workers which according to BIR “OFW’s salary from abroad is not subject to income tax”. Are Online Filipino Workers (coincidence aka OFW) getting their salary abroad can enjoy the same benefits?
Thanks. You answers will greatly help millions of Online Filipino Workers.
1) If you’re an online worker and your income is generated from an overseas source/employer (ex. US, UK, Europe), are your subject to pay taxes here in the Philippines? If yes, can you cite a BIR law for that? Otherwise, can you clarify please or guide me in relation to your statement above why one should not pay taxes at this moment considering that BIR is still working…
My answer is I can’t cite a law because as I have said in the blog post, I am not an expert. I have consulted an accountant for help on this article and we focused mainly on the issue of taxes. If you want the BIR law for this, the best person to consult would be a tax lawyer. But I can assure you that in my consultations with the BIR and accountants, for online workers, that even though our source of income is abroad, we are still considered taxable since we are providing a service and we’re working in the Philippines. OFWs in the other hand, work abroad and the money they send to the Philippines is a remittance, not payment for services rendered.
2) I’m thinking of Overseas Filipino Workers which according to BIR “OFW’s salary from abroad is not subject to income tax”. Are Online Filipino Workers (coincidence aka OFW) getting their salary abroad can enjoy the same benefits?
Same answer as above. And to be completely honest, there’s still a continuing debate on this within the online worker communities in the Philippines. If you wish to enjoy the same benefits as OFWs, by all means do so. My motivation behind is article is mainly to provide information for online workers who do want to pay their taxes, since paying taxes provides workers with an ITR, which is needed is you want to apply for bank loans, go abroad, etc.
Hello Julia,
Me and my husband are both working online. We are planning to register soon. So we need to register in separate?
We have both personal exemption of 50k right? What is that Spouse part in the form? Will I/he need to declare both our tax on that part?
Hi Anna!
You are both entitled to 50K each yes. You can file jointly or separately, depending on what works for you or which is more convenient. I suggest you consult an accountant or bookkeeper for this since joint filings are beyond the scope of my knowledge.
Hi,
Thank you for the detailed blog post. It helps a lot.
However, I have a few questions, the deadline for the quarterly income tax (2nd) is near. I’m quite confused because I’m not sure if I should fill out #35 in the 1701Q form. In your blog, it seems like you’re manually computing the quarterly tax without referencing to the previous quarters?
In the eBIRForms, if I fill out #35, it will used the previous quarter + the current quarter for my final taxable income. If I will fill out 38C/D, the amount I paid last quarter, the final taxable income won’t match compared to the manual process.
Example:
Q1 has a net of 100,000
OSD is applied so taxable income is 60,000
tax due will be 7,000
Q2 has a sudden change in sales, let’s say it went to 50,000
OSD is applied so taxable income is 30,000
tax due will be 2,500
However, if you used the eBIRForms and fill out #35 and #38C/D
Q2 tax due will be 5,500 even if I already paid 7,000 from the previous month? Are these fields not really necessary or they are used in a different case?
From what I understand, the Quarterly tax seems to get the average which means they are dependent on each other? I’m quite confused, please do enlighten me. Thank you.
However, I have a few questions, the deadline for the quarterly income tax (2nd) is near. I’m quite confused because I’m not sure if I should fill out #35 in the 1701Q form. In your blog, it seems like you’re manually computing the quarterly tax without referencing to the previous quarters? – Yes, you’re right. And the reason I did this is for the sake of simplicity. As I have mentioned in the blog post, I am not a tax expert and I wrote this in partnership with a bookkeeper/accountant. The reason they taught to me this way to make it easier for me to understand the process.
And from what they explained to me, you can include the previous quarters payments in your 1701Q or in the annual form. I chose the have the deductions on the annual form the make the process more straightforward.
When you fill up #35 and #38 C/D, you quarterly tax will influence one another since it takes into consideration how much you paid prior. Either the tax could be lower (through deductions) or higher (if there’s a gap).
From what the accountant explained, these fields are optional. But this option is present because in some cases the taxes maybe lower or paying taxes that way would be more convenient. It would be best if you consult with a bookkeeper or accountant so you’ll be given the best recommendation on how to fill up your form.
Julia, reading your article has been so timely. I was employed quite a number of years from a number of companies with industries ranging from Animation to Graphics and Web Design. I shifted to being an online worker as a Graphics and Web Designer a few years ago when I got retrenched from my regular job. It was hard for the first few months because I can hardly find clients. Then I got blessed with a US client who referred me to her friends who in turn became my regular clients; all from the US also.
Now, I got used to the practice where the companies from my regular jobs in the past took care of my tax. After my online jobs started to come in I wanted to pay my tax again. I approached a CPA friend, the accountant of our church, and asked her help to take care of my tax as a sideline. Since she does have several sidelines like that I thought it would be a perfect arrangement. When she learned that all my online work come from the US she told me that my earnings are not taxable. I took her word for it; she being the expert. But I am having a feeling of burden lately about paying taxes; call it ‘guilt-feeling’. So I researched on the net about my particular case. One article affirmed my accountant friend that my earnings from abroad is not taxable since the BIR has no jurisdiction over it (https://maribetholiver.wordpress.com/2013/08/01/why-ph-internet-freelancers-need-not-to-pay-tax-as-self-employed/). I decided not to rest on that info alone and searched some more until I came across your blog. Now I have decided to follow your recommendations and tips and be a good Filipino Citizen by paying my tax.
It is already August 2015. Is it OK if I start declaring my earnings this August? Will BIR still require me to fill-up my earnings since January when I file my annual ITR? Will BIR also run after the years I have not paid my taxes since turning to being an online worker and be penalized for that? This last question is a BIG reason why I am scared to go to BIR to inquire how to pay my taxes. I am afraid to be questioned why I have not paid taxes after I lost my job and shifted to being an online worker. The thought of being penalized for being a delinquent taxpayer or worst go to jail for being a TAX EVADER petrifies me.
What kind of Books should I keep? If I opted for Optional Standard Deductible (OSD), what will be the implication be on the Books I keep? Should I bring my Books when I pay my monthly and quarterly taxes?
Will wait for your answers. Thank you very much for your help.
God bless!
HI Bertz!
For the most part, you only need a book of accounts to keep track of your earning and expenses. If you opt for OSD, you don’t need to detail your business expenses. But if you opt for OSD, it’s with the understanding that all of your business expenses would be covered by it so you can’t have any additional deductions.
No, you don’t need to bring your books when you pay your taxes. You just need it for your records in order to be audited.
Is it OK if I start declaring my earnings this August? Will BIR still require me to fill-up my earnings since January when I file my annual ITR? Will BIR also run after the years I have not paid my taxes since turning to being an online worker and be penalized for that? – Before you start paying taxes, I need to ask, are you registered as an independent contractor/sole proprietor. As I explained in the article, after you get your TIN, you have to register first and you can start declaring your income from the start of your registration.
Thanks for the reply.
I am not yet registered as an independent contractor/sole proprietor. It was only after reading your blog that I decided to start paying my tax as an independent contractor.
The way I understood it in the last sentence of your reply, I can start declaring my income once I get registered and have been handed my COR, is that it? So if I get registered in August and start declaring my income for this month, then I will pay my first Quarterly Income Tax on November 15, 2015 that will represent just my August and September 2015 income, is that correct? So, my 2015 ITR will reflect my accumulated income from August to December 2015 only?
I have already been employed in the government and I have already been paying BIR taxes as well since I started my job. Recently I just have a second job which is an Online English Tutor and my Employer deducted 10% for BIR tax. Now my question is, is it legal to pay BIR tax twice a month by the same person for having two different jobs? Please help me understand this. I don’t know much about the labor laws because I am not a lawyer. Thank you very much, and more power.
Hi Dheniz!
I’m not a tax lawyer too so I’m afraid I can’t answer this question. I think it would be best to ask an accountant or bookkeeper regarding this.
Hi Julia, clarify ko LNG po, ano po bang dapat kong gawin?
Year 2007 kumuha ako ng TIN sa rdo 47 ( one of the requirements sa work)
Nagwork po ako as agent for 1month, and I haven’t receive any income since commission base po .
Then in the same year , nag study ako and graduated last 2012.
Started to work in 2012 to 2014 in paranaque (rdo52) ( I’m not aware na kailangan pla itransfer sa new rdo) . Kinakaltasan ako ng tax every month.
Now, need ko itransfer sa cavite so I went to rdo47 , and filled up 1905. HND natransfer kse po marginal income DW, walang akong tax from 2007-2014 from their record nila. Hnd ko alam na need po pla i close yun.
Naiistress na po ako dhl
– kailangan ko DW mgbyad ng penalties.
(Wala nmn po akong income from 2007- April 2012)
– magppsa dw ng form 1907 ITR ( hnd ko alam nilalagay ko, kse wala nmn akong mailalagay)
– kailangan ko ng ipasa yung 1905, 2305 as my requirements to preemployment.
Please help me.
Ayaw ko mgbyad ng penalties dhl wala nmn along kinuta ng mga taong yan ?
Hi Burn!
Sorry pero di ko rin alam kung paano sagutin ko. This is beyond my scope. The best person to consult would be an accountant or bookkeeper. Sorry!
Hello! I keep coming back to your blog whenever I’m confused about which forms to use or how to go about my tax filing and all that stuff. This blog is really very helpful!
I just have one question though is the form used for the monthly percentage tax different from those online workers who have 10% or so deducted from their income? What do I do in such a case? I hope you can explain to me how to go about that or at least lead me to a clear and reliable site or other such places. 🙂
It is different because the monthly percentage tax is for freelancers who are registered at independent contractors/ sole proprietors. Their employers don’t deduct anything from their salaries.
Dear Julia,
I’m really thankful I found this website! I hope you never get tired helping strangers (most especially freelancers) with their tax woes!
I am writing because I am having trouble filling up form 2551M online. What exactly does Taxable Amount mean? Do I put in the amount BEFORE or AFTER the tax withheld?
I got a form 2307 from the last freelance job I completed. So I have to fill out the bottom part of the 2551M where there is “Tax Withheld Claimed As Tax Credit” written. Do I just copy the details from the form 2307 given to me? What do I put in the “Applied” box?
Hi Anj!
I’m sorry but I have little experience with the online system. The best person to consult would be an account/bookkeeper for this.
Aww ok. Thanks for your quick reply! But can you tell me what taxable amount means? Is it the gross income?
Oh, I found the old 2551M form on the internet and it’s not much different from the online one. The parts I asked about are definitely still there. 🙂
Hi,
Thanks for replying to my previous question.
I have another question again. What if I was hired by a outsourcing company here in the Philippines as their subcontractor for foreign client would it still be considered independent contractor?
Would the process of filling the taxes will be the same?
I appreciate your response.
Thanks.
Hi Julia! Thanks for putting up this post, it’s been really informative and helpful for all of us. 🙂
I’m still trying to get a good grasp of this before I file my application with BIR. I guess the primary thing that’s holding me back is that I travel a lot and my work as a freelancer is location independent. Would it be possible to pay the taxes just annually, instead of paying it monthly and quarterly? From what I understand, this option will be a bit straining on the wallet since it’s going to be lump sum instead of installments. I don’t mind though, it might be more beneficial for me since I would just have to keep track of one date and fix my travel sched around that.
Hi Meryl!
Yes, you do have the option of paying once a year. =)
Hi to all,
i have seen a lot comments of others in this posts regarding Freelancer and Taxes, i would like to clear up some misconceptions and understanding about Tax and who has to pay, register etc.
1. Identify if Contractor or Employee Google it makes fun and will change your mind!
2. Tax Treaty for e.g. this one:
http://www.austlii.edu.au/au/other/dfat/treaties/1980/16.html
3. Who is doing Tax evasion vs. Competition Law
A Company is doing business here and in the US for e.g has a branch here and employees but what about those that operate without branch ? Yep those are the Tax Evaders from Australia – US – Europe, etc. the Freelancer and most of them i meet are considered by law a Employee – you cant register a business as employee !!
Even if you do so its in general supporting crimes against competition law and foreign tax evaders. Paying tax for something you shouldn’t is considered as dumb.
Fact: most in Philippines don’t know the law or have no lust to learn it, sadly to see that the BIR is jumping on the wrong boat because they not understand the first question or meaning,
“Contractor vs. Employee”
If You Google Contractor vs. Employee it explains what i mean.
or check out this Australian site:
http://www.fairwork.gov.au/about-us/policies-and-guides/fact-sheets/rights-and-obligations/contractors-and-employees-whats-the-difference
Nevertheless think you own a BPO and have 20 employees you pay your tax etc. aside you need all permissions. If a Corporation fails to register and hires Employees without having all permits its done for one reason: TAX Evasion and when you see this in relation to your business with 20 employees well than this is called a unfair advantage. This Tax Evader will not pay any Pay roll or business neither income tax.
If you like to know more about this have a look at:
(klick on the left side to open the PDF)
http://www.klgates.com/how-to-structure-overseas-independent-contractors-07-28-2015/
Maybe this shades a little light on all the discussion about Filipino and tax paying!
Cheers
York
Hi, I am currently working in Japan as an IT staff but I have a part time job too in the Philippines. My part time job is teaching English language to Japanese students. Philippine based account. Should I still need to pay taxes to PH government? Please let me know! Thank you!
Currently working-currently living, still here for the next 3 years. Ang akin lang, hindi ba unfair sa part ko na magbayad ng tax sa PH government dahil wala naman ako sa pilipinas. Thank you sa sasagot 🙂
That depends. Are you hired by the company as an employee or are you hired as an independent contractor. If you’re hired as an employee, then you won’t have a problem since the company would be the one doing the processing. If you’re hired as an independent contractor, then the procedures of the blog post would be applicable to you.
About the annual tax return, shouldn’t you deduct the FOUR quarterly taxes you filed instead of just THREE? Or is it the case that the FOURTH QUARTER tax and the ANNUAL TAX are aggregated, which is why you only deduct three quarters instead of four?
The 4th quarter and the annual tax are already aggregated. Or think about it this way. Once you have paid the 4th quarter tax, you have basically paid your entire annual income tax. Which is why there is no 4th quarter and it’s just called the annual tax.
Thanks for the clarification! And thanks for coming up with this article. You have been really helpful to most of us who are just lost! 🙂
You’re welcome!
Hi,
Would like to seek advice sana how would be my approach on this situation:
My taxable period starts june 2015 (as online worker in IT) up to now but yesterday my boss told me they want to convert me as fulltime officebased employee to their soon to open office in Taguig. Tentatively, I will stop as self employed online worker by Oct. My plan of changing RDO (previous rdo is taguig also) is pending due to the announcement. Will I still need to change RDO from taguig to san juan (home office) when eventually it will be again taguig? How will be my tax computation quarterly from july up to the nov 15 duedate?
Thanks in advance!
Hi Loren!
That is a good question! But unfortunately I am not qualified to answer that =( . It would be best if you consult a bookkeeper or accountant to help you with the proper computation of your taxes.
Very informative. Thank you for taking the time to explain this.
You’re welcome!
Thank you for this. Does this also apply to me, I am employed full-time by a US-Company but the nature of my job is online. Some people have told me I only need to file ITR every end of the year. But this article is saying I should be considered self-employed/sole proprietor (by the way, I also have a registered business on the side, so this confuses me even more)…
I hope you can shed some light. Even CPA’s I’ve talked to have conflicting opinions.
