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Ways for Filipino Freelancers to Pay Taxes in the Philippines

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Active Member
Theodore Albert L Member Since: May 13, 2008
Looking at posts from the forums here. It looks like the options for Filipino freelancers to declare their income and pay taxes are as follows:

1) Register as a non-VAT business

  • - Pay 3% monthly percentage tax on the gross earnings (BIR Form 2551 M).
  • - File and pay, if applicable, quarterly percentage tax (BIR Form 2551 Q).
  • - Pay quarterly income tax (BIR Form 1701Q).
  • - Pay annual income tax (BIR Form 1701).

2) Register as a VAT business

  • - Report monthly zero-rated VAT earnings (BIR Form 2550 M). No payment but you have to attach documentation as proof of your claim.
  • - Report quarterly zero-rated VAT earnings (BIR Form 2250 Q)
  • - Pay quarterly income tax (BIR Form 1701Q).
  • - Pay annual income tax (BIR Form 1701).

3) Register as a person engaged in profession

  • - Pay professional tax receipt (PTR) at LGU, if applicable.
  • - Pay 3% monthly percentage tax on the gross earnings (BIR Form 2551 M).
  • - Pay quarterly income tax (BIR Form 1701Q).
  • - Pay annual income tax (BIR Form 1701).
  • Note: Percentage tax is required to be paid only if income does not exceed Php1,919,500 (according to a friend). Otherwise, you need to be VAT registered.

Disclaimer: This post is in no way meant to give professional advice. Do not use this to make a decision. It's best to consult a CPA and/or Tax Consultant.

Let me know if this list has errors. What do you think is the best option?

132 REPLIES 132
Community Guru
Junelle A Member Since: May 31, 2009
thanks for posting this. i'd like to ask the mod to please move this to the Countries category, Philippines thread.
"If you don't like something, change it. If you can't change it, change your attitude. Don't complain." - Maya Angelou
Try harder, or care less.
Ace Contributor
Francisco F Member Since: Nov 13, 2010
Thanks OP. Here are the corrections based on my experience as a BIR-registered Pinoy oDesker taxpayer. [quote]- File and pay, if applicable, quarterly percentage tax (BIR Form 2551 Q). [/quote] This does not apply to oDesk earnings for non-VAT registrants. [quote]Report monthly zero-rated VAT earnings (BIR Form 2550 M). No payment but you have to attach documentation as proof of your claim.[/quote]No need for attachments but just be ready with the documentation in case of a BIR tax audit. The same applies to quarterly zero-rated VAT earnings (BIR Form 2250Q). [quote]

3) Register as a person engaged in profession

  • - Pay professional tax receipt (PTR) at LGU, if applicable.
  • [/quote]A BIR-registered self-employed professional is either a VAT or Non-VAT taxpayer. Payment of the PTR at the LGU is done before registering with the BIR and then annually every January. For me the best option to save on taxes is being VAT-registered because of the zero-rated VAT. But be careful with the supporting documentation because the burden of proof belongs to the taxpayer in case of a BIR tax audit. Being registered as a self-employed professional means having a PTR which legally allows the holder to practice his/her profession anywhere in the Philippines, unlike a sole proprietor whose area of operation is limited to the LGU place of registration.

Active Member
Theodore Albert L Member Since: May 13, 2008
Thanks for your clarification Francisco F. Could you explain what documents should be available when your VAT zero-rated earnings are questioned by the BIR?
Ace Contributor
Francisco F Member Since: Nov 13, 2010
The documents should prove in accordance with Sections 108(B)(2) and 113 of RA 8424: 1) Your BIR Certificate of Registration should show that the registered activities are other than processing, manufacturing or repacking goods. Data entry or whatever other services you render to clients will do. 2) Issued VAT official receipts should show date of transaction, quantity, unit cost and nature of the service, and payment in foreign currency with the said currency amount shown as zero-rated sale. 3) Certificate/s of inward remittances issued by your local bank showing that remittances were made in foreign currency as shown on the above-mentioned VAT receipts. You may have many clients but for tax purposes it would be more convenient to treat Odesk Corp. as your client and use either LFT or wire transfer to get your earnings because only Odesk Corp. will appear as the remitter on the said bank certificates. 4) SEC certificate of no registration to prove that oDesk Corp. is not registered in the Philippines. 5) Certificate of Status issued by the California Secretary of State proving that oDesk Corp. legally exists. 6) Certificate of authentication issued by the authorized consul at the Philippine Consulate General in San Francisco, California, US, proving that the said certificate of status is authentic. Item # 3 documents may be secured every quarter. Documents of items #s 4,5 & 6 should be secured annually after the taxable year (via postal mail or private courier if applicable) at the earliest during the first quarter just to be ready. Or you may wait for the BIR tax audit which has its own tight deadlines to present the said documents.
Active Member
Theodore Albert L Member Since: May 13, 2008
Is it easy to acquire #5 & #6 in your post above?
Ace Contributor
Francisco F Member Since: Nov 13, 2010
There's an order form to request via postal mail for oDesk's Certificate of Status. You may use your Philippine address on the said form and your self-addressed envelope. Or, if you want to get the said certificates faster and can afford it, you may hire private service companies. Have the said certificate authenticated via postal mail or private courier at the Philippine Consulate General in San Francisco. It's that easy!
Active Member
Theodore Albert L Member Since: May 13, 2008
You opened my eyes Francisco F. Thank you!
Frequent Visitor
Virginia D Member Since: Jun 22, 2015

Hi Sir, 

 

I just had my BIR application processed by a registered account and I was told in order to file ITR I have to register in DTI and have a business permit.

 

Did you really undergone this process when you filed yours? 

Ace Contributor
Francisco F Member Since: Nov 13, 2010

When I file my ITRs, I don't include DTI registration and Mayor's Permit (MP) because I'm already a registered taxpayer.

 

For BIR registration, a DTI business name registration is required if you are using a trade / business name, not your Birth Certicate (BC) name. As a freelancer, you are already using your BC name, so not need of the said DTI registration.

 

An MP is required if you are registering as a single proprietor, not as a professional taxpayer. I registered as a professional with my Professional Tax Receipt (PTR) because it's more legally convenient and cheaper than an MP.

 

The problem with an MP is that you are legally permitted do your freelancing business only in the city / municipality where you are registered. So what if you need to travel or go on vacation in another city / municipality?

 

With my PTR, I can do my freelancing business ANYWHERE in the Philippines as provided by the local government code.

 

When I did my BIR registration process, I encountered a BIR staff who did not understand freelancing and required me to produce a DTI registration and MP. I confronted them by stating provisions in the law and BIR policy, even though I'm not a lawyer. Their supervisor understood and accepted my registration as a professional taxpayer.

 

 

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