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Ways for Filipino Freelancers to Pay Taxes in the Philippines

Frequent Visitor
Wilson R Member Since: Sep 26, 2017

Hi Francisco,

 

I would like to ask, previously I was a member of an Agency since 2012 which is not paying any tax. Now that I am no longer connected with them, I wanted to file my taxes, using my personal TIN card I registered currently. What is the best option for me? 

 

 

Frequent Visitor
Catherine P Member Since: Sep 24, 2016

Hello Francisco,

 

First of all I would like to take this chance to thank you for the information you shared on this thread.  I would like to ask regarding the document proof for claiming the zero rated vat sale.  I went to the bank today and they said they cannot generate an certification bearing the foreign currency remittance because the local peso savings statement I had with them already reflects a converted amount.  With this, is it possible that the Upwork payment has been processed email(as I am being paid via LFT) will serve as a valid document as a proof that  I am really being paid in foreign currency to BIR?  My other option is a very expensive from my end and that is to open a dollar savings account with a maintaining of $500.

 

 

Appreciate your assistance on this matter.

 

Thank you very much.

Ace Contributor
Francisco F Member Since: Nov 13, 2010

Hi Catherine,

 

Try requesting your bank to have them trace one upwork LFT. There should be a financial institution in the Philippines that made the dollar-peso conversion before it was remitted to your bank because the Bangko Sentral prohibits any peso-dollar conversion outside the Philippines. Then go to that financial institution and ask for Certificate/s of Inward Remittance (CIR).

 

Emails from Upwork don't qualify as proof because the remittance proof should be based on Bangko Sentral regulations as the law requires. CIRs qualify.

 

Hope this helps.

Community Guru
Juvy Ann P Member Since: Oct 29, 2015

@Francisco F wrote:

Hi Catherine,

 

Try requesting your bank to have them trace one upwork LFT. There should be a financial institution in the Philippines that made the dollar-peso conversion before it was remitted to your bank because the Bangko Sentral prohibits any peso-dollar conversion outside the Philippines. Then go to that financial institution and ask for Certificate/s of Inward Remittance (CIR).

 

Emails from Upwork don't qualify as proof because the remittance proof should be based on Bangko Sentral regulations as the law requires. CIRs qualify.

 

Hope this helps.


I agree.  My bank statement indicates inward remittance (INREM) via PCHC.  But when my tax documents were audited, Upwork emails indicating the amount intended for LFT transactions were honored by the Certified Public Accountant. It is possible that my bank statements were considered as proof already since I am a non-VAT taxpayer.

Community Guru
Reynaldo M Member Since: Aug 4, 2012
Here is a link showing how to go about registering and Paying your taxes with the BIR. http://thefreelancepinoy.com/2011/06/taxes-for-pinoy-freelancers-bir-requirements-and-registration/#... http://thefreelancepinoy.com/2011/10/freelancers-how-to-file-taxes-bir/#comment-91552 BTW, the Blog author is also an oDesk Freelancer.
Frequent Visitor
Virginia D Member Since: Jun 22, 2015

Hi Sirs

 

How should I know whether I fall as VAT / Non-VAT registered business?

 

 

There's this article that I've read and says that "If a freelancer earn in USD, then that should be registered as VAT, is this true? 

 

Also just wanted to clarify, that if I fall as VAT registered business, does it mean I don't need to pay anything, just need to file them?

 

Please advise. Thank you in advance.

 

Ace Contributor
Francisco F Member Since: Nov 13, 2010

Generally if you're a Philippine-based Upwork freelancer just starting, you fall under non-VAT. When your gross sales exceeds the 12-month threshold of Php 1,919,500 or its USD equivalent, you're required to change your registration to VAT.

 

Freelancers earning USD can optionally register to VAT without waiting to reach the threshold to avail the zero-rated VAT (the nothing to pay VAT). But If the BIR subjects the freelancer to an audit, the burden of proof belongs to the taxpayer since the said VAT is a form of tax exemption.

 

Simply showing your Upwork transaction history to the BIR will not hold water. Also, if you withdraw via LFT or Paypal, your bank statements don't show that you received USD, only pesos.

 

There's more to do than simply filing zero-rated VAT returns to be VAT exempt, and you may be exempted from VAT but you're still subject to income tax.

Community Guru
Juvy Ann P Member Since: Oct 29, 2015

Updates:

 

The deadline for filing of Annual Income Tax Returns will be on April 15, 2016.

 

Because this is my first time to personally pay for my own taxes, I feel overwhelmed that I have just barely began. So far, I had the Certificate of Earnings Report notarized.  I am grateful that Upwork made it so convenient for me to have this form.  Together with other pertinent documents, I had my BIR form nos. 1901 and 0605 filed and assessed and resubmitted after paying for the registration fee of Ph 500.00 at the bank.  I am likewise grateful that I was able to retain my old TIN.  The Basic Taxation seminar is held every Thursday from 9:00 AM to 12:00 noon at the BIR office (I am based in Marikina so I don't know if this applies to all BIR offices in the Philippines).  I already applied for the invoice which costs Php 1, 200.00.  This Thursday, my Certificate of Registration will be released during the seminar. The next step will be the filing of the Annual Income Tax Returns.

 

I just have a random question as regards some posts on this thread.  Why is there an option for PTR?  According to the BIR Officer, freelancers who work from home cannot apply for this.