If I am to file ITR every end of the year, what computation would it be?
Thanks so much!
hello i have a question po. i used to work po in a company as a call center agent.then i resigned pero hindi po ako nkapag pa clear nung nag resign ako, but that was two years ago pa. and two years din akong na istambay. so lahat po ng records ko like philhealth,sss,bir is di na po nacontinue.and im planning po sana mg apply ulit ng trabaho sa ibang company. ok lng po ba na gumawa ng bagong records and hindi ko nlng po ideclare yung previous employment ko last two years. tsaka kasi hanggan training pa lng ako that time pero tumatanggap na po ako ng sahod nun. i hope mtulungan nyo po ako kung ano ba dpat kung gawin. thank you po.
Hi Phil,
As far as I know it would be illegal to have duplicate records. And since it’s clear that you were unemployed for 2 years, there shouldn’t be a problem with your records. But to make sure, please consult an accountant for the best course of action.
Hello po. I’ve been an online freelancer for a year but it’s my first time working with an employer who deducts 2% tax. I only work as a PART-TIME freelancer and I’m applying for a full-time job right now. Will my FULL-TIME employer know I have a PART-TIME job by looking at my taxes. Are they allowed to look at my tax records?
They are not allowed to look at your tax records.
thanks for the quick reply 🙂
Hello Miss! I wonder does this also apply to home-based English online teachers like those working in 51talk or Rarejob? thanks in advance!
Yes, it does.
Hi, I’m a self-employed professional with plans to freelance online (oDesk, or English tutorial). I have no TIN yet and I am getting soon. I hold two professional licenses. Would that mean I am going to pay the income taxes of my two professions as well as the 3% tax for online freelancing? Should the applications be filed separately? Thanks.
Sorry but that’s beyond the scope of my experience. The best solution would be to consult with an accountant or bookkeeper for that.
Dear Ms. Julia,
Allow me to post my sentiments here. I just wish the online workers will follow suit instead of just posting comments. Reading is not enough. It would be best for them to visit their BIR office and follow the process. In a nutshell, they cannot file their ITR without BIR registration. Sa mga winiwitholdan ng 10% monthly, you cannot claim it as tax credit because you cannot file your quarterly ITR and annual ITR unless you are registered as self-employed with the BIR. Meaningless din ang computation kung hinde sila registered sa BIR.
Nice blog, by the way. You were able to explain income tax in a meaningful way.
I totally agree. And if you read the blog post, it’s actually specified in the first part that you first have to get your TIN and register as self employed with the BIR. This blog post is simply meant to help people understand the process and shouldn’t be taken as gospel.
as online job worker, if nagstart ang work ng June then you were separated from the company ng end of Sept, ibabalik ba ng buo yung naibayad mong tax? thanks in advance!
HI Loren,
I’m not sure about that. Better ask a bookkeeper or accountant about it.
If I started freelancing January of this year, but registered only today (October), can I still pay for my income tax for the previous months/quarters? May penalties ba? Or can I just file in April 2016 for everything?
HI Aco!
I think it would better to consult a bookkeeper/accountant regarding that. He/She would have more information on when you should start paying or what penalities, etc.
Great!
It’s a very nice information for me that currently need to apply TIN# for my Online Business but still I’m employed in a private company.
I this case, I can have two TIN# or same TIN# to be used?
Also by reading this guidelines that very informative already as TIN# applicant/taxpayer still need to attend briefing before it release the BIR certificate of registration
Thank you!
Hi Grace,
The same TIN will be used.
But for more information regarding your taxes, it’s best to consult a bookkeeper/accountant.
Great blog.
It’s the second time for me to file my 1701Q with payment.
Confused lang ako kung ano ang dapat ilagay sa Tax payment for the previous quarter-38C at Creditable tax withheld for the previous quarter-38E.
sa 38C ba ay yung binayaran mo na previous 1701Q payments? Ang 38E ay previous 2307 withheld?
Pasensya na. Salamat.
Yung previous taxes na binayaran ilalagay sa 38C. Yung tax withheld (the one taken by the employer) ang ilalagay sa 38E.
But it would be best to consult with an accountant/bookkeeper to get the advice best suited for your situation.
Good eve po. Thank you for this informative and dynamic site. As follow-up question po sa concern about 38E/F Creditable Tax Withheld for the previous quarter(s), my questions are:
1. Since I am now using eBIRform software V.6, everything is automatically computed, but I would just like to confirm, ang “Creditable Tax Withheld for the previous quarter(s)” po ba eh ang na withhold ni company (considering I am an Independent contracting receiving 2307 form from them every quarter) nung previous quarter? So in case Im filing 1701Q (2nd quarter), 38E – is the 38G of 1701Q (1st quarter)?
2. In filing Annual ITR (1701), are Creditable Tax Withheld from 1st to 3rd quarter to be summed up? Thanks po.
Hi Josel!
Thanks for your question. Unfortunately, I can’t make an educated guess without seeing the software. I think it would be best if you consult with an accountant or bookkeeper.
Hello!
Learned a lot from your blog post. 🙂
I just have a question though. You mentioned that part of the requirements in getting a COR is “BIR Form 1905 (for those who already have a TIN and used to work in an office, to change your Regional District Office)” — just wondering if this applies to my case.
When I was still a student, I got a TIN number at my home’s RDO 39 (Quezon City) when I applied for a Student Permit/Driver’s License. I, since then, worked in companies located in Mandaluyong, Makati, and Taguig using the same TIN number. I just recently resigned and decided to just work as an online freelancer here at home.
When registering as a self-employed professional and getting a COR, should I still file form 1905, given that the RDO where I got my TIN and where I will register myself as self-employed is the same?
Thank you 🙂
Hi Lyn,
I don’t think you would need to change it but to make sure, please inquire at your local RDO. I think the only thing you might need to change is your status from employer to independent contractor.
Hello!
I just recently resigned as an employee and now wish to register in BIR as a freelancer/self-employed professional. Do I need to file form 1905 before applying for a Certificate of Registration? If yes, how do I go about filling up the form? Thank you 🙂
Hi Julia,
I just want to say thank you for this comprehensive blog. I’m glad to have found a great guide to paying my taxes.
I hope that every Filipino citizen would do their duty and pay their taxes. A lot are hesitant to pay taxes because they think that it would just go to the pockets of the corrupt government officials. That’s a fact everywhere we go. There will always be people like Janet Napoles. But it is not an excuse to not pay our taxes. If everyone would think the same way, the Philippines will not get out of the quagmire that it’s in. Let God/karma deal with those thieves. Even Jesus said that it is lawful to pay taxes.
Taxes makes it possible for us to use the roads and sidewalks, study in public schools, get treated in public hospitals, get police protection, and enjoy the other infrastructures built by the government. Taxes are very important.
This article shows that it’s not really expensive to pay taxes. I hope everyone will be encouraged to do so. Let’s do our bit to help the country. We can do this! 🙂
Glad you liked it. Thank you for your kind words =)
Hi Ms. Julia!
Thank you for this great blog, alot of info.. But I actually had to read the comments more than the whole steps.
I hope you can help me understand, since ive been reading articles from the net lang about online busines.
Me and my friend just put up an online events and party organizing business, and just had our first client. But they are asking for an OR since they are a company and needs it for bir purposes daw, or we can provide daw an AR if wla OR. Is an AR just an acknowledgement receipt that doesnt need BIR registration since urgent na nmen kailangan. Or if we are to register to BIR, are we going to be required to pay taxes since we dont have a regular income naman, and it will just depend if someone will get our services? Are we qualified as BMBE and is qualified for tax exemption? Btw, I registered as sole proprietor instead of a partnership because lesser hassle daw. And how about the “books”? I dont have an idea on how to go about that.
We actually just registered and plan to undergo the tedious process just to provide our client a receipt.
Ms. Julia, i would greatly appreciate you reply about this. Totally, no knowledge about how to go about this.
Thanks so much in advance!
Hi Ms Shine!
Congratulations on your business! Unfortunately, this is beyond the scope of my knowledge. The best person to consult would be an accountant for this. Sorry!
Hello Ms.Julia,
I have just started working as a fulltime online ESL tutor. I already have a TIN and I’m planning to register as an online tutor at BIR soon. Although, I’m skeptical about it because I don’t know whether online teachers also need to make book accounts, since I earn on a monthly basis. The company already withholds 10% from our monthly salary and provides form 2307. In such case, do I still need to make book of accounts and issue receipts as well. I hope you can enlighten me on this. Thank you very much, I hope to hear from you soon. God bless
HI Sherry!
Since your employer already withholds a portion of your income and provides your with a form 2307, I don’t think it would be necessary for you to register since you would be considered an employee. To be sure, please check with your company’s accounting dept.
Hello again Ms. Julia,
Thank you very much for the prompt reply.Sorry to bother you again po. I am considered an independent contractor daw po and not an employee. So since they withhold 10% from my salary every month, do I still need to pay monthly percentage tax and can I just file ITR once a year? Saka po I have a PRC license na po, do I still need to secure occupational permit?Thanks po ulit and pasensya na po sa dami ng questions.
Dear Ms. Julia
Greetings!
I just want to ask po reagarding sa 2551M may mali po kc kami na declaration for example po yung month of June nagdeclare po kami ng 157,682 sa 2551M tpos nung nagdouble check na po kami sa mga O.R ang idedeclare dapat nmin ay P162, 282.14 so kulang po sya ng P5,600 sa month of June n dineclare po nmin sa 2551M. ano po kaya ang pwede namin gawin? my penalty need help po. thank you.
Hi Jane!
Thanks for the question. I’m sorry to say it’s beyond the scope of my knowledge. It’s best if you consult an accountant or bookkeeper for this one.
Ok po Ms. Julia Thank you!
Hello po. First, just wanna say how helpful this article is. I, too, is an online worker for more than 5 years now but I have never filed tax before.
I am an online tutor. My company deducts 10% withholding tax of my monthly wage. So what should I do with that? I mean, how can I declare that the company is already withholding 10% of my monthly income?
Thanks a lot.
HI Sims!
If your company is already deducting tax, you don’t need to pay your income tax but you would need to ask your company for a copy of the taxes they’ve withheld. That way, if you want to file your taxes you can show that you have already paid through your company.
Hi Ms. Julia!
You have a great information for us.
But still I need to know for filing of 2251M what if I have income but I did not issued yet OR to a customer because not yet received the printed OR that time.
Do I need to declare it as income or excluded it?
Thank you!
Grace
HI Grace,
The client doesn’t need to receive the OR but you do have to issue the OR. If the OR is not issued, then the income is not declared.
Hi Ms. Julia
Thanks for the reply!
I have another question, if no sales for that month and late filing still have penalty?
How much?
Thank you!
Hi Grace!
I’m sorry but I don’t know the answer to that (late filing). This is the part where I think it’s best to ask an accountant or bookkeeper for more advice.
hi, not sure if still relevant to you but yes there will be penalty. compromise is now at 1k, minimum
Thank you so much for explaining all that! It clarifies a lot of things. Would you might if I took your comment in verbatim to update the post? I want to make sure that the post would be accurate. I hope I can also credit you on the update. Would it be okay if I ask for your full name? Or do you have a website or a blog so I can credit you on the corrected information?
Hi Ms. Julia!
I just want to tell you that I finally got my COR last December 15, 2015, thanks to you.
My question is – since I registered only last December 15, 2015, am I eligible to file for annual tax return come April 2016? Also, I have no idea what to put on the notebook that I received when I got my COR. What should I put in there? Would you believe that I was able to obtain my COR without them (BIR) giving me a seminar on it?
Looking forward to your reply and thanks again.
Sincerely,
Gil
Congratulations Gil!
Regarding your tax return, since you only got your COR on Dec. 15, 2015, you can file for annual tax on April 2016 but I believe that would only cover December.
Regarding your notebook, that’s where you should list your income and expenses. In this case, I think it would be better if you consult with a bookkeeper so he/she can help you fill that out. I don’t know much about your work so I’m not sure if I would be giving you the right information on that one.
Once again, congratulations! Happy to help!
Hi Julia. I want to ask in the form (where there’s a name for the Spouse Name). My husband is a foreigner working in Norway. Do I need to write his name on the form including his TIN no.? He’s working in Norway while I’m working here in the Philippines. Thanks.
Hi Myra,
Yes, you need to fill in his name in the general information section (it’s usually on the front of the form). It’s your option to file jointly or individually. And since your husband is a foreigner, I think it would be best to consult with an accountant or bookkeeper to get more information on how to do it properly.
Thank you Julia. I will consult that. I have another questions: I have TIN no. (when I worked before in an office), my questions:
1) Do I need to attend the taxpayer’s briefing to get my Certificate of Registration? 2) Can I can update my TIN Card with change of status from single to married using my husband’s surname and using the Form 1905?
3) I’m working as Online Graphic Designer, do I need to show to the BIR Officer my Certificate of Employment that I just got hired.
4) Lastly, I’m confused with the Books of Account: 1 ledger, linear journal, 1 professional income book, 1 subsidiary purchases/ expenses book and must print the invoices/ receipts printing (booklets of invoice/ receipt on the BIR Accredited Printers >>> Do I need these??? I’m really confuse on this.
Thank you so much and sorry I have many questions. Thanks and more power Julia!
It’s January now. I got to renew my certificate of registration which is P500. Do I have to pay again for the Professional Tax? I’m quite saddened by the government because they have different view. Some says I don’t need Mayor’s Permit anymore since I am only home-based, while some says I have to because it’s still business…. Huhuhu. I’m also saddened because when I help my friend to close his registration, he was asked with several requirements – the hardest part is the Certification from the local government that he is now closing his business. They won’t give them that because he did not get Mayor’s Permit. How disappointing is the government. It is us who are doing our best to be responsible by paying taxes, but it is us who is being burdened of not helping. Tsk. Tsk.
I can empathize with your troubles. Have you tried consulting an accountant on what the best course of action? Since you also have a professional tax?
Hi! I have a question. In case I won a lottery in Nevada, let’s say, a million dollars, should I still pay taxes in PH even if the taxes has been paid in the US?
Hi Jocriss,
I think it would be best to ask your lawyer on the best way to approach that.
Yes, if you are both a citizen and resident of the Philippines. There is the Philippine-US tax treaty to avoid double taxation. If the tax rate of the Philippines is higher than the US, you pay the remaining balance to the BIR. Consult a lawyer / accountant if needed.
If the US rate is higher, you may ask for a refund from the IRS for the remaining balance.
Firstly, I want to thank you for this very informative article 🙂
I already have a TIN since 2010 as I worked as an ESL instructor and I have started working online since mid July of 2014.
I have my own website and sell my own digital tutorial ebooks. The first 6 months (July to December 2014) I was averaging at 12k to 15k every month. Since January 2015 to December 2015 I get sales around 20k to 30k pesos every month since I’m doing this full time. I don’t have any other job, just this one. I am getting paid via PayPal and transfer it to my bank in a form of ‘Remittance’. I also see on bank account that they are automatically deducting ‘Withholding Tax’.
I also got a house which I’m paying on a monthly amortization.
I am so worried and confused now about this ‘BIR thing’ since I haven’t register my online business… They (BIR) might question me about how I got a house…
Will I be penalized for not declaring my income and paying my taxes since 2014?
