Reply
This is an open group. Sign in and click the "Join Group" button to become a group member and start posting.
cancel
Showing results for 
Search instead for 
Did you mean: 
Reply
This is an open group. Sign in and click the "Join Group" button to become a group member and start posting.

Ways for Filipino Freelancers to Pay Taxes in the Philippines

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

Negative values that are reflected on the Quarterly ITR do not spell a tax refund yet.  This is what I have learned when I processed my tax documents today.  

 

I learned that if the total amount payable is either zero or negative, filing must not be done through either the bank or BIR office.  

 

eBIR_forms_package.jpg

 

Online filing of the eBIR form must be done.  For those with internet connection, the software package must be downloaded first.  Those who do not have internet connection may visit eBIR processing kiosks which accept payments for as low as Php 100.00 for transmitting tax information online.

 

eBIR_forms_software.jpg

 

The accomplished form 1701Q must be printed together with the emailed tax return confirmation (for future verification purposes).  

 

printable_BIR_form.jpg

 

tax_receipt_confirmation.jpg

 

Those who will finish the online filing procedure will not be penalized.

 

 

So in summary, every Filipino freelancer who will opt to pay taxes as a self-employed individual will have to submit tax returns four times in a year - 3 quarterly ITRS (which are to be filed on or before May 15, August 15 and November 15) and 1 annual ITR (which is to be filed on or before April 15) to avoid penalties.

 

Monthly Percentage Tax Returns must be submitted on or before the 20th day of the succeeding month.

 

Penalties can range to as low as Php 1,000.00 to as high as millions of pesos.

 

Payments can be done through Authorized Agent Banks (AABs) only. Prior to paying for taxes, tax documents may be prepared either manually or via a downloadable eBIR Form software (which is highly useful even when the gross sales derived from receipts may become either zero or negative.)

 

Books of Accounts are renewed on or before January 31 every year.  Receipts expire after five years.  Clients may be issued invoices to time segments captured by the Team App with a minimum amount of Php 25.00.

 

Glancing at my journey so far, I reckon that taxes are not scary at all.  I agree to whoever said that freelancing can be a great avenue to learn how to transact proper business - and paying for taxes must be at the core of it.

Active Member
Algene P Member Since: Jun 22, 2015

Hi Madams and Sirs,

 

I'm a novice regarding Taxes. I do hope you understand my dumbness.. Smiley Happy

 

I already have a TIN, it's a requirement for driver's license.

 

I just got a few questions.

 

1. Can I pay my tax as voluntary option? without registering as business or person engaged in profession?

2. If for example i registered as person engaged in profession, is it required to have a Book Keeper or an Accountant (CPA).. ?

 

Thank you very much for the big help, I really appreciate the time you spent for your response.. Smiley Happy

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

@Algene P wrote:

Hi Madams and Sirs,

 

I'm a novice regarding Taxes. I do hope you understand my dumbness.. Smiley Happy

 

I already have a TIN, it's a requirement for driver's license.

 

I just got a few questions.

 

1. Can I pay my tax as voluntary option? without registering as business or person engaged in profession?

2. If for example i registered as person engaged in profession, is it required to have a Book Keeper or an Accountant (CPA).. ?

 

Thank you very much for the big help, I really appreciate the time you spent for your response.. Smiley Happy


1.  I am reminded of equating SSS, PAG-IBIG and PHILHEALTH payments with BIR payments with your question, Algene.  But the way I experienced things personally, I can say that paying taxes is never a voluntary option.  Once an individual is registered as a tax payer, he or she is obliged by law to pay for taxes.  If the income tax return is not filed on time, the tax payer has to pay for penalties amounting to at least Php 1,000.00 per return.  If there is no income to declare (and this is possible for freelancers), it is okay to file using eBIR forms so as to avoid getting penalized.  The government will not take anything from zero income.  

 

2. Francisco has experience as regards your question.  I am a licensed teacher but I don't practice my profession (that is, teaching via online lessons) here at Upwork.  

Ace Contributor
Francisco F Member Since: Nov 13, 2010

Algene,

 

Your question #1 has been answered.

 

For #2, generally an accountant/bookkeeper is not required.

 

Hope this helps,

Active Member
Algene P Member Since: Jun 22, 2015

@

Juvy Ann P

Francisco F

 

Thank you for the great help!

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

Thanks for your questions, Algene.  The same day that I found your questions here at the forum was the same day that I finally got the time to sit for a recording of the webinar session on taxes for US freelancers.

 

Some parts of this post are derived from the email I sent Garnor last October 17, 2016 as regards the said webinar.

 

Indeed, I am sincerely grateful for the opportunity to learn more about taxes for freelancers.  Even if I do not reside in the US, I could glean from Derek's presentation some elements that both US and Philippine tax laws have in common.  For instance, we also have to pay for annual and quarterly income taxes, to file returns always (even when there seems to be no income), and keep good records of everything.

 

I was surprised that SSS and Medicare expenses (which I think you were interested about, Algene) are considered as taxes in the US.  Furthermore, payments for delegees can fall under the category called "tax-deductibles" (although, I must admit that it makes sense).

