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Ways for Filipino Freelancers to Pay Taxes in the Philippines

Ace Contributor
Francisco F Member Since: Nov 13, 2010

Hi Catherine,

 

You need  Certificate/s of Inward Remittance issued by the financial institution that first received or converted to peso your foreign currency remittance.

 

Hope this helps.

Frequent Visitor
Catherine P Member Since: Sep 24, 2016

Hi, Francisco.

 

Thank you and I hope bank will provide me that or do that for me, will there be a cost to ask that?  Would you know the cost of getting the cert of no registration from sec and the request from state of Cali regarding the proof mentioned?

 

As Im trying to weigh things on where would I benefit better.  If the 3% monthly tax will just even out the cost of getting all the proofs ready for the vat, zero rated, then, I think there will be no more reason for me to go for VAT registered.

 

Your thought , please.

 

 

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

Hi Catherine,

 

Let me try.  If you must face the auditing process, all that is needed is the consistency in the data that you entered in your Certificate of Registration and your proof(s) that you actually complied with all the requirements.  Being VAT-registered so as to avoid the 3% Monthly Percentage Tax is a valid option but VAT registered business individuals or corporation must have a gross sales that exceed Php 1,919,500.00 annually (please refer to http://www.bir.gov.ph).  Besides, one cannot be VAT-registered if the individual has an existing TIN already (meaning has been employed prior to being engaged in the  since having multiple TINs is a criminal offense.  If there has been a mistake in filing tax forms, for instance, in the case of someone who has been in the convent for years who was employed prior to embracing the religious life, but after a few years of discernment has decided to go back to the secular world and seek employment, the mistake must be corrected first before using the new TIN.  This can happen in real life situations.

 

So to reiterate what is stated at the BIR website, "zero-rated transaction becomes only an exempt transaction if one fails to register as a VAT taxpayer".  Also services that are "paid for in acceptable foreign currency and accounted for in accordance with BSP rules and regulations" can fall under this category.  I think that the bank satatement must reflect the INREM status for each local funds transfer (LFT) transaction.

 

Overall, it seems that your main point in registering for VAT is actually to avoid the 3% Monthly Percentage Tax. This assumption can be verified using the eBIR software as indicated below:

 

VAT_versus_non-VAT.jpg

Frequent Visitor
Catherine P Member Since: Sep 24, 2016

Hi, Juvy Ann.

 

I thank you for responding to this message. I have the COR being a Non VAT already.  Eventually, I came to understand what Francisco have discussed on his post here that an individual can opt to register  as a Vat payer provided all the requirements are met.  Per what I understand, it doesn't necessarily mean that you must earn the almost 2M as long as you can prove that your earnings are supported with the VAT zero rated rule that "services that are "paid for in acceptable foreign currency and accounted for in accordance with BSP rules and regulations.

 

I have actually ask BIR office on my interest to change from non-vat to vat, and they say it can be done which they have listed all the steps in considering it.

 

So, here am I, weighing things if I will still pursue on changing from Non vat to VAT just for the zero rated benefit(not paying the Montly percentage tax) or not.  As I have noted that if the cost in terms of money and time of doing all the steps of changing my type of registration will just cost me the same with continually paying my MPT, then, its better not to pursue.

 

 

Thanks again, Juvy, for your thoughts on this matter.

 

 

 

 

 

Frequent Visitor
Virginia D Member Since: Jun 22, 2015

Hi Guys, 

 

I started asking for an agency to file my ITR since I have clients that I need to work on every day.

 

However they asked me to file for DTI and business permite as well. Is that something correct? I was actually thinking they might mis understood what I ment by Home base online freelancer.

 

Any advise? Thank you in advance

Ace Contributor
Francisco F Member Since: Nov 13, 2010

Hi Virginia D.,

 

For BIR taxpayer registration, a DTI business name registraton is required if you are not using your own Birth Certificate (BC) name. Your name "Virginia D." is your BC name, so the said DTI registration is not needed.

 

A Mayor's Permit (MP) is required if you are doing your freelancing only in your home or business address. But what if you need / want to go to another municipality /city where your MP is not valid? Do you have to apply for another MP for that locality? It's not practical. That's why freelancers like us are legally better off with a Professional / Occupational Tax Receipt (PTR) because we can practice our freelancing ANYWHERE in the Philippines as provided by law (local gov't code). You can get a PTR at your municipal / city hall for P300 (if without penalty). An MP costs way higher than a PTR.

 

I suggest you get a checklist of requirements for a professional taxpayer registration at your nearest BIR office or visit the BIR website at www.bir.gov.ph for official info.

 

The term "freelancer" is too broad. I suggest you download the list Philippine Standard Occupational Classification (PSOC) from www.nscb.gov.ph/csd/publication/2012%20PSOC%20CD.rar and search for your exact occupation term.

 

Hope this helps.

 

 

 

 

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

It looks like what Theodore Albert shared through his post is correct most especially item no.1.  Today, I went to the BIR Office (Marikina City Branch) and this is what I did.

 

1. I secured an ONETT CAR number so I could transact business with the Officer of the Day.

2. An agent approached me and asked me if I need accounting help.

3. I learned, through the brochure that he gave me, that I just saved Php 3,000.00 for keeping my two books of accounts well-maintained.

4. I went to have a one-on-one conference with the Officer of the Day and he actually confirmed that I have well-maintained Accounting books.