Is it still OK to register my online business (like I was still starting out) this month of January 2016? What will I tell them?
Your expert response will be so much appreciated.
Thank You.
Martin
Hi Martin,
Wow, that does complicate things.
I have to reiterate that I am not an expert. I stated that in the start of the blog post. I consulted with an accountant on a very specific topic. Beyond those circumstances I have very little knowledge on the rest of the Philippine tax system.
I think it would be better if you consult with an accountant about this. I don’t think there’s anything wrong with you registering your business this year. But regarding everything else, you will need to talk to your accountant on how to go about with things.
Hi, I am currently in the process of renewal. Do I just go fill up my 0605 and pay at the bank or there’s still something else I need to do?
Hi Mac!
Sorry but I don’t know much about renewal. Please check with your accountant or bookkeeper for more information.
Hi Ms. Julia,
I’m currently employed (fulltime) in US but I’m working here in the Philippines. My salary is hourly based (USD) and I am required to work 8 hours per day or 40hrs per week. So meaning I don’t receive same salary every month because sometimes there are 21,22,23 working days per month.
I’m receiving my salary thru PayPal. How can I declare my monthly income if it is not fixed every month? Should I present any income proof to BIR? I don’t have any payslip or monthly invoice. Or can I declare a fixed amount of my income?
Also can you recommend an accountant for me?
Thanks,
RJ
HI RJ,
You can just declare a fixed incomes based on what you receive on average. Unfortunately, I can’t recommend an accountant for you because I don’t know where you are based. The best place to ask would be your local PICPA: http://www.picpa.com.ph/
So I did the math and if I earned 90k a month, I’d pay 28k worth of taxes quarterly.
The annual tax computation would look like this:
P162,760 – 84,000 (3 paid quarters) = 78,760.
Does that mean I have to pay 78, 760 yearly or is that the amount the government owes me? I don’t have an accountant and file taxes on my own.
In your initial computation, you need to pay 28k quarterly. And your annual computation is P78,760. You pay P28 for the first 3 quarters of the year. For the last quarter (in April) you’ll pay P78,760 – (P28,000 X 3) = -P5,240. This means the government would owe you P5,240. You can claim this as a deductable in your next quarter tax or next annual tax.
But this is just from the information you have given me. For the best information, please consult a bookkeeper or accountant. He or she may be able to help you more with this.
Hi,
If a taxpayer wants to correct errors of figures in his/her 2nd and 3rd quarterly income tax returns for calendar year 2014:
Does he/she need to file amended return of each of the said quarters?
Or, does he/she only need to file the amended ANNUAL income tax return?
Thank you.
Hhhmm, that’s a good question. But sadly, I don’t know the answer to that. You’ll need to consult a bookkeeper or accountant regarding that.
Hello po, I just want a clarification. Based on my contract though this is a online job I will be deducted with the 10% witholding tax and in case I won’t send in a sworn of declaration it will be 15%. Since we will be tax this way it is mandatory to file for the certification for registration as an Independent tax payer and pay the tax of 3%? It’s like were an employee of a company, so I think there no need to file but the company insist. Will it be unfair if we’re going to file as independent tax payer but debited with the normal employee? Just wondering, seems not right.
Hi Pat!
I’m sorry but your question is a little confusing for me. I think it would be better if you consult an accountant on this one.
hi, i was working online since May 2012, i started 9k and now 14k, been working for same company, Were on the process of my fiancee visa, how much will be my tax with my 14k salary?
Hi Rowena!
Just follow the steps pointed out in the post. It’s shown there in detail how to compute for your tax.
Hi there, I just to point out that this line is wrong:
“So every quarter, Jose has to pay P1,300.”
If Jose earns 10k every month, with OSD, he has to pay:
1Q – 1,300
2Q – 2,100
3Q – 2,700
Annual – 2,200 less payments 6,100 so he’ll have
3,900 credits
The number works out about the same, but the filing is wrong and BIR will impose a fine.
On the form 1701Q – for 2Q;
Item 26 is 30k for the 3months salary.
Item 35 is taxable income of 1Q (18,000)
Item 38C/D is tax paid for 1Q (1,300)
Also, this line:
“He can also have his monthly percentage taxes deducted from his quarterly income taxes to reduce the amount he pays every month so he won’t be paying in excess.”
No he cannot do it the way you show it. Percentage tax is part of Item 33, but he cannot use that if he is using OSD.
Hi Jasmin! Thanks for pointing this out. But before I make the edits, I have to ask:
1. How did you compute for the following:
If Jose earns 10k every month, with OSD, he has to pay:
1Q – 1,300
2Q – 2,100
3Q – 2,700
Annual – 2,200 less payments 6,100 so he’ll have
3,900 credits
Why would his 2Q and 3Q payments be different if he earned the same amount each month. I find that confusing. Can you show the computation for this?
@. I consulted an accountant with this (several times) and he said that percentage tax can still be deducted with OSD. But you say that you can’t do it with OSD. Why? Does this the monthly percentage tax can be deducted if you don’t take the OSD? And if you opt for OSD does that mean you have to pay monthly percentage tax? But you mentioned that monthly percentage tax is part of Item 33. So he can declare but not deduct?
Thanks for taking the time to comment. I really want this post to be accurate so your response would be welcome.
Hi, for the 2Q, he has to declare the 2Q’s earning, as well as the 1Q. He also has to declare the taxes he paid on 1Q.
Basically on the form 1701Q
item 26: 30,000 – revenue for 2Q
item 34: 18,000 – taxable for 2Q, (60% of #26) add
item 35: 18,000 – taxable for 1Q
————
item 36: 36,000 – taxable income to date
item 37: 3,400 – tax due – based on the table, less
item 38c/d: 1300 – tax payment from previous 1Q
————–
2,100 – total amount payable for 2Q.
Same for the 3Q, he has to declare the 3Q’s earning, as well as the 1Q and 2Q. He also has to declare the taxes he paid on 1Q and 2Q.
Really I don’t know they do it this way. But it’s the right way of doing the 1701Q.
On the percentage tax, it’s an allowable deduction. If you’re not on OSD, its part of your other expenses like SSS payments or internet payments or whatever business expenses you have.
If you’re on OSD, that’s already counted with the 40% expenses, again like the SSS payment and internet payments and what have you.
BTW yesterday I only skimmed through your annual tax computation (and copied your 2,200) and didn’t notice it till now. Jose’s annual tax should be:
120,000 – yearly income, less
48,000 – OSD, equals
—————
72,000 – net taxable income, less
75,000 – personal exemption
—————-
0 – so the overpayment is 6,100
And this line:
“And of course, he as to fill out a 0605 to pay for his quarterly tax.” Not really required now with the ebirform/efps
Hello,
Ask ko lang I am a full time employee and as well nakaregister ako as professional sa BIR last year ng April. Am I consider mixed-income ba? How would I file my annual income tax ? Thanks.
Hi Dhenn!
This is a little beyond the scope of my experience. So it might be best if you consult with an accountant on this, since you’re already registered as a professional.
Hi! I am not sure if this has been answered already, anyway, I got my TIN number when I worked in Alabang from 2011-2014. However, I resigned and started working as an online employee since 2014. I traveled most of the time, though, so working online was not a full time job. I plan to work full time as an online employee this year, and continue pay my taxes as an independent payor. So I need to get COR again, right? If I register this month (Feb), and decided to pay quarterly, should I pay this April or August 15? Also, do BIR offices do advice on this matter? Since I am totally lost on this, I plan to visit and ask them myself. Otherwise, do you know where I can contact them for advice? Thanks very much in advance! And thumbs up for your very informative article! 🙂
Kaye
Hi Kaye! You don’t need to get a TIN but you do need to get A COR as an sole proprietor/independent contractor. You can ask your BIR office regarding it. But based on our experience it might be better to consult an accountant/bookkeeper. They’re often more accommodating. And If possible pay for the consultation so their advice would be more tailored to your needs.
Tanong ko lang kung ang employer ko ay nasa abroad at ibe base lang ako sa Pilipinas and completely wala silang company sa Pilipinad magbabayad pa rin ba ako ng tax?
Ideally, yes. In this case you would be paying as an updated contractor.
Hmmm… seems like I have the same situation with this one.
As long as you are a Philippine citizen and residing in the Philippines, you are required to pay taxes whether your earnings are sourced from within and/or outside the Philippines.
Hi!
Is this updated?
I am working on updating this but it hasn’t been updated yet. I’m waiting for one of the commnenters to confirm that I can use her comments for the update. But if you want to help me update this, I would really appreciate this. I’ll even cite you as a source.
Another thing, I don’t issue any receipt at all. The payment for my services are being sent via wire transfer and/or bank transfer. That said, are “Cash Receipt” and “Cash Disbursement” Journals required? I am not registering a business, so I assume that’s unnecessary. Please confirm.
Thanks!
re: Receipts, you still need to issue them even if your clients don’t expect them. The receipts are the basis of your income. So what you write in your cash receipt journal is based on the the receipts issued.
First off, this blog is really helpful. My apologies for not mentioning that earlier. Although the situations may differ for each individual, am really glad that there is open board for inquiries such as this.
On to my concern. I believe receipts are for registered businesses (correct me if I am wrong), something that I am not. You can think of me as a contractor. The company that pays me is based abroad; however, the company is not registered here in the Philippines. Should I be paying as Self-Employed or as a Contractor or my situation is something else entirely? When paying as a Contractor, does that require having to issue receipts. And do we have the same set of rules or calculations based on what you have explained in this blog?
Please advise. Thank you and more power!
Hmmm, nevermind. Am guessing that is going to be the Cash Receipt books. What’s the Cash Disbursement books for anyway? Are those for expenses? Expenses do include Internet, Electric, Components used for working online, is that correct?
Thank you so much for this helpful blog.
I worked abroad for 3 years. I pay tax abroad as well. Now I need to go back to PH and I never had TIN. My employer abroad would like to keep me to work for them even if I am moving to PH through online work or work-from-home basis. Do I need to file my tax as self-employed online worker?
Ideally yes. But it would be best if you also consult with an accountant to help you with that.
Hello Ms Julia,
Kailangan ko po ba talagang mag fill out ng Form 0605 kapag nagpa file nung monthly, quarterly and annual tax returns? I pay sa Metrobank and wala naman silang hinihinging Form 0605. Thanks for checking.
Trend
HI Trend!
Precaution lang yung 0605 in case hanapin ng BIR.
No. The BIR has never asked me any 0605 form since I started filing returns years ago. It’s usually used for payment of the annual registration and if you opt to pay 50% of your annual income tax on or before April 15, that form is used to pay the remaining 50% on or before the June 15 deadline.
That’s good to know. Thanks for the info Francis!
hello po :: dito ko nakita ang kasagutan..salamat sa blog na to 😛
pwede po bang magbigay kayo ng sample kung paano yung sa excess credits?
paano po ba marefund yung mga excess credits? kailangan po ba ng attachments?
paano po maavail yun? thanks po.. par sana mabawasan yung babayaran … thanks… feeling ko kasi malaki yung excess sakin e .. thanks and more power … 🙂
Regarding the refund, it would be easier if you just declare your extra tax payment and deduct it to your current payment. It would be best if you consult with an accountant or bookkeeper to get the right computation.
Hi po. Taxable po ba if part time lng po ako..earning lower than the minimum wage..im aware namn po n excepted ang minimum wage earners.. Pro may pinagkaiba po b? Kasi I worked as a part time for 4 months then for 8 months I worked fultym having 600 basic salary and 2500 allowans.. So panu po pagcompute noon. Thanks a lot. Godbless po.
If you’re earning less than minimum wage, you should be exempt from paying taxes.
Hello Again Ms Julia,
Wanted to know if when paying taxes for Quarterly Should I present any income proof to BIR? since I don’t have any payslip or monthly invoice. I mean do I need to show invoice or just declare a fixed amount of my income on the form? also how can I declare my monthly income if it is not fixed every month? let say if I will pay for first quarter: January: 15k , February : 20k , March 18k ,25k and so.. so total for the 3 months salary is 53k how thus I declare that on the form and do need to attached invoice or so? But I dont have any invoices..
Please help I need your advice before going to BIR 🙂
Thanks,
Margie
Hi Margie!
You don’t need an invoice or payslip. As an online worker, you’re considered as an independent contractor. So your receipts are your proof of income, not your invoice.
HI Ms Julia Thanks for your reply of what receipts you are referring ma’am? how it will be possible since my earning is not fix?
Thanks,
MArgie
Change your mindset from being an employed fixed salary worker to a business person — an independent contractor.
Also ms julia do I really need an accountant even if i use the optional standard deductible? since BIR now have a eBIRForms software.. hope you can answer this 🙂
because i’m afraid I cant fine an accountant and afford to pay them 🙁
Regards,
Margie
If you’re using e-forms, then yes you don’t need an accountant.
How about for Cash Disbursement Journal and Cash Receipt Journal? Do i need an account or bookkeeper to sign? or I can sign by my self..?
This post has been quite helpful and I was hoping you could help me further with my case. I’m a blogger and will be under contract with a brand. They have asked me to get a BIR Form 2303. Upon research it seems to get the BIR Form 2303 I have to get a 1901. I already have a TIN though and I don’t have any intention of setting up a business. This engagement that I have is a one time deal. How do I go about getting a 2303 please? Thank you in advance!
HI Louisa!
Thank you for your question. But unfortunately, this is beyond the scope of my expertise. The best person to consult on this would be a bookkeeper or accountant.
Hi Mam ,
I have a question in regard of the declarations of deductables like SSS, Pagibig, Philhealth, Internet payments, Electric bills , I actually quite confused on this, and I am receiving my income every week if you are familiar with Upwork(Odesk) , My income every week is 120 USD but the Upwork will deduct 10% of my income amount and everytime I withdraw my funds in upwork ,, Upwork will charge .99USD per withrawal,,, so do I need to declare the entire amount the 120 USD or the amount that I only received?
2nd question , can We consider Online Jobs as a business , if yes do I need to get a business permit?
3rd question where do I register ? in my local like , Municipality? or in the City?
4th question are the BIR people will required also a proof of income? so if yes can I use the bank staement with every remittance or the withdrawal slip I have every time I withraw online..
I appreciate the information posted here in your blog , at least now I know I can pay my tax and a good follower of the Philippine tax law ^_^
Thank you
Alvin Joseph Valdez
HI Alvin!
Thank you for your question. I will try to answer them to the best of my ability. But please note that the best person to answer this would be an accountant or bookkeeper.
1. Only declare the amount you received. The 10% Upwork deducts from your salary is not taxes, it’s a fee for their services.
2. Yes, online jobs is considered as a business. As to whether you need a business permit, it depends on the size of your business. You can register as a micro-business (consult the DTI on that)
3. Regarding local laws, please consult your local government on how they recognize local work.
4. Proof of income are your receipts. You don’t need to show them your withdrawal or remittance slips. Just issue a receipt every time you receive payment.
Again, please consult an accountant or bookkeeper for answers best suited for your situation.
As an online worker, I get a professional tax receipt (PTR) every year from my local municipality/city for Php300. A PTR allows me to practice my online profession anywhere in the Philippines, unlike a business permit that’s costly and limits you only to your registered place of business.
Register at your nearest BIR office as a professional taxpayer using your PTR as one of the supporting documents.