 

I feel affirmed that I have good tax record practices such as the following:

 

  1. Keeping a cash disbursement ledger
  2. Keeping my invoice booklets
  3. keeping digital copies of my records

 

Some things that I fear I may have overlooked are the following:

 

  1. I do not use the Earnings by Client page.
  2. I make use of the transaction history report only.
  3. I do not classify Upwork service fees as commission fees.
  4. I consider as my net income the income that I receive minus Upwork service fees.
  5. I learned that transcription outputs fall under consulting services (and it made my head ache).
  6. I do not have a record of printed invoices reflecting Upwork service fees as well as emailed transactions which show the local funds transfer amount that has been deducted from my gross income.
  7. I do not use the exchange rate information that is released every Wednesday via email.

So this week, I did not issue invoices to my clients without the exchange rate information from Upwork and a few hours ago, I tried preparing amended tax return documents.

 

Based on the Earnings by Client CSV file that I downloaded, I took note of the contracts that I have had and verified the facts via the Lifetime Billings by Client page.  I found it easy to navigate through the quarterly details for each contract.

 

I expanded the file a bit by adding rows for gross income, Upwork service fees, and local funds transfer for both currencies - US dollar and Philippine peso.

 

I tried "cross-referencing" strategies as I added new columns to the matrix that I previously had (the one that is based on the processed payment confirmation emails that I receive via email on a regular basis).  

 

Then, I extracted the "balanced" information onto the eBIR form.  I had to make necessary adjustments as I opted for a 40% optional standard deduction.  I had to remind myself that the first line had to be about the NET sales from receipts (as payment for services). Then whatever amount that I paid for in the previous Quarterly ITRs that I filed was reflected in the box for 38I/J (for the first quarter) and both 38C/D and 38I/J (for the succeeding quarters).

 

After pressing the "validate" button, I saved and printed the form as well as the tax return confirmation email that I received after submitting the form online.

 

What will happen next?

Active Member
Carl C Member Since: Jun 22, 2015

Are the details in this article accurate?

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

 Which detail are you referring to, Carl?

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

It's tax season again.  The 20th day of November, 2016 is the deadline for the payment of the Monthly Percentage Tax.  I just accomplished Form 2551M using the BIR software that I was able to safely (?) download.  For this month, I did an experiment.  I tried to reconcile what is reflected on Upwork's report and my own matrix.  For the past few weeks I have been monitoring the fluctuations in the exchange (US dollar to Philippine peso) rate.  I noticed that Upwork releases two exchange rate values.  Those which can be read during a withdrawal request tend to be different from what actually is given in the emailed processed payment form.  There seems to be a higher value to my earnings when I use what is emailed to me every Wednesday.  

 

I also want to add that the BIR website offers a sound description for deductions that can arise from exchange rate fluctuations.  These can fall under the LOSSES category which can be reflected in an income tax return.  I feel relieved upon knowing this because it means that it will be easier to make an account for the "discrepancies" between what is reflected in Upwork's reports and my matrix epecially the ones which I prepared prior to the exchange rate configuration.

 

Consequently, this can have an impact on my invoicing schedule.  I am beginning to get comfortable with my schedule for invoicing my clients.  I release the receipts only when I get the the exchange rate via email.  Saturdays and Sundays seem to be the best days to ignore the clutter sponsored by my toddler and attempt to beat deadlines. lol.  But with my new knowledge on foreigh exchange rate risk, I can actually do invoicing any time I want.  I think that this is a great thing.

 

As for the preparation of the tax form using the software, I noted that there is a necessity to not forget item No. 1. It calls for the "year ended" information.  I was taught by the Officer of the Day before that it must be December, 2016 and the box to be ticked must be the one labeled as FISCAL (and not calendar).

 

Also, there is a space in the form calling for ATC (I am not sure what the acronym stands for).  Self-employed individuals must base their ATC information on their Certificate of Registration.  For instance, I was granted the Non-VAT status so in the software-sponsored tax form I have to tick tax rate 3.0 corresponding to persons who are VAT-exempt.

 

I am beginning to like using the software now.  It is making my tax life really easy.  I just wish it has an automatic beeper to remind me about tax deadlines. lol.

 

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

I just had a discovery as regards BIR payment hubs today.  It seems that not all branches of Authorized Agent Banks (AABs) can accommodate payments during weekends.  I am surprised that BIR payments are not honored at the malls where these AABs are located.

 

Okay.  So it's tax time once again.  The deadline for the payment of the Monthly Percentage Tax will be on the 20th day of December.  I have yet to review the Income Statement and Financial Statement of Business that a Certified Public Accountant audited for me.  I am hoping that I will be ready come Annual Income Tax Return season.

 

Overall, I noticed that the weekly ritual of invoicing clients and accomplishing the balance statement is becoming rather easy.  As for this month, for instance, I just had to copy the net earnings (gross income minus service and local fund transfer fees) for five weeks and then click on the first option for ATP (does it mean "authority to print"?) in the software and presto, I can already see what I need to pay for.

 

I'm glad I have taxes to pay.   Taxes can mean that I'm still earning! 

TOP KUDOED MEMBERS