 

Here are some suggestions for those who want to save time while filing an application for COR:

 

1. Ask the security guard (of the bank) for the special BIR payment form.

2. Photocopy three sets of BIR form nos. 0605 and 1901 which can be downloaded from the national website.

3. If you must use the BEA terminal at the BPI, please key in 0605 (BIR form number) and 500 (COR application fee). These numbers are important.

4. The notarization of the Certificate of Earnings Report costs around Php 100.00.  It's good to have at least three copies of the document.

5.  Bring a BLACK pen. They are strict (or perhaps it's just my perception that they are strict lol) I tell you.

6.  Expect some SURPRISING events (like buying a bundle of receipts).

 

 

Community Guru
Juvy Ann P Member Since: Oct 29, 2015

Updates:

 

Here's what I learned from the seminar this week:

 

The Basic Taxation seminar spokesperson stressed out that freelancers who purchase their computer sets (or laptop/netbook), pay for licensed software (antivirus, transcription software, etc),  and broadband internet connection bills need to keep their receipts as proof that will be attached to BIR form no. 1701.  Apparently Filipino freelancers can opt to choose between either the itemized deduction or optional standard deduction which is equivalent to 40% of gross sales.

 

The seminar seems to be prerequisite to acquiring the Certificate of Registration (COR).  The COR, in turn, is necessary for the "purchase" of the bundle of receipts which will be given to the freelancer after submitting an application for authority to print receipts and invoices (BIR from no. 1906).

 

It seems that receipts are for goods while invoices are for services (or is it the other way around?).  Goods, in the economic sense, are directed towards the satisfaction of the client or customer.

 

BIR form nos. 0605, COR and the Ask-for-a-Receipt Notice must be posted at our profile page lol.  

 

Every freelancer must have her/his own Accounting Journal and Ledger Book, Book of Accounts, Cash Receipts (the bundle) and Cash Disbursement Book.  For the Book of Accounts, RMC No. 82-2008 dated November 13, 2008 must be used.   I don't know if the documents at the Reports page will suffice for this purpose.

 

Even if a freelancer does not have gross sales of Php 1,919,500.00 yet, she or he may opt to go for VAT, specifically the zero-rated VAT option.  Applications may be filed online via the national website.

 

If there will be tax information that needs to be changed, BIR form no. 1905 must be used.

 

 

 

Community Guru
Juvy Ann P Member Since: Oct 29, 2015

Updates:

 

 

And for the last leg of the registration race, here's what I went through this week:

 

In order to get my Certificate of Registration (COR),  it was necessary for me to secure documentary stamps (worth Php 15.00), and a photocopy of an accomplished BIR Form No. 0605.  Since I didn't bring my CTC (cedula), I presented my PRC license (a government-issued ID which contains information on both the date and place of issue).

 

I took a priority number for my COR copy and while waiting, I requested the Officer of the Day to have my taxes computed.

 

Once my number was called, I presented my documentary stamps, got my COR and my "Ask For Receipt" Notice and paid for my receipts.  With Php 1,200.00, I was able to get ten booklets with 50 sheets in each booklet.  These booklets will expire within 5 years. (Note the "Ask for Receipt" Notice must be used for freelancing purposes only.)

 

I got another priority number for my transaction with the Book of Accounts personnel.  While waiting for my turn, I purchased two columnar books.  Each columnar book was worth Php 50.00.

 

I then proceeded to the eBIR lounge where someone fully accomplished my ITR.  I opted for the 40% optional standardized deduction.  The software automatically computed my taxes.  The assistant had my ITR printed.  But on my own I had two sets of BIR Form No. 1701 prior to paying at the bank.

 

At the bank, I got the BIR payment form from the guard.  I paid for my taxes and was surprised that the bank teller had to stamp all pages of my three sets of BIR Form No. 1701 with the word "RECEIVED".

 

When I went back to the BIR office, I marked my ledger notebooks with the stamp pad that was available at the designated area. 

 

I photocopied my COR copy and accomplished BIR Form No. 1905.  In the form I ticked the box for "update of book of accounts".

 

Once my number was called,  I presented all  of my documents - BIR Form Nos. 0605 and 1905, COR photocopy and the two columnar books - to the Book of Accounts personnel.

 

I learned that one columnar book will serve as my Cash Receipt Book while the other will be my Cash Disbursement Book. In the future, receipt (even if the client does not need it anymore since Upwork has its own invoice system) amounts that are derived from Upwork's transaction records must be reflected on the ledger journals.  Each page of the two ledger journals have three entries: Date, Official Receipt (OR) Number, and Amount (paid by the client). The accounting books must be properly signed by the BIR representative at the Book of Accounts Section prior to making accounting entries.

 

Furthermore, I was advised to make daily records of all of my financial transactions.  Whatever is declared in my Certificate of Earnings Report must tie up with what is reflected in my accounting books.  I feel grateful that record keeping will be much easier since everything is reflected at Upwork'k GUI.  Thank you, developers and computer engineers. Heart

 

The first date of entry in those two journals must be the first day or days after I  received my accounting books.

 

After everything has been accomplished, I am now a registered Filipino business individual.  Well, I am glad that I was able to FINISH the entire process of registration.  To me, the process is significant because where I live, taxes mean a lot.  Scholars get to earn their Bachelor's and Master's degrees, schools get to be built and under-the-street drainage holes get to be poked so that floods will be avoided.  

 

I am a Filipino freelancer and this is how I "pay-it-forward". Heart

 

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