I only declare what goes to my bank account as my gross sales/income when I file tax returns. My proof of sale/income is the official receipts (OR) I issue for BIR compliance. My foreign clients don’t need those receipts, so I just throw away the client’s copy of the OR. On the OR, I only write the amount that was actually credited in my bank account.
I don’t bother myself with deductions, I just choose the optional standard deduction (OSD) to avoid confusion and headaches in deducting expenses when filling income tax returns.
Thanks for the information regarding PTR Francis! Can I update the blog using you comment? Is it okay if I quote you on this?
No problem.
Thank you!
hi francis,
what “occupational code” did you use in registering your online profession?
and where can i possibly secure a PTR
Hi I used to work in philipines and I pay tax quarterly, but suddenly I worked abroad. Do I have backlogs to pay? I suddenly stop paying my tax without any forms submitted when I worked abroad.
Hi Brenda! Thanks for your question. Unfortunately this is beyond the scope of our experience. It would be best if you consult with an accountant or bookkeeper on this.
You should have changed your registration by having your COR cancelled so that you’ll not be having open cases at the BIR for not filling tax returns.
Thanks Francis!
We are a US business hiring Phillipine employees from OnlineJobs.ph. Are our online employees considered as owning businesses and is this how they should be reporting their income?
Thank you.
Hi Tracy,
In terms of taxation, in most cases they are considered as independent contractors or sole proprietors. And their salary would be considered as business income.
hi po… ask ko lang nagtrabaho po ako year 2000 and i got my tin number that year, ngayon po mag oopen po ako ng business and i got my dti and mayors permit na po gamit ang tin number nung working pa po ako… want ko po register sa bir ung business ko… tanong ko lang po kung wala po ba magiging problema kasi po ung tin number ko year 2000 pa at wala naman po akong work 2000-2015, magkakaroon po ba ako ng penalties o wala naman pong magiging problema… worry lang po kasi ako bago me pumunta bir magkaroon na po ko ng idea kung magkakapenalties po ba ako… thanks po
HI Sie!
Thanks for the question. I’m sorry to say this is beyond the scope of my experience. The best thing to do would be to consult your bookkeeper or accountant for more information.
This is very very informative and I’m so happy I found it
Just a question
My previous office work was in Manila and now i want to work home from Batangas
Do i need to transfer my records or can I just start updating it as it is?
You will need to transfer your TIN from the Manila RDO to the Batangas RDO if you want to register as an online worker in Batangas. Just go to your nearest BIR office, they can help you transfer your TIN.
This is what happen sa akin,, I am from Cebu City but I need to transfer my TIN from RDO81 to RD080 I followed the PTR which suggested by Francis ,I paid 376.50 including the penalty then I paid 500 php for the registration , make sure you have 3 copies of form 0605 signed from the chief assessment section because the bank will not accept the payment without those signature, then after, they ask me to to attend the seminar and it takes 2 hours and make sure you will ask for the certificate of attendance , photo copy it then you need to purchase a 1 doc stamp 15 php each attach it to the form 0605 and a copy of certificate of attendance after the in charge will give a a piece of paper with the information when you can get your Certificate of attendance, after,,, get an ATP(Authority to print) for your receipt and go to the printing press… as of the the time being I am waiting for the receipts because they said that they will going to forward it to the BIR before I can get it.
Good day! I really find this page so helpful. I just want to ask about tax refund.
Last year 2015 we had two employers. We were with company A for the period of Jan- Feb of last year. and then we were transferred to company B for the period of March up to Dec of last year.
Currently, we are with company B. I tried to ask about tax refund, since we were not able to complete the whole year with them and our tax varies every cut-off but we don’t get clear answers from them.
These are my questions:
a. are we required to get 2316 from company A? what if we can’t be able to get a copy? since we have an issue with them?
b. company b told us that if there is a tax return, this will be available in the month of June.
… thank you in advance for your response Ma’am.
HI Janine! Thanks for your question.Unfortunately this is beyond the scope of my experience. It would be best if you consult with an accountant or jobseeker on this one.
Good day! I really find this page so helpful. I just want to ask about tax refund.
Last year 2015 we had two employers. We were with company A for the period of Jan- Feb of last year. and then we were transferred to company B for the period of March up to Dec of last year.
Currently, we are with company B. When I tried to ask about tax refund, since we were not able to complete the whole year with them and our tax varies every cut-off but we don’t get clear answers from them.
These are my questions:
a. are we requird to get 2316 from company A? what if we can’t be able to get a copy? since we have an issue with them?
b. company b told us that if there is a tax return, this will be available in the month of june
Hi! Thank you for the article. It is really very informative and helpful. Just a question, do I have to register my online job as a tutor in DTI?
HI Ven! Thanks for the question. regarding the DTI, we’re not sure. I think it would be best if you consult the DTI on that one.
What business people usually transact at DTI is business name registration. If it’s better and more practical to use your birth certificate (BC) name as a tutor, you don’t need DTI registration because your BC name is already registered at your civil registrar and the National Statistics Authority (the former NSO).
If you’re a self-employed tutor, you need to get a professional tax receipt (PTR) at your local municipality / city in order to practice your profession ANYWHERE in the Philippines.
Hi, I really find this page helpful. I am currently processing my accreditation with the BIR, as a professional I am told to declare my income via efps (so I enrolled). The problem is I do not know how to file 1701 because I have no operation. Could you please provide a guideline to this matter? Thank you and more power.
HI Alvin, Thanks for the feedback. I’m working on updating this blog post soon , promise =)
Thank you Ma’am Julia. I will wait for your comments.
Hi Alvin
I Currently finished my application in BIR as Professional but I never file a form 1701 ,, I only declare what goes to my bank account as my gross sales/income when I file tax returns monthly,
Hi Sir Alvin, what form do you file as a professional?
Alvin, you are required by law to file 1701 annually and 1701Q quarterly for your income taxes. 2551M or Monthly and quarterly VAT are for business taxes, not income tax. You should have known that when if you attended the required BIR briefing for newly registered taxpayers.
Francis I know, 2551M yes they told me that but the 1701 and 1701Q no , briefing is very quick yes you are right I should have known that in the seminar, the question is did they include this topic to the briefing? No , because if it is .. I should have known that , in the first place I followed all the said requirements and I just CURRENTLY done the application meaning I am still in the process and thank for that information perhaps now I know
Hi,
What if I don’t get paid every month because I do contractual work or project-based?
Hi Gracie,
You can simply get the total of your earnings and declare it quarterly.
If a business taxpayer has no business transaction during a taxable period, then he/she should file the applicable “no payment” tax return in order to avoid open cases at the BIR.
Hi, thanks for this, It is helpful. I am trying to find my way around this since I am not very good with forms and stuff. I have been working online since 2010.will there be a fee or penalty for all those years i neglected my tax forms? Thank you.
If you have registered and neglected to pay, yes there might be a penalty. But it would be best to ask a bookkeeper or accountant for more information regarding this.
Have you registered yourself with the BIR previously? If not, there may be no penalty for those period. But I do suggest that you register now, and comply moving forward.
Thanks a lot Julia! This is that time of the year and I am still scratching my head and letting out a deep sigh every turn of the pages so this blog is a huge help. 🙂
Thank you so much for sharing this valuable information 🙂
Hi!
First of all, this specific blog is very concise and I keep coming back here to read this guide as I would be a first time payer and would not want to miss a thing. So, kudos to you and the team!
I will be using OSD to simplify things as I will also do my own books and everything else. So, just to clarify:
1. Monthly percentage tax can be deducted from either the quarterly or annual income tax?
2. If yes, and I choose annual, then that is 12 x 3% Percentage Tax paid for the last 12 months, right?
3. If I paid tax in the 1st quarter, can I deduct it from the next quarter’s payable and so on? Or this can only be deducted annually when filing for the annual income tax?
4. Lastly, when I was employed before, I’ve declared one of my parents as my dependent when she became a senior citizen. Can I still claim this as a deduction aside from my personal deduction? Or this does not matter anymore? Meaning, I can only claim for my personal deduction of 50,000php.
Your insight would greatly be appreciated.
Thank you very much.
Hi Nervz! I’m glad for your questions. I’ll answer as much as I can based on my understanding. But it would be better if you consult with an accountant or bookkeeper to get the answer best suited for your situation.
1. Monthly percentage tax can be deducted from either the quarterly or annual income tax? – Yes
2. If yes, and I choose annual, then that is 12 x 3% Percentage Tax paid for the last 12 months, right? – Yes of you’ve been paying the same amount every month. If not, you need to add the the 12 payments of percentage tax.
3. If I paid tax in the 1st quarter, can I deduct it from the next quarter’s payable and so on? Or this can only be deducted annually when filing for the annual income tax? You can only deduct them (3 quarter tax payments) from the annual tax
4. Lastly, when I was employed before, I’ve declared one of my parents as my dependent when she became a senior citizen. Can I still claim this as a deduction aside from my personal deduction? Or this does not matter anymore? Meaning, I can only claim for my personal deduction of 50,000php. – This one I’m not sure. So in this case it’s best if you consult with an accountant.
Hi Nervz,
I’ll answer your 4th question. I don’t think it has been the case with your previous employment.
For tax purposes, your parents can never be your qualified dependent. They could have been for your dependent for your Philhealth, HMO, or other insurances.
To qualify as dependent for additional tax exemptions, they must be:
1. Your legitimate child or is legally adopted,
2. not more than 21 years, or regardless of age, if incapable of self-support due to disabilities.
3. unmarried
4. not employed
5. living and depending for chief support
If you have someone who is a qualified dependent based on above, then you can claim them as additional exemption of 25,000 each (but not more than 4), on top of your 50,000 personal exemption.
Just a follow up, Julie, can you please clarify, too, the right order in computing for the annual income tax? Because I tried your way, which is:
1. Gross Income
2. (-) Personal Deduction
3. (*) 40% (OSD)
4. (=) Taxable Income
and that yields a higher taxable income compared to:
1. Gross Income
2. (*) 40% (OSD)
3. (-) Personal Deduction
4. (=) Taxable Income
Thanks again and looking forward to your replies.
Hi Nervz!
Yes, I agree that my way would yield a higher taxable income because the OSD is computed from the gross income directly. I consulted with my accountant friend on this f it’s possible to do the computation the other way around (your way) and she insisted that the personal deduction should be removed first before computing for OSD. I’ll try asking her again if there’s another way around it.
Hi Julia,
Your answers and your time are highly-appreciated. And thank you in advance for trying to find another method in computing for the Annual Income Tax.
I have another question, if you don’t mind. Actually, this would probably be the same as computing for the Annual Income Tax, but again, when talking about numbers, we should be careful, right? 🙂 Hence, I would ask anyway to be really sure. So, I would like to know – when computing for the Quarterly Income Tax, which should be deducted first from the last quarter’s income:
1. The 40% OSD or
2. the last 3 months Percentage Tax paid?
Again, thank you very much, Julia. And oh! Apologies for misspelling your name in my previous comment/inquiry. 🙂
Either choose the 40% OSD or itemized deduction on your 1st quarter income tax return and that will be the ONLY deduction method allowed for the succeeding quarters and the annual income tax of the current year. You’re not allowed to shift from OSD to itemized deduction or vice versa.
If you chose OSD, then you’re not allowed to deduct percentage taxes. If itemized deduction, you can deduct percentage tax.
Hi can you recommmed to me a BIR certified account that has a lot of experience with online workers that is
based in Cebu?
Hi Roel!
I think it would be best if you contact your local PICPA office. They have chapters all over the country. http://www.picpa.com.ph/
mam good am ask magtatanong sanaa ako, tama ba na binabawasan ako ng tax kahit hindi pa na file un tin number ko, for almost 4 months na po ako binabawasan ng tax, above minimum po sako mam
Hi Bon!
Thanks for the comment. Unfortunately this is beyond the scope of my knowledge. You would need to as an accountant or a BIR personnel on that one.
Hi Bon,
Who is you employer in this scenario? Is it a local based company?
It is just right for them to withheld tax based on your income on the time that you receive it. I suggest you process your TIN the soonest. The amount withheld will still be reflected in your account.
Hi Bon,
Tama si JLM, file it soonest and then find out if pumasok ang tax payments mo. Kasi some companies don’t pay the government, either they forget or it gets delayed or they do it on purpose. And if wala ka pang TIN, they can say that it’s your fault not theirs. As my HR tita would say, don’t be fooled, check if it was credited to your TIN. 🙂 But yeah, file first. Madali lang naman yon…supposedly.
is this applicable for bloggers who earn from advertisements?
As far as I know, yes.
Very informative! I am looking into paying taxes and getting an ITR because it’s one major requirement for banks. I hope that there is an article for those who works for the private sector + an online job.
Hi Cathy,
If you are employed and earning solely compensation income from 1 employer during the year, then you a qualified to a substituted tax filing. Meaning your employer will compute, file and pay your taxes for you. The equivalent of the ITR which you will get is the Form 2316 (Certificate of Compensation / Income Tax Withheld). This serves the same purpose for bank requirements (ie getting a loan)
If you have 2 or more sources of income, in the case of having online job on the side, then you are now disqualified for the substituted filing. This is when you will have to prepare your own ITR by consolidating all your gross income and allowable deductions to arrive at your taxable income and tax due.
Hi Julia, thanks a bunch for one massively helpful article!
To Julia and Lemuel, thanks for the clarification above. Finally, I found some clarifications to questions I got in mind.
One small question please…if we are to become a mixed-income earner, we will need to update our taxpayer status first, is that right? Then that will automatically disqualify the taxpayer from substituted filing?
Thanks for the clarifications.
Best regards,
Francis
Hi, I am hired on an Australian Business but working here in the Philippines. This means I still need to comply for these tax requirements?
Ideally, yes.
Resident Filipino citizens are taxed on all their income earned within the Philippines and outside the Philippines. So, yes. you are covered by these requirements.
I have this question. I’ve been working on this company for 4 years without paying taxes. Will BIR impose a penalty on me if one day I would apply there to begin paying my taxes?
Hi Francis!
Thanks for your question. But given the sensitive situation, I think it would be best if you ask an accountant about that. That way they can give you the best advice.
Hello dear,
Thank you for your article, it actually clears up our concern with how to pay taxes on our own since we were used to just having deductions by the company/employer.
Anyway,
Here is the scenario. I want to pay all my taxes for this year starting January 2016. However, I will still apply for registration next month; July.
Question is, will I get penalty for the unpaid taxes from Jan-June
Or do I just need to declare payment of taxes from the date of registration, which is July, meaning ang start lang ng bibilangin ko na pagbayad ng tax is from July onwards not January? (since July ako mgreregister)
If I pay taxes this year, will I get an ITR for the current year by the end of December? or updated naman ang payments mag rereflect online? Thank you so much
Hi Anne!
Thanks for your questions. Unfortunately, this is a bit beyond my scope. It would be best if you consult with an accountant or bookkeeper so he/she can give you the answers best suited for your situation.