5. I was asked to secure a verification slip from Counter 6.

6. After getting the slip, I had the Certificate of Earnings Report and Affidavit of Income Declaration notarized.  (I prepared the Affidavit prior to going to the BIR Office.  I was able to validate the entries in the Transaction History, the Certificate of Earnings Report and the Timesheet Details Report and found not a single error. I am giving 3000 kudos to the Engineers and Developers who maintain my daily records at Upwork.  There was, however, a problem reconciling the figures in my book of accounts with those in the Certificate of Earnings Report. I came to realize that the reason for such "discrepancy" is because the 12-month period stated in that document is not fixed - it seems to change depending on the time the sheet is downloaded from the system.  That is why I solved the problem by creating an affidavit myself based on a given template and the figures which are reflected on my Cash Receipt Ledger.)

7. I went to the Collection section.

8. I was asked to accomplish a Case Monitoring Sheet (CMS) because my BIR Form 2303 (Certificate of Registration as a Self-Employed Individual) has specifications as regards my tax type including the Percentage Tax which I am obliged by law to pay on a monthly basis.

9. I then learned that I have deficiencies - or open cases as they call it at the BIR Office - with Form 2551M for the months of March, April, May, and June.  I was shocked and couldn't help but ask the air, "What sort of alien is this?" I later learned that it is for the business tax apart from the Income Tax that I was hoping to pay for.

10.  I accomplished the verification slip (while still in a state of shock) with the Administrative, Collection and Assessment sections.

11.  I went back to the Officer of the Day and was told to redo my entries and prepare my Form 2771M for those 4 months.

12. The last thing that I remember about my BIR adventure today is that the Officer reminded me that for each Income Tax Return, I will be penalized with at least Php 1000.00.

 

I was thinking, "Was it good news to have known that I just saved Php 3,000.00 for having well-maintained Accounting books?"

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

 BIR_Form_1701Q.jpg

 

Tax_Table.jpg

 

1st_Q_2016.jpg

 

BIR_Form_2551M.jpg

 

 june_monthly_percentage_tax_return.jpg

 

machine_validated_BIR_payment_slip_02.jpg

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

I just finished accomplishing 8 BIR documents yesterday. - two quarterly income and five monthly percentage tax returns - all with penalties of at least Php 1,000.00.  The monthly percentage tax return for August have been saved from the consuming fire of these penalties.

 

From the experience, I have learned to compute for and process my own tax documents with less supervision from any Officer of the Day.  If I have taken these lessons, it might have cost me at least ten thousand pesos.

 

What struck me about the experience was that BIR payments for tax returns seem to be done via authorized agent banks only.  I tried asking whether "Bayad Centers" can accomodate payments but I was told that only banks that have been authorized by the BIR can accept payments.  I also noticed that bank tellers have to stamp numerous documents aside from processing payments through machine validation.  They were so loaded with work and the only way I could help was to arrange my documents and receipts in order.  Furthermore, it seems that if I am going to do this on a monthly basis, I must really communicate with my clients that I will be on a vacation for a week. lol

 

Does anyone have a similar experience as regards paying taxes? Do Filipino clients and freelancers here at Upwork pay taxes at all?

 

When I was still employed, I relied on someone else to look after my tax documents.  I would just know how much tax I paid through the pay slip that I would receive every 15th and 30th day of the month.  Now, I do (and discover) everything on my own.  Will I have tax refunds, too? lol

 

Looking back at the experience, I reckon that I have many reasons to attend to my open cases and that those penalties can actually be converted to something relevant (like my son's education) someday.  I am working AT home (sounds like I have physical deformities) but I am a part of the economically active population in the Philippines.  I bring dollars in so in a way, I am a heroine. lol

 

These past days were exceedingly stressful and I even have lucid dreams of broken things around me but these days made me realize what the core of freelancing is - family, relationships.

 

And speaking of relationships, it seemed that my clients are forming a sort of a support system for me, too.  They have dropped by the message center yesterday and it really warmed my heart. I am grateful to be working for and with them.  They are such great clients and I wish I will never have to abuse their kindness and generosity to me and my family.

 

I now declare my open cases as CLOSED (for the time being). Smiley Happy

 

 

 

 

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

One of the best things that happened to me after the "tax deluge" was that I got to appreciate the payment confirmation email.  I am still one day ahead of the end of the third quarter but I am through with tax computation and preparing my tax documents already.  I am grateful to Upwork for making it convenient for me to track my financial records.  

 

Upon receipt of the email (which I receive every week), I right away access the transaction history report and download the CSV file.  Then I extract the figures and update my data matrices - both for the quarterly ITR and monthly percentage tax return.  

 

Today, I was surprised to know that I actually "over paid" BIR.  Will that result to a tax refund? Is it good luck to have tax refunds?  Or is it an indication that I have a downward slope as regards my quarterly earnings?

 

While I was googling Philippine taxation stuff a while ago, I came across Benjamin Franklin's quotation on the certainty of death and taxes.  I marvel at the tax reality in my country.  It seems that taxes are not as certain as death here.  But I am not ignorant when it comes to the rampant corrupt practices among our political leaders.  I, somehow, reckon that perhaps it is because of this reality that my fellow Filipino freelancers would rather choose not to declare their income and avoid experiencing tax refunds.  I do not stand as their judge.

 

I am still one day ahead of the end of the third quarter and I am thinking of the "penalties" that I will no longer pay for.  Sometimes, I just have to learn the HARD way. (I think I've "heard" this statement from Petra before.) Heart