Hi Anne! I’m not an expert either but I had the same problem. Technically speaking, you can’t pay for the months when you were not yet registered. Kung baga sa business, hindi pa recognized yung business mo so there’s no business name to pay under. What makes it scarier is that may fine ang late payment. Hehe. I’m not sure if BIR has thought about such a scenario but right now there’s only provision for paying what you earned after you’ve registered. No one can stop you though from reporting it as as if you earned it after you’ve registered. Although parang mali naman. I doubt if you’ll have any luck asking BIR staff. Perhaps, attend the seminar. But based on experience, asking just anyone in the BIR office doesn’t help. They’re not very keen on these matters. And yes, maybe ask a good accountant. Although ask two or more if you’re not sure kasi ako, I asked an accountant but was advised not to file! Hindi ko daw kailangan because my US client already pays for my taxes in the US. Genun. So now, I haven’t paid my “back” taxes yet. Although di naman kasi ganun kalaki and I didn’t know that I had to when I started freelancing so I was not able to set them aside. Baka mabaon ako sa utang if I pay for them… But hoping to pay for the ones I’ve earned after I’ve registered.
If I were you, I’d start clean from registration date. So far I have not received any notice from the BIR about unpaid taxes prior to my registration a few years ago. If the BIR subjects you to an audit, then follow the legal process with your accountant lawyer.
But if you really want to pay taxes prior to registration, it’s better to consult an accountant / lawyer.
Hi Anne, I hope you have registered and applied by now.
Just start paying your taxes for all your income earned after your registration date.
You have to prepare and file your Income Tax Return yourself first before you can pay to the BIR. Not the other way around.
Your ITR should cover the period from your Registration date up to the end the taxable year.
Most people don’t want to pay taxes because yep, it goes to the government’s pockets. Not just officials, but the tax collectors themselves and project managers too. I’d place a link for proof, but that isn’t something we post publicly. We also don’t do public shaming.
One more reason is the process. It takes too long with too much requirements, and sometimes, these people who process your requirements add additional “fees”. Mind you, these “fees” go to their pockets as well. And going back to requirements, they’re very contradicting. You’re applying for an ID, but requires 2 valid IDs… what? So you’d have to go back and fill out more forms, which require more money to spend and more time to waste.
Yes, it’s our obligation. Our responsibility to help our own nation. But how can we help it if the people who govern the very same nation we try to improve take advantage of us?
Hi! Great article! Thanks so much for this. I have one question though. I’m currently a full-time employee in one of our local companies here in the Philippines and am already paying taxes. I recently applied to and will be working for a US company and since my taxes will be my responsibility and subject to the rules of my company, i’ll have to file for it myself. So I’ll have to pay those taxes apart from the taxes i’m already paying? Please verify. Thanks.
I mean, subject to the rules of my COUNRTY***
HI Maur,
Just to clarify, so you’ll be working for a local company and a US company. And you’re asking if you’ll have to pay taxes for both? The short answer is yes. The long answer is the local company is probably already deducting your incomes taxes from your salary, so no need to worry about that. The only one you’ll be paying on your own is your salary from the US company. But how much you’re already paying in taxes with the local company can affect how much you need to pay. So it would be best to consult an accountant about that to be sure about your computation.
Hi Julia! Thanks so much for the reply. Got it! Will consult an accountant.
Hi Julia,
Do you know any accountants you can connect me to? Preferably someone who is willing to advise and guide me through the process via email or text/call?
Thanks.
Hi Maur,
You have to consolidate you income from your local employer and your US employer in your ITR.
Your local employer have been deducting taxes from you monthly. At the end of the year, they will give you BIR form 2316 (Certificate of Compensation/ Income Tax Withheld).
The computation would somehow look as follows:
Local Company Income
+US Company Income
-Allowable deductions
=Taxable Income
-Personal and additional Exemptions
X Income Tax Rate
=Income Tax Payable
-Income Tax already paid (withheld by local employer)
=Net Income Tax still due
I just want to ask if my salary will have a deduction on income tax.
My rate per day was P278. I work from Monday to Saturday.
Im from province of Pangasinan wherein the minimum rate here is P253 but my daily rate now was P278? Does my rate subject to income tax deduction? And may I know the computation table in your website Tax Rate if it is computed Monthly or Annually because our accounting head told that it would be computed Annually?
Kindly please help me.
Hi Mae,
It’s difficult to give an accurate assessment given the limited information. I think it would be best if you consult with an accountant on this.
You’ll know if there’s a deduction thru your payslip.
I don’t have deduction before in my payslip, but because of our new accounting head they told us that from now on we will have an income tax deduction…
Hi Mae Anne,
First, you have to know what is the payroll policy of your company in computation of your EMR (Equivalent Monthly Rate). That is asking what is your divisor/ number of working days in a year?
After knowing it, that is when you can determine if you are taxable or MWE (minimum wage earner).
It is okay to compute annually. The tax table above is based on annual amounts.
Computing tax monthly and annually should give you the same tax due at the end of the year. We annualize the tax computation and make necessary adjustments if needed, that’s why there are sometimes tax refunds at the end of the year. It will only be a matter of timing difference.
Thank you for this wonderful informative post, i never tried to apply for TIN and pay tax since BIR has no right category for us online workers. And so i don’t know how are they gonna implement tax for freelancers. We simply belong to a complicated category of workers that doubles the complication on the processing and filling for it. One of my biggest problem is i need ITR for my personal transactions but i never filled TAX because of those reasons.
So thank you for clearing this up and giving me proper path to take.
You’re welcome!
Thanks for this post. I’ve registered before already and have tried paying my tax via the BIR’s online thingie and the bank. But I honestly thought I was only supposed to pay for the local transactions because that’s what the accountant I consulted said. She said my client in the US is already paying my taxes. At that time kaka-register ko palang sa BIR and nagulat naman ako kasi nag-effort pa ako tas di pala kailangan. So I’d just like to clarify that I still have to pay right? And I’ll just do what the others are doing, report the amount that goes in the bank para hassle free! Thanks again!
Hi Riza!
That depends on Whether your employer is also paying taxes (and income taxes) in the Philippines. If he or she is already paying for your income taxes then you don’t need to. If not, you would need to pay taxes. But it would be best to consult an accountant or bookkeeper to avoid taxes.
Thank you for that detailed info..gusto ko magbayad ng tax so i can have my itr..these process and forms may look easy but for me not..nakakalito! May babayaran ka na nga na monthly meron pang quarterly and annual! Kahit sabihing pang maliit ang tax..kahit i alarm ko oa yan sa phone ko there will be instances na mamimiss ko ang pagbayad pag ganun penalty yun.. i once quoted for an accoutant and 20k for service fee pag aayos pa lang ng mga docs..naku!! Sana makaisip ang govt pati na ang bir ng one time process lang ng filing of tax..isang form at one time payment lang every year!
Hi! Good morning! Naisip ko lang po, what if si A nag work from Jan. ~ June 2015 at nag end na ang contract niya, is it necessary ba na maka receive siya ng tax refund whether minimum siya or above minimum? At kung si A ay wala ng work from July 2015 until now, kelangan pa ba niyang mag report sa BIR at mag file ng tax this year 2016 kahit tambay lang siya from July ~ December 2015? Thanks a lot. Your soonest reply will be much appreciated.
HI Vhenne,
If A is working below minimum wage, they’re usually tax exempt. If it’s above minimum wage, there’s a table in the blog post that shows how much the tax would be for month.
And if A didn’t have work from July to December, all he needs to do is file a Certificate of No Income with the BIR so he won’t have to pay for taxes for that time period.
Hi Julia,
Mag file ng monthly then mag file po ng quarter.
1. Pwede po ba na ideduct ang payment (2551m) sa quarter (1701q)?
2. If hindi po na deduct ung monthly na bnayad (3months) sa quarter(1701q) ano pong mangyayare sa monthly na binayad?
Thanks in advance 🙂
1. Yes.
2. As far as I know, you can deduct it from your annual income tax. In fact, it’s easier to just deduct it all from your annual instead of the quarterly
Yes, you can deduct it only if you chose itemized deduction, not the 40 % optional standard deduction (OSD).
Love Me
1. You cannot deduct your payment from 2551m to 1701Q because they are different taxes.
2. If your payments from your monthly 1701 were not deducted to their corresponding quarter, you need to amend the concerned quarterly IT return.
Hi, I have read the updated regarding professional tax receipt or PTR. In my case BIR told me to Get a PTR in our local municipality/city. when Filing a tax for Online Worker PTR is not applicable for Online worker since PTR are only for those who has a license profession like Engineers, Doctors, etc. this is what the Head of licencing Dept have explained to me…
Margie, try asking for an Occupational Tax Receipt, it’s just like a PTR. The reality is not all municipal / city hall officials interpret the law uniformly.
Margie, here’s a copy of a BIR document:
ftp://ftp.bir.gov.ph/webadmin1/pdf/66017RMC%20No%2064-2012.pdf
Perhaps you print it and show it to that official. The first sentence of the 2nd paragraph states:
“Professional, classified as self-employed, refers to an individual or a group, practicing his or their profession or calling, with or without license under a regulatory board or body. ”
Hope this helps.
Margie, go to your city / municipal legal officer for their interpretation of that BIR document. If that legal officer agrees, ask him/her to write a note or call the head of licensing explaining their interpretation.
Hi Francis,
Thanks for the info.. hmmm I dont know why on our municipality explained to me that I dont need PTr. by the way do you have a Cash Disbursement Journal and Cash Receipt Journal ? thus it require accountant to sign or can I sign this by my self?
Margie,
If your municipality / city does not require you a PTR or even an OTR, ask them to write an official letter addressed “to whom it may concern” or to your local BIR stating that they don’t require a PTR or OTR for your occupation. Present that letter and that BIR document I posted earlier to your local BIR in case they insist on a PTR / OTR as one of the requirements for your BIR taxpayer registration.
Regarding books of accounts or accounting journals, I think no one needs to sign it except the BIR officer who registered such books / journals.
You’re welcome!
Hi Francis,
I have question, are we freelancer required to pay Quarterly or we have an option to pay Annually directly?
Margie,
To avoid open cases, file/pay your quarterly income tax returns (QITR) as well. QITRs help reduce the unpaid balance of your annual income tax.
If your total annual income tax this year exceeds two thousand pesos, you may opt to pay at least 50% on or before April 15 deadline next year and pay the remaining balance on or before July 15 deadline next year.
Hope this helps.
Hi Julia,
for Cash Disbursement Journal and Cash Receipt Journal do we really need to have an accountant for this to sign? also is this done Quarterly to sign? let me know… I cant afford to pay account 🙁 or I can sign by my self??
Hi,
Thank you for this blog! I’m currently following this while registering in BIR. First, I was asked to get Mayor’s Permit but when I asked about “PTR”, they said that it depends on the City Hall Staffs if they can give us PTR. So yes, I was able to get PTR from City Hall and went back to BIR.
Right now, my problem is that they are asking me for a Business Address, my family doesn’t have title or tax declaration of the house(current), so I do not know how can I give them a proof of ownership. I asked if Barangay Certification will be fine, but they said that it cannot be used as proof of ownership. Another situation is that, my family owns a lot in a subdivision and currently on the progress of house construction. Can I use the tax dec/land title of that lot even if the house isn’t completed yet?
Thanks!
Hi Vic!
Thanks for asking. Unfortunately, I don’t know the answer to that. Best ask an accountant or bookkeeper for the information.
My accountant just told me to use the tax declaration and title of the lot owned by my parents in a subdivision. So that’s what I’m going to do. Thanks!
Hi Julia. I’ve been looking for this kind of blog for a long time. Thank you for posting it. However, I am still quite confused regarding the tax rate. I am working as an on-line ESL teacher and the company deducts 10% monthly tax from my earnings. We are considered as independent contractors/professionals according to them that’s why they deduct 10 %. But my question is, let’s say your earnings for the month is just around 8,000, should the company still deduct 10% tax rate from it? Or does REPUBLIC ACT NO. 7496 apply to this?
For example:
Earnings for July 2500 less 10% (250) = 2250 total monthly earnings
Is this right? Shouldn’t there be exemptions even for individual contractors?
Thank you.
Hi Jenny!
Yes, tax exemptions do apply for independent contractors.
Hi Jenny. Being a contractor, it is correct for them to deduct 10% expanded withholding tax. This is a creditable tax withheld at source. (It will be 15% if you are earning gross of more than P720,000 per year)
Now, when you compute and file for your Annual Income Tax, you will now be subjected to the Income Tax rates based on what bracket you will fall. From your total gross income for the year, you can deduct all the taxes previously withheld from you, including a personal exemption of P50,000 and additional exemptions for your qualified dependents.
Hello, thank you for the informative article. I will be a freelance english teacher which is home-based. This will also be my first job. I am only planning to work lets say 2 months then I wont be a freelance anymore. Because this is just a part time job for me. Assume that i pay my taxes every month. What about the succeding months wherein i dont work anymore? Should i just leave it like that or should i close my “freelance business” and inform the BIR? This is my first time with tax and stuff.
Hi Lindsay, First you have to process your registration with the BIR. Afterwards, you have to file your tax returns regularly whether you have operations or not.
In the event that you go into another business or become employed, you’ll have to update your registration information.
I created an app to make these computations (basic one). Please let me know your thoughts.
http://taxcomputationph.azurewebsites.net/
Regards,
Kim
Wow this blog is really informative!! It’s my first time being an independent taxpayer since I’ve been with an employer ever since. I have a question! This applies also to freelancers who are not necessarily online right? Also, I see monthly, quarterly, and annual taxes based on the blog – my question is do I have to pay all of those? Or do I choose one preferred method of paying taxes (meaning I’ll pick if I want monthly or quarterly or annual)? Also if I’ll only choose 1, are the total tax equal for all? Or is paying monthly ‘cheaper’ than annual payment, etc. Thanks for your help!!
HI Anne!
Regarding your questions:
This applies also to freelancers who are not necessarily online right? – Yes
Also, I see monthly, quarterly, and annual taxes based on the blog – my question is do I have to pay all of those? Or do I choose one preferred method of paying taxes (meaning I’ll pick if I want monthly or quarterly or annual)? Monthly is the monthly percentage tax. You pay taxes either annually or quarterly.
Monthly taxes are usually BUSINESS taxes like percentage or VAT while quarterly annual taxes are usually INCOME taxes. You are subject to both taxes, no multiple choice.
thank you for making this so easy for non-accounting people. I have questions too. This may been asked by other people who commented but please bear with me. (I tried reading ALL the comments but I started zoning out, sorry!) My questions are: if I file my taxes online, will there be a need for an accountant’s signature for the annual filing? If I choose OSD, will I need to save all my transaction (income and expenses) receipts? Thank you for the enlightenment!
Hi Jean!
If I file my taxes online, will there be a need for an accountant’s signature for the annual filing? – Not really sure about this one. I will ask our accountant. But I hope our readers who are accountants who can also answer this question
If I choose OSD, will I need to save all my transaction (income and expenses) receipts? No. If you choose OSD, you don’t need to save the receipts of your expenses.
Hi Jean! Whether submitting online or manual, You won’t be required to have an accountant sign on your ITR. The taxpayer himself can sign on the ITR.
You just have to ensure yourself that the details you have provided in the return are correct and true to the best of your knowledge.
thank you Julia and Lemuel for your helpful advice =)
Hi po! May tanong lang po ako. Kasi bago lng po ako sa job na ito, mag start plang po ako. Ang sabi po kasi pag online worker need pa din po mgbyad ng tax. may tin number na po ako dati kya dko na need kumuha ng bago pero ung pagreregister po as self employed yun po ba ang gagawin ko para mkapagbayad ng tax kahit na nasa training period palang ako?
I hope matulungan nyo ko sa tanong ko thank you..
If you’re not earning yet, you can simply file a certificate of no income so you won’t be taxed on the months where you have no salary.
Ok…Pero kelngan ko po magreg sa bir as self-employed? how can bir categorized my work?do i need to get journal and receipt to bir? I’m a little bit confused.
It’s better you register as a self-employed professional even before you actually earn. Get the checklist of requirements from your nearest BIR office and comply.
You may check your exact occupational classification thru the following link:
http://www.bir.gov.ph/images/bir_files/research_and_statistics/NSCB_PSOC_2002.pdf
Tell the BIR person in charge of taxpayer registration your exact occupation even its code because you are more familiar with your occupation.
You’ll be required to attend the BIR briefing for new taxpayers, that’s when the books of accounts like journals and official receipts will be explained/clarified.
When you become an officially registered taxpayer, even if you have no transaction for a particular taxable period, you are still required to file the applicable no payment tax return/s to avoid open cases.
Hello,
I work online as a freelance tutor and my students are abroad. I have to file first percentage tax this week but BIR told to issue receipt? Do you do this receipt and journal stuffs? Also when I am going to BIR this week to pay my first percentage tax do I have to bring the receipts as well as the journal or I am going to just tell how much I earned in 1 month (month of July)
Just bring your journal and receipts to be safe.
Thank you for your reply. It might sound pretty basic but I would like to know if there is any tutorial or sample out there on how to fill up the receipt and journal the right way?
Issuing receipts and recording transactions on books of accounts like journals are SOP. Just file your monthly percentage tax return. You don’t need to bring receipts and journals every time you file tax returns. Bring them only to the BIR after you received an official WRITTEN notice from them requiring you to do so.
Thank you for your reply. It might sound pretty basic but I would like to know if is there a tutorial or sample out there on how to fill up the receipt and journal the right way.
hi! I applied for TIN and COR as online job worker, the BIR office in Davao City said that online workers don’t need to issue receipt or are exempted from issuing receipts.
Are you registered as a Marginal Income Earner (MIE), earning less than 100 thousand pesos a year?
Hello,
I’ve been searching about what other requirements we need to comply for our taxes. Since most of us are receiving income outside the country, I would like to know if we need to do this
http://www.bir.gov.ph/index.php/international-tax-matters/taxation-of-foreign-source-income.html
or if not, are there penalties waiting for us?
Thanks!
Additional Details:
“To avail of the this benefit, you need to submit the Certificate of Residency (COR) to the foreign tax authority to prove that you are a Philippines tax resident.”
This means that we’re already covered with that Double Taxation Avoidance benefit right? Or do we really need to submit that COR to International Tax Affair Division? Or just submit it if they asked me to?
Does your foreign income source withhold any tax? Are you required to pay any tax by that foreign tax authority? If not, there’s no double taxation.
No, they do not withhold any tax. But for example, this might be a situation in the future, a client will ask me to pay all required federal domestic, state and local taxes prior to the services that I’m going to give, will I need to avail that Double Taxation Avoidance or is it automatically applied and I just have to pay the income taxes?
What country is your client based? Are you both a citizen and resident of the Philippines? Are you performing your service outside your client’s country? I need that info.
What country is your client based? Australia
Are you both a citizen and resident of the Philippines? No, I’m Filipino residing here in Philippines and the client is not.
I see. You are not required to pay any Australian tax, only pay Philippine taxes applicable to you. It’s automatic, that COR is not needed.
Ok thank you very much Francis! I hope this will help other online workers to understand DTA. One last question, in my OR, I will just put the name of the Australian client right? Is there going to be an issue if they saw that the client is Australian?
It does not matter what country your client is based.
Ok Thank you! You’re a life saver!
So as a conclusion, BIR will only check if I’m doing my business inside our country, and that’s their only concern to charge taxes right. 🙂
Right on!
Hi! 🙂 Anyone who can enlighten me please?
I would like to ask if I need to include the following when I file my 1701?:
1. Statement of management’s responsibility for annual income tax return
2. Balance Sheet
3. Income Statement
I am an online worker. I just want to know if I need to include an annual financial statement or not when filing of 1701 comes. Coz if I do I don’t know how to go about the computation.
And also whether I need to fill out the “Assets/Liabilities/Capital” portion in the 1701?
Thanks! 🙂
Hi Kritz!
This is a bit beyond my basic accounting skills. It’s best of you consult with a bookkeeper or accountant for that one.
It depends on the deduction method you chose on your first quarter income tax return. If you chose itemized deduction, then those you mentioned are included. If you chose optional standard deduction, only #1 item is needed.
Thanks Julia and Francis! I now get it. Since I chose OSD there’s no need for balance sheet. While the Income Statement is just the gross income minus the OSD, then I have the net income which is the amount taxable. 🙂
Good day,
I need help!
I am an ESL Teacher from Cebu. There are only 7 full time employees which includes 2 regular workers(I am 1 of them).It’s only the 2 us regular employees who have withholding tax deductions monthly.Is it possible for the company to have only two employees got deducted with the withholding tax?
Big thanks 😉
Hi Jorny!
Thanks for the question. Unfortunately this is beyond the scope of our experience. The best person to ask would be an accountant.
hi can anyone compute my income taxes if i am earning a flat 50K pesos a month as a freelancer?
thanks a lot!
Hi Alan,
Just follow the guide and you shouldn’t have any problems =)
Good Morning,
Do you think it will be better if I will get an accountant on a retainer or maybe go to a firm for my tax compliances? Or since I will just need to file through ebirform(computes automatically) and pay my taxes, I can just do it on my own?
The accounting firm told me that they charge 3360(vat included) every month but I will just have 2-3 transactions or sometimes might no transactions at all for a specific month. I don’t know what to consider to know if I need to get an accountant for this matter, please help me decide.
Thanks!
Hi Vic!
I have read from the taxpayer’s compliance guide is that there’s no need for an accountant or CPA if your quarterly income does not exceed 150,000pesos. But if it does exceed that amount, then it is mandatory/required.
Hope that helps. 🙂
Thank you Kritz!
Let’s assume that my quarterly income is above 150,000, may I know what will be the tasks of the accountant that i’m going to hire?
Hi! I’m a doctor by profession. I was employed for almost 10 years and transferred to another company last March 2016. I registered this May 2016 as Professional but in June 2016 I was hired again as employee. I missed out on paying the monthly and 2nd quarter tax for some reason. Now I don’t know what to choose in the deduction options. I plan to close the books once I pay for the missed payment. how much is my penalty? how do I compute it? should I include the tax exemption for children and 50% deduction as OSD since i’ll close the books anyway? please help me understand the computation. I have to file asap to prevent additional penalty. thanks!
HI Malu!
Thanks for the question. Unfortunately this is beyond the scope of our experience. The best person to ask would be an accountant.
Hi Julia,
Thank you for this informative post!
I am currently employed in an outsourcing company so they are the one who handles my taxes. I have a UK based client and this client likes to hire me directly as their company employee (I will be working from home). With this, I have to pay for my taxes and other government requirements by myself.
I have the ff questions:
1. Am I qualified sa tax computations (percentage, quarterly, annual) that you shared here once I am hired by this client?
2. How will the BIR know my actual salary? Need ko ba mag submit ng contract? or bank account?
3. Are there any restrictions for the 40% OSD (like maximum allowable salary)
4. Is there a mandate na need ng accountant ng online workers? (like if salary reach a certain range), or we can choose if we want to do it by our own.
Thank you so much!
1. Am I qualified sa tax computations (percentage, quarterly, annual) that you shared here once I am hired by this client? – If the company doesn’t pay taxes in the Philippines and you work as an independent contractor, then yes, you need to pay
2. How will the BIR know my actual salary? Need ko ba mag submit ng contract? or bank account? You will declare your salary in your receipts.
3. Are there any restrictions for the 40% OSD (like maximum allowable salary) – As far as I know, wala
4. Is there a mandate na need ng accountant ng online workers? (like if salary reach a certain range), or we can choose if we want to do it by our own. You can do it on your own but you will need an accountant to sign your annual filing.
Hi Jhulia, thank you for your reply! 🙂
The client considered those phil. government deductions (as they’ve asked my about it), so they will consider them in the salary but I will be the one who will handle or process them — so does it means that I will be an Independent Contractor?
– Is there any cons being an IC, other than I will process these by myself? OR
– is it possible that I will still be consider as a ‘regular employee’ but still doing these tasks by my own?
They are asking me these things as they are not familiar with our policies here. Sorry if this might be off topic, but would like to try if you are familiar with this.
Thanks again!
Can someone provide headings for Cash Disbursement and Cash Receipt Books?
I’m not really sure how to do it yet. Thanks!
Here, page 3 and 4: https://docs.google.com/file/d/0B6AUVjDyiwlmNWxYSDBqLWtWTGc/view
Good Morning,
I’m currently reading this taxcode page and found something about collecting foreign payments. Just wanna know how to make it legal to collect foreign payments?
Thanks!
http://www.bir.gov.ph/index.php/tax-code.html
Section 259 – Illegal Collection of Foreign Payments
I wish I’ve read your blog sooner! For the quarterly ITR (2nd and 3rd), same lang po ba talaga yung babayaran every quarter? Hindi po applicable sating mga freelancers yung section wherein you will add the taxable income/payments from the previous quarters? I included it nung 2nd quarter and medyo malaki yung binayaran ko. 🙁 I don’t have an accountant and I just follow the computation for a small business.
Same if you’re earning a consistent amount.Kung pabago bago or may months na wala kang kita, bababa or tataas sya accordingly
Thanks for your reply, Julia. I was referring to the entries #35 and 38C/D sa form 1701Q. When adding the taxable income and payments for the previous quarters, lumalaki yung amount na babayaran ko. I’m using eBIRforms para automatic na yung computation. This quarter, I’ll follow the format in this post 🙂
By the way, in my case I was not required to pay the professional tax receipt kahit my PRC license ako (I’m a nurse turned freelancer :)). The staff at the municipal hall suggested that I should pay for the occupational tax receipt, instead of PTR since not nursing related naman daw yung pag gagamitan ko. I paid P150 only for the occupational tax.
Breakdown of fees:
Mayor’s permit fee – P100
Health permit – P30
Police clearance – P20
Total = P150
Hi! If a virtual assistant uses the Professional Tax Receipt,
does he still need to use cash receipt book and cash disbursement book?
Does he still need to keep a general journal and ledger?
A PTR is a BIR taxpayer registration requirement and a registered taxpayer practicing his/her profession or occupation is required to get it annually. PTRs are issued by city /municipal gov’ts, not by the taxpayer. It has nothing to do of what book of account to keep/use.
hello
ask ko lang po pwede na po ba kong magbayad ng 2551M sa November 15 kahit every 20th pa dapat akong magbayad ,, kasi gusto ko lang naisabay na rin sa pagbabayad ko ng 1701Q sa november 15 para isang bayaran na lang. thank u po
Yung 20th deadline lang yan. Pwede naman mula 1st to 20th mag file ng 2551M.
Good day!
I would really appreciate if you can help me out on this:
What should I do if I made an error on BIR form 1701Q and have submitted it already online?
I started receiving payments for my services in October 2016. However, I made a mistake of submitting 1701Q for 3rd quarter with the amounts of my Oct payments (Which should be included only for 1701Q 4th quarter, if I understand correctly). What should I do to correct this?
Thank you!
Either file the amended return of your 3rd quarter 1701Q or reflect the correction on your annual income tax return.
In the article, it says: “Online workers are exempt from VAT, which qualifies Jose for 3% percentage tax”. Is this true even if the annual total would exceed PHP 1,919,500.00? I saw some article saying this is a threshold. If no longer exempt, what can the worker do if he cannot charge VAT?
If it exceeds that threshold, then VAT comes into effect. If the online worker can prove that his/her earnings are in foreign currency, clients don’t do any business in the Philippines and the work is done in the Philippines; then VAT exemption can be through zero-rated VAT.
Because Zero-rated VAT is a form of tax exemption, the burden of proving it belongs to the taxpayer. Be ready to face a BIR audit just in case and slug it out in court if you have the means.
Hi! I started working home based since 2013 but at first it was really a struggle it was only last year up to this year that my career flourished. How can I go about starting paying taxes now? What will happen to the previous years that I failed to pay taxes?
Just start clean with your present taxes. I also had a similar situation like yours and I’ve never received any BIR notice about my previous years of being not registered with the BIR.
Happy to find this blog, and I hope it’s not too late to ask a couple of questions and get some answers. 🙂
– I am looking for a reference kung kailan babayaran ang 1701Q for October to December earnings, pero usually hanggang 3Q lang. Paano pala babayaran yun? Kasi earnings ko 4Q lumabas.
– Doon sa past registration ko as freelancer hindi naman ako nahanapan ng 1701Q nung nag-close ako ng registration sa RDO (kasi nag-transfer ako to another RDO), pero mahigpit sila sa 2551M and I had to pay penalties doon sa months na hindi ko na-file na 2551M. Paano pala remedyohan pag hindi nakapag-file ng 1701Q?
– Lalabas ba na deductible sa 1701 ang 2551M payments?
Maraming, maraming salamat!
1701Q hangang 3Q lang. 4Q earnings kasama na yan sa annual 1701. What really matters yung annual 1701 mo. Yung 1701Q payments are treated as ‘advance’ partial payments ng annual 1701. 2551M payments ay deductible sa 1701 kung pinili mo ay itemized (hindi optional standard) deduction sa 1Q 1701.
correction — 1Q 1701 is 1Q 1701Q.
Thank you for replying to all these queries Francis! You’re awesome!
Hello,
I already have a TIN registered in Pasig (when I used to work in call center years ago). Now, I want to start filing taxes as a Freelancer, but I am currently living in a different city. In order to process documents such as Mayor’s Permit, cedula, certificate of residency to obtain a COR, should I have my TIN transferred to the RDO that has a jurisdiction of where I am presently residing? Thanks! 🙂
Hi
Thank you for this important information.
Actually, I am a business owner of online English school in Japan.
I do not have any registered offices in the Philippines.
But many filipino tutors are working at my company as home-based tutors
My question is what kind of documents do I need to issue for these tutors’ tax obligation?
Just such as Payment record is enough?
I have no idea for this.
Since they work as an independent contractor and your business is based in Japan, yes a payment record would be enough.
Your Philippine-based tutors are responsible for their own taxes. They should be registered as self-employed professional taxpayers with the BIR.
How can i report an online tutorial whose owner is a korean but has a filipino counter part that signs as an owner but the truth he is jus a dummy and they are operating for many years now but they are not paying taxes and they are declaring that there are only 2 employees in the company. Pls tell how, because this company has many korean students ang earning much and teachers as well do earn good money. they are renting a Php21,000.00 building and a interet fibre of Php 60,000.00 monthly. There were 15 or 16 employees but they were not paying taxes, since the korean owner does not reside in the philippes, the manager was just the one managing the company.
If he is a registered employer with us, you can report by emailing support@onlinejobs.ph and we can launch an internal operation. If he is not with our database, I’m afraid you will have to report it to DTI or BIR.
diba online na ngayun?nakalimutan ko kase na deadline na pala ng form 0605 till january 31 lng sya,eh late na sarado na ang bangko,kung i file ko sya ngayun online tapos tomorrow ko i pay. ok lng kaya yun.may penalty pa din ba yun kahit na i file ko na sya ng january 31.ynx
Hi. So I have been working online for 6 years now. I had a corporate job before for 8 months. That was the only time I paid taxes. I want to start paying now. Frankly, it’s because I want to have an ITR for visa purposes. How much do you usually declare as income?
Good day, I’d like to know how to get a PTR? What are the requirements? I have been paying taxes for over 3 years, but I don’t have a one.
Also, I was planning to apply for a visa, however, they are looking for a DTI permit, and I don’t have one… is it necessary for us online tutors to have one? If so, how to get one. I hope you could help out~ Thank you! ;v;
It’s best to go to your city/municipal hall and ask for the PTR requirements. LGUs don’t have uniform requirements. Some require a gov’t issued professional license ID card while others don’t. Some accept any lawful occupation while others issue occupational tax receipt for non-licensed professionals like actors, singers, artists, online workers, etc. A PTR normally cost only P300 annually excluding fine for late payment.
You may include a cover letter with your visa application to explain why you don’t need a DTI permit. A DTI permit normally refers to a DTI business name registration if you are using a business name in your occupation. But if you’re using your own Birth Certificate (BC) name, it does not need a DTI permit because your BC name is obviously registered with the local civil registrar place of birth and the National Statistics Authority (formerly NSO).
Hi
I really liked your blog and I’ve been keeping it as a reference for me and for my friend. I’m just having a hard time where to start exactly 🙁 My CPA friends are not that aware with the self-employed stuffs, they are more knowledgeable with the corporate set up. So I’m hoping for your response 🙁
I was a former employee (I already have my TIN number) but a year ago, I started working for a Singaporean company but I am based here in PH. That makes me “self-employed” individual here in PH. I am giving my IT services online meaning I can work anywhere. I checked the BIR website and I read that one requirement is the DTI Certificate of Business Name. So here’s my concerns.
1. As an online professional, should I still need the DTI Certificate of Business Name?
2. I was not able to pay my taxes for last year, can I still pay for it so that I will not look “unemployed” in the eyes of the government (visa purposes)? If yes, is there a penalty?
3. Do I still need Book of Accounts? Please bear with me cause I have no idea how to produce one.
4. Do I also need receipts? Cause since I am their (SG employer) employee, I have constant communication with them, do I still need to give them receipts every time I am giving them my deliverables?
Thank you I am hoping to get your response.
My answers —
1) If you are using your own birth certificate name in your profession, that DTI certificate is not needed.
2) There may be penalties. But just start clean with your present taxes. I have never received an official notice from the BIR about my past unpaid taxes before I became a registered self-employed professional taxpayer.
3 & 4) These would be better answered during the required BIR briefing/seminar for newly registering self-employed taxpayers. Books of Accounts are needed. Issued receipts are required by the BIR but if your foreign client does not require it, you don’t have to send it to them, but make sure to a least keep a copy of every receipt issued.
3)
1. Is it still possible to register as a professional and file for COR when it is already March? I want to file for ITR for 2016 income.
2. Do professionals need to pay percentage tax?
3. I want to pay Annual income tax for the whole of 2016 but not paid any tax within the year 2016, will I get penalty for any tax missed to be paid during the taxable year?
4. Is it possible to pay income tax once a year only? no quarter income tax?
Hello,
Great Article!
By the way I am an online contributor for an educational supplementary mags here in the Philippines, and I just submitted originally written 11 articles last February and the payment will be released after 7 months, which will be on September. I am not considered as their employee, but as an independent contractor only. The company released an agreement that we have to issue a BIR Receipts in order to receive the compensation.
My questions are:
1. Am I exempted with any BIR taxes as I will only be receiving below P10,000 on September, and I will only be receiving one payment for the said month?
2. If I am not exempted, will the steps and procedures stated above are applicable to me?
Hoping you’ll be able to enlighten me. Thank you!
Hi! I’ve just filed and submitted my ITR. I included the tax payment my company made, Form 2307, which was required on Schedule 9.3. Last year, when I filed my ITR, I submitted it (form 2307) to my RDO and one staff told me I didn’t need to submit it there and that it could be done online… I just want to confirm, should it still be submitted since my company already paid it and if so, where should I submit it?
Thanks for the great post. I had been wondering if I can do the tax filing myself. I’m still in the process of registering with BIR despite knowing that my monthly income is erratic and there will be a month or two where I will have 0 income (I know we can still report this with BIR). And I had been wondering if I can do the annual ITR by myself considering that I will just use the Optional Standard Deduction. Reading your article, so it’s really mandatory to hire an accountant/bookkeeper when it comes to annual ITR kasi may pipirmahan sila? I thought (and I was hoping) that OSD is just simple deduction of 40% of the gross. 🙁 But looking at the annual ITR form, parang na-traumatize yata ako. Haha. Thanks for the post again.
Do you know of a support group or org specifically offering help or provide assitance/information to homebased freelancers on their tax filing? Thanks
Hi Jonathan!
Last week, we just met up with app developers who can help with freelancers filing for taxes. You can check them out. Just search for Taxumo. We mentioned them on our Facebook page =)
Thanks for the info, Julia. I read about them, but I heard they can’t help people in Cebu when it comes to tax filing. I will check them out again, hoping they could at least help freelancers outside their coverage area to handle up to the filling out of the forms. Thanks.
Hello po. Paano po mag-file ng zero percentage tax (Form 2551M) for a month with no income via eBIRForms? If I click the “Submit / Final Copy” button after filling out the form and get a confirmation email from BIR, is it deemed filed already? Or is there a need to print-out something and submit personally to the RDO?
—-
Also, for months with payments (which will be paid to the bank), is there still a need to fill out the Form 0605 (Payment Form) and click “Submit / Final Copy” every time I file/submit Forms 2551, 1701Q and 1701?
—-
Thanks po in advance. 🙂
Yes, it’s considered as submitted. But print out a copy for you to sign and keep, no need to submit it to your RDO. Payment for 0650 is not needed for every form 2551, 1701Q and 1701 filed.
Yes, it’s considered as submitted. But print out a copy for you to sign and keep, no need to submit it to your RDO. Payment form 0605 is not needed for every form 2551, 1701Q and 1701 filed.
Hi, medyo nalilito pa rin ako sa tax payment. Matagal kasi akong unemployed and just last month lang ako na hire as an online ESL teacher, and yung company ko nagkakaltas ng 10% every pay period for taxes. Now my question is, kailangan ko pa bang magbayad ng monthly and quarterly tax? If so, besides the monthly tax, I need to pay quarterly and annual tax separately? How about the withholding tax that my company is deducting? By the way, this company is Philippine based, I thought supposedly sila dapat ang mag file ng tax. According to them they will just provide form 2307. Actually this is a grey area, since local yung company, even though we are teaching foreigners thru them. Shouldn’t we be considered as normal local employees? And also,if we follow the logic of paying taxes btw, since this a local company, it would mean that we also need to pay VAT…this has been giving me a headache.
Hi July just question, I have already registered in BIR last May 15 my COR got approved . so I will need to start paying Monthly Percentage tax starting this June 20 or Before June 20, 2017 for my income for May 2017.. let me know if this is correct.. I’m worried that I may pay penalty?
Regards,
Margie
Correct!
Hi.
I’m using the e-TIN facility to apply for a TIN. On Registration Page 2 where we are automatically assigned our TAX TYPE. I don’t get why my income tax is under “II012 RESIDENT ALIEN – PURE BUSINESS” when I input PHILIPPINES in Citizenship.
Does anyone have an idea why?
Hi July,
I have a question.. I already register sa BIR Last may 15, 2017 I start paying my 3% percentage tax last June june jlu and for this August 15 due ng 2nd Quarter ng Income tax… when i tried to fill up the EBir form fro 2nd Quarter and select 40% standard deduction I cant input a Value sa field na #34 which is sa samle nyo is #34 kung saan e lagay ung Taxable income this Quarter.. can you help me? also wala ako filing for Q1 since I started my registration Mid May of 2017..
pls see image
Hi julie,
I have a question.. I already register sa BIR Last may 15, 2017 I start paying my 3% percentage tax last June July, and for this August 15 due ng 2nd Quarter ng Income tax… when i tried to fill up the EBir form fro 2nd Quarter and select 40% standard deduction I cant input a Value sa field na #34 which is sa samle nyo is #34 kung saan e lagay ung Taxable income this Quarter.. can you help me? also wala ako filing for Q1 since I started my registration Mid May of 2017..
pls see image
Hi Ms. Julia,
Question lang po. kaka stablish pa lng kse company may 5mos pa lang operate..and ang client is us base. we issue invoice thru excel form lang. how can i declare sales? pwede mag or without giving sa client..pero iisa lang kase client then ibaibang project. okay lng ba un?
When it comes it sales, I think it would be best to consult with a bookkeeper on this one =)
thanks ma’am 🙂
hi need help po..
hinahanapan kasi kami ng SLSP (sales and purchases) ng 2015, problema nawawala na yung mga receipts ng sales and purchases..
kung mag fifile ulit kami ng bago at hindi magtatama sa 2550m at 2550q yung idedeclare namin sa slsp ano kaya magiging problem nun?
My RDO is Baguio, but I’m not staying there all the time. Can I pay to any AABs? Like a bank in Pampanga…
Thanks.
Hi, I’m currently working as an online ESL tutor at NativeCamp. TIN tsaka bank account yung requirements para ma receive ko yung payment. Eto din ba yung susundan kong process? Pwede ba akong kumuha ng TIN online?
i have one scenario:
If currently for example a Jose is working in private corp. and he is earning above minimum wage by default the company deduct the tax from his take home every 15th and 30th,
But jose have another online job he earns for example 6 thousand per project [this will depends if he has a project] maybe in 1 year if accepted 2 jobs for 2 months.
Question: is jose required to pay another tax to the BIR because of his part time online job?
Hi. Thanks for this helpful post!
I have a question… What if you’re earning P100,000 per month as a freelancer?
Monthly income tax (3%) = P3,000 per month
Quarterly tax: P300,000 – P120,000 (40% OSD) = P180,000 taxable income
P22,500 + P10,000 (25% of P40,000) = P32,500 for 3 quarters
Annual tax: P1,200,000 – P50,000 (yearly personal exemption) = P1,150,000
P1,150,000 – P460,000 (40% OSD) = P690,000 taxable income
P125,000 + P60,800 (32% of P190,000) = P185,800
P185,800 – P97,500 (Quarterly tax paid) = P88,300 annual tax
So in 1 year, ito binayaran mo kung P100,000 per month income mo:
Monthly: P3,000 x 12 months = P36,000
Quarterly: P32,500 x 3 quarters = P97,500
Annual: P88,300
TOTAL = P221,800
Tama po ba yan?
Then, you’ll have to worry about the annual business registration expense pa.
Good day! Thank you for this very useful article. I just need to have these points clarified.
1. There are two kinds of virtual assistants, project-based and full-time/part-time workers. Under our Labor Code, those who are working part-time or full-time under the supervision of an employer, are technically employees. And then our Tax Code is very specific in SEC. 22. Sub-section (CC) “The term ‘trade, business or profession’ shall not include performance of services by the taxpayer as an employee.” So wouldn’t it be misleading and illegal to tell ALL online workers to register in BIR as self-employed?
2. Also, how conclusive it is that our salary is taxable? Consider the following provisions of our Tax Code:
SEC. 23. (A) A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines; – This tells us that there are two sources of taxable income – 1)within the Philippines and 2)without or outside the Philippines. So as online employees, we fall under category 2.
SEC. 23. (D) Taxable Income From Sources Without the Philippines. – From the items of gross income specified in Subsection (C) of this Section; – This says that there’s a specific list of taxable income whose source is outside the Philippines.
SEC. 23. (C) Gross Income From Sources Without the Philippines. – The following items of gross income shall be treated as income from sources without the Philippines:
(1) Interests other than those derived from sources within the Philippines as provided in paragraph (1) of Subsection (A) of this Section; (2) Dividends other than those derived from sources within the Philippines as provided in paragraph (2) of Subsection (A) of this Section; (3) Compensation for labor or personal services performed without the Philippines; (4) Rentals or royalties from property located without the Philippines or from any interest in such property including rentals or royalties for the use of or for the privilege of using without the Philippines, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises and other like properties; and (5) Gains, profits and income from the sale of real property located without the Philippines.
Although we are almost in item (3), online employees are excluded from this list. It’s understandable because this was drafted way back 1997, when online jobs were unheard of. I believe this tells us that BIR has no legal jurisdiction yet to impose taxes on online workers (not sure about freelancers, though). It’s a legal dead-end.
So instead of inventing ways to circumvent the Tax Code (which could also be potentially an illegal practice), wouldn’t the responsible thing to do is to initiate a petition for Congress to amend our Tax Code and include provisions for online workers?
I don’t have anything against paying taxes. Just my two cents.
Hi!
I would like to know, where we stand as online workers, on the new tax (TRAIN). I want to know the details of how much tax will be deducted from us being the self-employed/ independent contractor?
Please enlighten me.
Hello Roda,
I saw this PDF memo from BIR website: https://www.bir.gov.ph/images/bir_files/internal_communications_1/TRAIN%20matters/RR%20INCOME%20TAX%20FOR%20PUBLIC%20CONSULTATION.pdf
I’m still waiting for explanation regarding that first option regarding 8% of the excess of 250,000PHP as tax due though, considering it’s also in lieu of the monthly percentage tax. How do we declare we’re taking this route when we will have to do it still on the first quarter (after march) and the first percentage tax is coming first (after january)? I hope someone can enlighten us, although the BIR officer of the day I had talked to mentioned that they’re still finalising standard operating procedures on these matters.
I hope you update the computation based on the new tax deductions that took effect this year 2018. Thanks!
Saw this while searching about TRAIN for Self-Employed.
More tax arrangement options for self-employed individuals and professionals
The Senate-endorsed TRAIN program also includes an 8% flat tax rate on gross sales and receipts for self-employed individuals and professionals. But this is just an option. People like doctors, lawyers, freelancers, and micro/small/medium business owners can still opt to pay their income tax based on the tax rate table in the bill. Having the privilege to choose the more favorable arrangement is supposed to encourage them to pay their income taxes correctly. To make things even easier, the TRAIN also provides that they report their income taxes only once a year instead of the current quarterly filing.
Marginal income earners, or those who derive gross sales or receipts not exceeding 100,000, will be exempt from paying income taxes. This provision will be of huge benefit to farmers, fishermen, small sari-sari store owners, market vendors, and tricycle drivers.
In your company wonderful unique job but I want to contact any person in your database mam im very interesting to more learn study and knowledge about this job I’m hard working person every since but this time I want to grow and improved my self-ability, skills, and knowledge my pass job is office staff assistant Secretary, data encoder using computer and sales marketing telephone operator and talent manager in Japan.But this is my first job online experience is very interesting to make this jobs until to success my future and for the good of a company. I hope this work continues to give a more opportunity to encourage improved my self-confidence thanks.
I dont know if this was asked from the previous msgs, but my question is this, What if I pay the taxes for this quarter and I didnt on the next because I haven’t gotten any salary at all..meaning, no income for that specific quarter.
Hello Patrick!
As far as I know, you still need to file and declare 0 income for the quarter (or months in case of 2551Ms, but I don’t know how this process is changed in light of the TRAIN). For “no payment” cases, you’ll need to file and submit it via the eBIRForms. The email confirmation you’ll receive should be kept as proof of submission.
Thanks
Thank you for this very helpful article. I just have a question – I am a sole proprietor of an online business selling cloth diapers. I use my current TIN with my Sole Prop business name to file for my NON-VAT monthly percentage and WHT taxes. The current tax forms I am filing have my business name on it. However, I also plan to do consultancy service freelancing work on top of this. How should I pay for my consultancy service tax if we are not allowed to use more than one TIN? Should I lump it all together with my online product business in a single form reflecting my current business name and TIN? Thanks in advance for your response.
Hi Tin,
From what I could understand with TRAIN, you can lump it under the same TIN but it would reflect as “additional” income. On how to file it accurately, please consult your bookkeeper/accountant.
Hello, is this different pa from the income tax na monthly which is 3%
I just registered and they asked me to get a DTI, receipts, and sabi iba pden daw ung sa train law.
So I have to pay the 3% monthly + if I exceeded 250,000 i have to pay 8% of that.
Ty!
This post focuses mainly on income tax with regards to the BIR and online freelancers. Yes, there would be some differences if you register with DTI and you register as a partnership, corporation or cooperative. The DTI and your local government would have additional fees and taxes which wouldn’t be covered here.
The 3% is the quarterly percentage tax. You need to pay this IF you opt for the graduated income tax. The 3% is based on gross sales. That means even if you make under P250k after expenses, you still need to pay it.
If you choose the 8% gross sales tax, you don’t need to pay the 3% percentage tax. Just 8% off your gross sales.
Hi Julia! Thank you so much for this very informative blog and for being very accommodating to all the questions. Pardon my ignorance on taxes but I have some questions I’m hoping to get answers to since I really have no idea where start. I’m an online English teacher and I haven’t paid taxes in the last 2 years. I wish to be given a chance to fix this but I’m so scared to be penalized so if it’s not too much to ask, could you please shed some light as to how I should get started with this step by step? Thank you so much in advance!
As far as I can understand from your question, and the current tax law, as long as you haven’t registered, you don’t need to pay the past 2 years. No need to declare it because you were not yet a registered entity. But as soon as you have registered, you will need to declare your income, from the date of your registration.
Hi,
I am confused by the example. If Jose used OSD and his annual income is now 216K which is below 250K, why does he still pay 1300 for his quarterly income tax? How did you compute for that? Thank you.
The 1,300 is not his quarterly income tax, it’s the quarterly percentage tax, which is based on Jose’s gross sales. If you choose to use the graduated income tax table, you can be exempt from paying income tax if your earning after expenses is under 250,000 but you still need to pay 3% percentage tax from your gross.
Hi Julia, thank you for your quick response, under your OSD sample computation, the image form sample, it shows they used 1701Q and put 30K in #34 (Taxable income to date) and then the tax due is 1,300. This is what confuses me.
If Jose’s income is 30K per month, his quarterly should be 90K-36K(40%OSD), he will be left with 54K as taxable income to date? Then what will his tax due be? This is my understanding, so if it is wrong, please kindly correct it. I really want to be enlightened. I tried using the eBIR forms for 1701Q using Jose’s income as sample and I’m not sure if it is updated because the computation of taxes seems like the old one before TRAIN. Thank you so much for your help!
hi good eve thanks for the very helpful info,
i just want to ask what if i already file 1701 last month Feb 2018 do i still need to file it this deadline submission of April 15, 2018?
Thank you
Hi Julia, thanks for the information. Very useful for us. I would like to ask for some help. Actually this is for my husbands income tax and I am preparing the quarterly income tax (1701Q). He is working in a company as Consultant. He opted the 8% flat tax rate and the company is withholding 8% tax from his gross income. How can we indicate in the 1701Q that we opted the 8%. In the 1701Q form there is only two method of deduction, itemized and 40% OSD. Which one shall we choose? The 1701Q form program in the eBIRForm will not proceed if no method of deduction is indicated. I tried to click the itemized and indicate the total gross earnings. But since there is no amount of deduction is indicated, the amount of tax due is very high. Please help us on the proper filling-up of the 1701Q. Although the deadline for the 1701Q is on May 15, I don’t want to beat the deadline and rushing. Thanks for your reply.
HI Victoria!
Thanks for the question. Unfortunately, I am unfamiliar with the electronic form and with itemized deduction. I am more familiar with the 40% OSD (easier to compute) and paper method (because I’m old, hehehe).
With regards to the 8% vs TRAIN table for online, I have heard from several people that this isn’t available yet for online eforms.
I’m sorry I’m not much help. I think the best option here would be to consult a bookkeeper/accountant.
Hi Ms. Julia,
Thank you for this informative blog post. I just have 2 questions tho:
1. What is the most easiest way to pay and/or choose as far as % is concerned? You mentioned:
a. pay an 8% tax on their gross income or — does it mean that I do NOT need to pay anything else but just the 8% tax??? Do I still need to pay this monthly, quarterly and annually?
b. use the graduated income tax table plus 3% quarterly percentage tax. — What is the difference between this and the other one?
2. What if I do not issue receipts to my clients? Say I get paid directly thru the platform and I will just transfer it to my bank, not via Paypal etc and it does not require an invoice? How does that work?
With thanks,
Deanne
1. What is the most easiest way to pay and/or choose as far as % is concerned? You mentioned:
a. pay an 8% tax on their gross income or — does it mean that I do NOT need to pay anything else but just the 8% tax??? Do I still need to pay this monthly, quarterly and annually?
b. use the graduated income tax table plus 3% quarterly percentage tax. — What is the difference between this and the other one?
It really depends on what you feel is more convenient/advantageous for you. I suggest you try computing for taxes to see which would be best for your situation.
2. What if I do not issue receipts to my clients? Say I get paid directly thru the platform and I will just transfer it to my bank, not via Paypal etc and it does not require an invoice? How does that work?
Even if your client doesn’t ask for a receipt or request an invoice, it’s still your option to issue them if you want to. The important thing is that you are giving receipt. And you don’t have to send them the paper receipt. You can just scan it and send them a copy, that would also work.
Hi. Very informative article. Thank you so much for sharing this.
I already have a TIN and I’m already paying taxes as a self employed (freelance) Real Estate Broker.
Just this week (due to TRAIN law) I went to BIR to update my COR from percentage tax to 8% income tax.
Now I have an online work (working for a foreign company). How do I add this online work to my BIR records so I can also pay taxes for the income I’m getting from it every month?
I already asked people from BIR on how to pay taxes for online job working for foreign country but they couldn’t give me complete information on this… (i got better info from this article than from them…)
Could you please help me?
Thank you in advance!
If you have receipts as an independent contractor, you can just invoice and receipt the company you are working for so you can declare your earnings.
My concern is if your receipts are specific to your work as a real estate broker. In this case, you may need to consult an accountant or auditor.
thanks for the article, its really helpful especially to me, as a new entrepreneur. The computation also applies to business owners with physical store right? Thanks again.
For sole proprietor businesses, yes.
Thank you so much for this information! So much more informative than the chaos at the BIR! I do have a question which may have already been answered.
I work online and was wondering how I would go about with the Official Receipts (which I have yet to receive). Basically I work for a company in the US and I have to send them invoices electronically to receive payment. Can these invoices be used as proof or do I have to physically issue an OR each time?
Many thanks in advanced!
You still have to issue an OR. That’s where your sales will be based on. =)
This is very helpful and informative without causing my eyes to glaze over from info overload 😀
I’m working from home and the company i’m with is based in the US but not registered here in the Philippines. I want to file my taxes but i’m wondering if it will be an issue with BIR that I’m earning online from an unregistered business. Also, said company will not release a contract service needed as part of the requirements, how do I go about this?
Thank you.
You would be considered as an independent contractor. So even if the business is based on the US, it shouldn’t be a problem.
Thank you for this article, it has been very helpful.
My question is about reporting sales to the BIR. If you invoice in a foreign currency, say 200 USD, but then receive your payment via remittance thru the bank, therefore subjected to fees and exchange rate, can you just declare the actual net peso payment you received?
Thanks!
Madam, under train law pano e apply ang exemption na 250,00.00 as exemption kung ang filing ay quarterly? ano po ang gagamitin na form? available na po ba ang form na yon sa 1st qtr return 2018.
Madam, under train law pano e apply ang exemption na 250,00.00 as exemption kung ang filing ay quarterly?
The exemption applies if you earn 250,000 or less per year. This is equivalent to 20,000 per month or 60,000 per quarter. If you are earning 60,000 or less per quarter, you are exempt.
ano po ang gagamitin na form? available na po ba ang form na yon sa 1st qtr return 2018.
Use the 1701Q, it is available on the BIR website.
Hi Julia,
I have Question what if I earn 20k/Month and that should be 240k in Annual which means below 250k tax exemp
Question :
do I still need to file it Quarterly?
if File via EFPS what form should I fill up and HOW can I GET and ITR if ever im Exempted?
Regards,
Marg
do I still need to file it Quarterly? – Yes
if File via EFPS what form should I fill up and HOW can I GET and ITR if ever im Exempted? – you will still fill up form 1701Q and 1701. The 1701 will be your ITR
Taxation = Organized, Glorified, Legalized Mob Robbery
Keep Paying.
Just want to ask, what it you are currently employed and you already paying taxes through your employer? And I tend to have part – time jobs here, do I need to file for another taxes?
Why pay taxes when you know most of what you’re paying will just line the pockets of greedy and corrupt politicians?
ok
hi. if, for example, my COR is dated May but i started receiving income in April (against which my client has withheld 10% tax), should i declare income from April, May, June in my first 1701Q filing, or just May and June, since my official registration date is May? the 2307 that my client will give me will include April, so I’m concerned that the quarterly income i will declare might not match. i hope you can enlighten me.
same inquiry as lucy says. hoping to get your response. Thanks a million!
Hi Julia,
Hope you can answer my question.
I have been a freelancer for 2 years now, and I haven’t filed ITR yet. If I register as a new taxpayer, am I also required to pay the taxes for the last 2 years? or no need and start to may for the recent term?
Thanks,
Tiffany
Just start in the recent term.
Hello Julia,
I’ve been working online for years now and I want to start paying taxes. However, last 2016 in order to get a tin, I registered online. I wasn’t able to go to the bir office to complete the registration. My problem is I think I was classified as self employed back then. Now, I don’t know what to do. Am I liable to penalties etc?
Hi. If my COR is dated May, but I started work and receiving pay in April, should I include April in quarterly income tax filing? The 2307 that I received from client included April.
I paid my taxes through our LGU tax collectors and honestly declare my income. But I think they should put a bracket that will free us from tax. Why, for two reasons, first when we bring dollar payment to the country through banks and payment centers, that would help the nation’s economy. Second, online workers are a catalyst to the local economy, whenever we buy something locally or from online, collectively those transactions would have an impact on local businesses growth and the national economy. So if a city has a huge number of population of online workers, that city would have a healthy economy.
I’m not promoting not-to-pay taxes, but don’t tax online workers just yet. Anyways when the government helps them grow by not taxing them until they get into bigger investments let’s say owning a property or even when they travel locally, these will give a boost to the economy. My perspective here is for longterm benefits for everyone, both the government and the online workers.
Hello Julia,
Good Day!
How about working full time or should I say currently employed and at the same time has a part time job as online like VA?
Hello,
Pag 40% OSD yong pinili ko, irerecord ko pa rin ba sa cash disbursement journal yong itemized list ng expenses ko?
Hello, what if my income every month is not consistent? For example, for the first month, my income is P10,000 then for the following month is P15,000? How should I compute for yearly income?
Thanks,
Jing
For your initial computation, just average out what you earn. Then make the more accurate computation at the end of the year.
If 15,000 is your monthly income, do you need to pay taxes?
If we do the math
15,000 x 12 = 180,000
P180,000 is below 250,000. So yes, that would mean you’re exempted from paying income tax.
I made a mistake on this year’s 1701a. It’s my first time filing for ITR and I didnt know where to put the 250 000 amount for the 8% (I didn’t exceed 250 000 and just had sales of 100 000). Do I need to put Php 100 000 on the “Less” portion? I’m afraid I didn’t fill that part up as I didnt know how to file the new form and submitted it already on eBIRForms and promptly received the email confirmation. Is there a way I can still less the deduction? Please Help before the filing ends.
I’m surprised they didn’t automatically considered that my sales are below 250 000 and register the Tax Due as 0. Instead I got a 8000 due that I have to pay because I didn’t put the Less(I’m not even sure what number I should put there). It’s still a mistake on my part as I didn’t check but I’m not sure where to put the 250 000?
Hi Julia,
I just registered as a self-employed at BIR and will start to pay my taxes on the 2nd quarter. There are 2 tax rate to choose, the graduate rates and 8% ITR.
I found that 8% ITR is the best for my.
So my questions are:
1 – Am I eligible for 8% ITR?
2 – How to compute my tax due using the 8% for 1701q quarterly payment?
3 – Should I need to print out my invoices from my clients to add them to my book of accounts?
I would appreciate your help in answering my questions.
Thanks in advance!
So my questions are:
1 – Am I eligible for 8% ITR? Yes, you are eligible to 8% sales tax. The thing here is you have to use 8% all throughout, you can’t switch to the calendar.
2 – How to compute my tax due using the 8% for 1701q quarterly payment? You need to compute using your gross income. If you can estimate your yearly income, you can use that.
3 – Should I need to print out my invoices from my clients to add them to my book of accounts? What you need to put in your book of accounts is your receipts. What you can do is pasta copy of the receipts you send to your client.
Question: How about freelancers, who only earns 17k a month and 200k annually? Are we included to the 8%tax to be paid yearly? Or it will be different? I am new with this taxes. Thank you
Hello,
I am an online teacher and has an average income of 11K monthly (132K annually). When I file 2551Q for quarterly percentage tax in BIR offline forms I always have at least 1K tax to be paid (It was computed automatically by the system). In my understanding if you’re earning below 250K annually no tax will be collected from you. Can you please enlighten me? Thank you so much.
Agnes
Agnes,
I also have the same question as you. So in my experience, I found out that you need need to avail the 8% tax rate at your BIR need you.
With this you won’t be paying 3% quarterly tax but a fix rate of 8% annually. But again, you need to request this at your nearest BIR office. But you will also avail this on the 1st year of the taxpayment so that is 2020.
I already tried requesting this to our BIR office but that what they’ve mentioned. So for now, we are suffering in paying 3% quarterly tax which really hurt our pockets.
I hope this helps.
Hello. Yong Percentage tax meron po tlga babayaran. Yong Quarter Income Tax and Annual Tax lng po wla babayaran under sa Train Law
Hi po!,
Ask ko lang po kung ok lang po ba na DTI business name registration lang po ang kunin ko? Para po sa Home Online Ticketing Business? Kahit hindi na po ako kumuha ng mayors permit, business permit at bir. Hindi po ba ako magkakaproblema or magkakapenalty? Kung Dti business name registration lang po kukunin ko?
Thank you!
Hello to all
In this difficult time, I proclivity you all
Esteem your family and friends
Hello. Bakit putol yung article? Its only up until the graduated income tax
Hi Alex,
Thank you for your comment. We will check on this right away, but you can check out updated blog post about Taxes here -> https://blog.onlinejobs.ph/updated-filipino-online-workers-guide-to-paying-taxes-2020
Thanks Jessica. Such a life saver.